What is Spend Data Classification?
Spend Analysis
What is Spend Data Classification
What is Spend Data Classification
Spend Data Classification is the process of grouping spend data for similar goods or services, assigning them to predefined categories using a Taxonomy document. A hierarchal taxonomy or framework, that spans many major purchasing sectors with multiple sub-categories, that provide procurement managers with clarity, spend visibility and purpose. To achieve this bespoke Spend Analytics Software is used.
What is a Procurement Taxonomy
A Procurement Taxonomy is related to the way in which goods and services are bought and aligned to specific spend categories. A Taxonomy, tends to be hierarchical structure, that provides procurement with a logical group of goods and services, split into two functional areas called Indirect & Direct Procurement.
The above diagram shows the spend areas of procurement, these are known as Procurement Types
Indirect Procurement
Direct Procurement
Spend Classification creates Spend Categories, it’s the way procurement department then structures its staff, with Category Managers assigned to manage each Category and Supplier.
Spend Analysis Video (1.5 mins)
What is Spend Analysis and Spend Data Classification.
What is Indirect Procurement?
Indirect procurement is the sourcing of all goods and services, for all non-production related expenses, incurred, associated with SG&A expense in the P&L. Goods and Services, bought for consumption by internal business units, functions or stakeholders only.
Indirect Procurement Video (1.2 mins)
Indirect Procurement Video Examples
Indirect Procurement Classification
Typical Indirect spend classifications or Indirect Procurement Categories list are shown as follows :
Indirect Procurement Taxonomy
Professional Services - Consultants and Consultancy
HR Services - Contingent Labour
Legal
HR
ICT
Travel
Marketing
Telecoms
Office
Fleet
Utilises
Postage
Print
Photocopier
Direct Procurement
Direct procurement, refers to the direct costs of production goods, including raw materials and services, known as Cost of goods sold (COGS). This includes the purchase cost of the materials and labour directly used to create the goods and the costs go straight to the P&L. Direct Procurement, typically makes up the bulk of an organisations spend and is very much sector and Industry specific.
Frequently
Asked
Questions
Spend Classification
Q1. What is Spend Analysis?
Spend Analysis is the process of gathering, cleansing, classifying, transforming and sharing procurement spend data, providing spend visibility and procurement baseline, to facility category and spend management. Spend Analysis, is a key success factor for procurement to achieve its corporate goals, procurement KPI’s and objectives.
Q2. What is Spend Analysis Dashboard?
A Spend Analysis Dashboard, is a visualisation of spend by category, supplier and period, it is a visualisation of spend analysis and provides simplified content, to make informed procurement decisions.
Q3. Direct vs Indirect Procurement?
Direct Procurement and Indirect Procurement both have an impact on the P&L. Typically, more and more companies, rely upon both procurement channels to deliver value based procurement. Direct Procurement is linked directly to Volume of goods, typically used within Bill of Material ERP systems that generate production demand for direct materials.
Indirect Procurement, is typically know as independent demand and is controlled by a function budget holder, Indirect procurement is the purchase of non-production related goods and services for Internal use only.
Q4. Why is Spend Classification Important?
Spend Classification is an important factor in build spend pipelines and opportunity assessments. Classification, that provides category managers, with a framework to understand items and goods bought for the business, with a view of optimising the spend.
Q5. Spend Analysis Benefits?
Spend Analysis provides procurement with a spend visibility and spend profile, which is then used to consolidate the supplier base. Creating a process of transparency, risk understanding, cost awareness, demand profile and efficient use of resources.
What is Accelerated Insight ?
Accelerated Insight is a spend analytics software, that takes raw spend data, organises quickly it into a Spend Analytics Dashboard. Agile process design which requires minimal input from Procurement, designed to take Data to Dashboard in Minutes*.
A budget friendly spend analytics software and solution, that combines data science, business intelligence with procurement subject matter expertise. Built with purpose, to provide a future proofed, robust, Spend Analytics Software Solution.
Spend Analytics Software - Video YouTube
▶ YouTube
What is Spend Classification