Spend reporting by vendor with dollars and unit volume

Description

blank in Corporate Performance Management (CPM) software involves tracking the purchase spend across different vendors, broken down by the dollar amount and quantity purchased. This capability allows organizations to have a comprehensive view of their purchasing behavior and trends, contributing to better cost management, improved vendor relationships, and strategic procurement practices.

Example Use Case

Scenario: A manufacturing company uses CPM software for their procurement processes. They want to be able to see their overall spend on different vendors for raw materials, along with the volume purchased.

Solution: The company plans and reports on a Vendor dimension in their planning model which collates all spends across vendors and presents it in terms of dollar spend and unit volume. With this, the company can identify vendors that offer competitive prices and analyze their purchasing patterns for cost optimization.

Considerations

While planning spending on a per vendor basis may seem obvious, many systems on the market will struggle with this function. This often is a result of transactions being posted to the ledger without the appropriate vendor + unit tagging. When actuals are imported into the planning system, they must be tagged to a specific vendor to be useful. Including units that are matched to a vendor also requires a more detailed level of tagging inside the GL that is difficult to achieve due to the labor involved in high volume / high transaction environments.

Sometimes vendor spend analysis is simple - for example, a business wants to break down all software costs by vendor to track down waste and duplicative spends. In other cases, they want to plan a spend on something elastic like computing power by volume and expected discounts based on that volume. The more granular you want to get with vendor spend analysis the more implementation services you can expect.

For larger organizations that have a dedicated procurement system, this may contain a cleaner source of data than your general ledger. Even then those outputs must be appended with other vendor spend data (like from credit cards) where the procurement application was not used.

In the end, really harnessing the power of vendor spend planning requires solid source data to start with. Installing a CPM system first and looking at your source data second will usually result in disappointment.

Questions to Ask a Vendor

• Data Aggregation: How effectively does your system handle the aggregation of spend data by vendor, in both dollar amounts and unit volumes? What do you need from us to make that happen?
• Data Model: How do you treat vendor in your data model? Is it a dimension or an attribute? (this will effect how you can use Vendor in a planning model)
• Rules: Can we insert rules that change the price of what we spend with this vendor based on unit volume tiers?
• Comparisons: Can we place two vendors who sell the same product side by side in order to analyze the cost differences by volume?