Instructor Peter Thuleen
Spend analysis is a process that an organization can perform that will allow them to identify wasteful spending and increase company profits. A spend analysis will also show spending patterns and bottlenecks that occur, which will increase company long-term savings (Sharfaei, 2013). This process may be difficult and time consuming, however, with cooperation with each department and proper data analysis and presentation, a spend analysis will be extremely beneficial in the long run. The following information describes what a spend analysis is, skills and tools needed for the data analysis, how a Six Sigma ...view middle of the document...
Data analysis involves collecting all of the necessary data needed, transforming the data, and extracting pertinent information which will lead to conclusions on how the organization implement changes that will help them to reduce spending and increase profits. Data analysis skills are important when conducting a spend analysis because the team that is evaluating the data must have an understanding of what goods and services need to be purchased, who purchases them, what expenditures are critical to organization, if there are opportunities to consolidate invoices, have the ability to calculate the potential savings from the spend analysis, and more (NePP, 2014).
Data that is compiled and evaluated by the data analysts can be constructed into charts and graphs which will give other members of the organization a better understanding of the spend analysis. Charts and graphs help to consolidate large amounts of data in an easy to read format which will clearly show certain aspects company spending. This information can be grouped into categories that do not overlap which will show where the largest amount of spending occurs. Histograms will show a continuous history of the company’s spending overall or within certain categories that have the most spending. Other charts, such as pie charts, will show members of the organization the percentages of spending of certain departments compared to other departments (Minter & Michaud, 2009).
A Structured Process
An organization may utilize a Six Sigma methodology when conducting a spend analysis which incorporates five critical DMAIC processes; define, measure, analyze, improve, and control. These processes outline steps that should be followed to improve the organizations existing processes. The defining process will define goals of what a spend analysis will accomplish and how it will help to improve the organization. This will prevent the analysts from loosing focus on their task of data gathering and analysis and will ensure that they will not waste efforts that will be beneficial to the organization (Boorer, 2009).
The second step in the Six Sigma process will measure the organizations existing processes. The data analysts will validate the current organizational processes, gather the organization’s process data, and measure the organizations current performance within the different departments in the organization and with the organization’s suppliers (Borror, 2009).
The next step in this process analyzes the information that has been gathered and will help to validate and isolate processes that are not cost effective for the organization. This will also allow the organization to determine the root causes of the isolated issues; such as issues with quality, poor purchasing policies, poor performance, and organizational compliance issues (Borror. 2009).
The fourth step in the Six Sigma process is to improve the processes that have been isolated in the analysis. The organization...