Cut costs, not corners: Smarter vendor spend analysis strategies

Procurement teams face no shortage of pressure in 2025. With budgets tightening and supply chains growing more complex, procurement teams are under pressure to do more with less. 

To respond with confidence, organizations need more than spreadsheets and assumptions. They need a clear, consolidated view of how money flows across their vendor ecosystem. That’s where vendor spend analysis becomes a game-changer.

Instead of chasing numbers across disconnected systems, this approach helps you understand what you’re buying, who you’re buying it from, and whether those relationships are delivering measurable value.

If you're managing dozens, or even hundreds, of vendors, contracts, and approvals, you're not alone. Many organizations already have the data they need but lack the visibility to act on it. The result? Overlapping vendors, fragmented purchases, and inefficient buying patterns quietly erode profitability.

Learn how to bring structure to your vendor landscape, identify opportunities to consolidate redundant suppliers, and surface actionable ways to reduce costs and streamline purchasing.

What is vendor spend analysis?

Vendor spend analysis is the process of collecting, organizing, and analyzing data that shows how much your organization spends with each supplier and what you’re getting in return. It’s a subset of broader spend analysis that zeros in on vendor relationships to uncover patterns, inefficiencies, and opportunities for cost savings and consolidation.

When you can do it right, vendor spend analysis fuels your procurement strategy and gives leaders the visibility they need to make smarter sourcing decisions. It also helps you answer critical questions like the following: 

• Are we overpaying for the same product across vendors? 

• Can we negotiate better terms? 

• Are low-value purchases inflating supplier lists and increasing risk of fraud or overspending?

By understanding exactly who you’re buying from and how those vendors impact your spend, you can shift from reactive purchasing to strategic procurement. This is a key move for teams that are under pressure to reduce costs without sacrificing purchasing agility or compliance.

Key terms to know

These essential terms will crop up as you dive deeper into vendor spend analysis:

• Spend data: The raw numbers that show how much you’ve spent, with whom, and on what

• Strategic sourcing: A long-term approach to evaluating and managing suppliers based on value, not just cost

• Tail spend: The 20% of purchases that often account for 80% of vendors, which are typically unmanaged, have low value, and are ripe for optimization

• Maverick spending: Off-contract or unauthorized purchases that bypass preferred suppliers and drive up costs

• Risk management: The process of identifying and reducing exposure to supply chain, compliance, and vendor-related risks

• Spend analysis tools: Software that aggregates, categorizes, and visualizes purchasing data to support better decision-making

   

Why vendor spend analysis matters now

In an environment of constant change, supply chain challenges, economic pressure, and changing stakeholder needs, procurement professionals can’t rely on fragmented data. Agility starts with visibility—and it’s no longer optional.

Vendor spend analysis helps equip teams to navigate shifting budgets, uncover inefficiencies, and make strategic calls faster. That way, you can move from reaction to strategy without wasting time or money. And with more eyes on procurement’s impact, analyzing vendor data becomes a direct gauge for performance.

Here’s what it helps you do:

• Reduce costs without cutting value: Identify overlapping contracts, inflated pricing, or underused vendors hiding in plain sight.

• Curb maverick spend: Flag purchases outside approved suppliers and redirect spend to negotiated contracts.

• Strengthen supplier negotiations: Arm yourself with hard data during renewals and requests for proposals to lock in better terms.

• Improve compliance and governance: Use spend trends to reinforce purchasing policies and mitigate supply chain risk.

• Drive organization-wide alignment: Support finance, operations, and sourcing teams with consistent, centralized vendor insights.

   

Six steps for effective vendor spend analysis

To get the full picture of your vendor landscape and act on it, you need more than a spreadsheet. Follow these six steps to analyze vendor spend with purpose, clarity, and impact:

1. Define your KPIs

Vendor spend analysis only works when you tie it to measurable goals, so start by identifying what success looks like. Common key performance indicators (KPIs) include:

• Total vendor spend over time

• Percent of spend under contract

• Number of active vendors per category

• Percent of tail spend

• Maverick spend as a percent of total spend

• Cost savings from vendor consolidation

   

2. Gather internal and external data

A complete view starts with gathering data from multiple sources: purchase orders, invoices, supplier master records, contract terms, and delivery reports.

All Amazon Business customers get access to Amazon Business Analytics with detailed, accurate per-transaction data, monthly spend summaries, and customized report templates. Business Prime members can use Spend Visibility and more analytics tools to consolidate and track this information in real time, centralize vendor data, and highlight trends automatically.

3. Classify suppliers and categories

Group vendors by what they provide, how critical they are, and the risk they carry. Two common approaches include:

• Commodity-based grouping, such as for office supplies, IT, and maintenance, repair, and operations

• Risk-based classification, like single-source, geopolitical exposure, and responsible purchasing alignment

Knowing which suppliers are strategic versus transactional helps you prioritize relationship management and contract strategy.

4. Evaluate cost drivers and risks

Once you categorize your supplies, analyze the why behind the spend. To do this, look at:

• Profit-impact categories and pricing trends

• Payment terms and discount structures

• Risks like late delivery, sole sourcing, or compliance gaps

Modern procurement solutions make this easier by providing dashboards and visualizations that surface spend anomalies, renewal dates, and contract exposure without manual digging.

5. Consolidate opportunities

With solid data in hand, it’s time to find areas to streamline. That might include:

• Consolidating similar vendors under one negotiated agreement

• Leveraging bulk-buying discounts, such as business-only pricing from Amazon Business

• Creating custom supplier catalogs to steer spend

These changes support better pricing and stronger vendor accountability without sacrificing flexibility.

6. Deploy improvement measures

Turn insights into action by updating your processes and enabling automation. This might include:

• Auto-approvals for low-risk purchases

• Standardized sourcing templates

• Quarterly vendor reviews and alerts

Amazon Business integrates with budgeting tools like Precoro and Fraxion to automate workflows and maintain alignment across teams. Scheduled cross-functional check-ins over time also keep your vendor strategy optimized.

Strategies for optimizing vendor spend analysis

Applying procurement best practices to vendor spend analysis helps procurement leaders better align their supplier strategies with evolving business needs. 

Using these tactics, you can support smarter decision-making, stronger supplier performance, and long-term cost control:

Use benchmarking for negotiation

Benchmarking external market data against your current vendor pricing reveals where you might be overpaying or missing out on value. This helps you enter negotiations with stronger leverage.

The data proves benchmarking’s worthiness—according to the Hackett Group’s 2024 benchmark analysis, the most efficient organizations spend 21% less on procurement efforts than their peers, leading to a 2.5x greater return on investment.

Automate reporting and monitoring

Manual tracking wastes time and introduces risk. Procurement analytics tools, on the other hand, can automate reporting on key metrics like contract compliance, maverick spend, and vendor performance trends. This not only can save you hours each week but also can help you flag issues early and track them over time.

Centralize your data sources

Disconnected tools and siloed teams limit visibility. Meanwhile, centralizing vendor data across invoices, purchase orders, contracts, and communications lets you identify spend patterns, reduce redundancy, and act faster when supplier issues arise.

Develop consistent categorization rules

Category management starts with defining and enforcing clear spend categories. Whether you group vendors by product type, department, or risk level, consistent rules guarantee that you’re comparing apples to apples and can surface hidden savings across business units.

Use vendor scorecards

Scorecards provide a standardized way to track vendor performance across criteria like cost, delivery, quality, and risk. They also support fair evaluations, improve supplier accountability, and ensure that the right data informs contract renewals or sourcing decisions.

How to spot inefficient vendor spend

Inefficient vendor spend often hides in plain sight. These common red flags signal that it’s time to reassess how you manage suppliers, contracts, and approvals:

• Duplicate suppliers or invoices: Multiple entries for the same vendor, or repeat invoice payments, inflate costs and disrupt financial accuracy. Instead, use digital invoicing software to flag duplicates automatically. 

• Missed volume discounts: When teams buy in small quantities or spread purchases across too many vendors, they often miss out on bulk pricing. Consolidating orders under preferred suppliers, however, unlocks significant savings.

• Overreliance on high-cost suppliers: Some vendors may charge above-market rates or include hidden fees, which gradually drains your budget. Because of this, benchmarking tools and competitive bidding processes are a good choice to make sure you’re paying fair prices.

• Maverick spend: Off-contract purchases can lead to inconsistent pricing and compliance risks to buying policies. Guided Buying and procurement enforcement tools can keep maverick spending under control.

• Lack of contract visibility: Siloed or out-of-date contracts make it easier to miss renewal deadlines or accept unfavorable terms. Using centralized contract management instead gives you control, accountability, and better leverage during negotiations.

   

How to choose the right vendor spend analysis tool

The right tool depends on your organization’s size, current processes, and long-term goals. From small teams just starting to track spend, to complex organizations managing hundreds of suppliers, there’s an option that can meet your needs. Here’s how the most common choices compare:

Spreadsheets

Spreadsheets are a practical choice for early-stage or low-volume tracking. They’re flexible, familiar, and low-cost. However, because updates are manual, it’s easy for outdated information to circulate and slow decision-making.

BI tools

Business intelligence (BI) platforms like Tableau and Power BI offer robust visualization and querying capabilities. They’re a natural next step when you need more insight than a spreadsheet can provide, though they require setup, maintenance, and skilled users to get the most value.

Spend analysis software

Purpose-built spend analysis tools provide automation, categorization, and dashboards out of the box. They help teams of all sizes track, manage, and optimize spend across vendors without the need to build reports or processes from scratch.

Each tool has a place in your procurement tech stack—but if you're managing multiple suppliers and budgets, spend analysis software is your best bet.

Spend smarter and scale faster with Amazon Business

Effective vendor spend analysis is a foundation for smarter procurement and stronger supplier relationships. With the right spend analysis software and a focus on clean data management, procurement leaders can surface hidden cost-saving opportunities, reduce risk, and make faster, more informed decisions.

In today’s volatile economy, the power of collaboration matters more than ever. Because of this, strategic supplier relationships are essential for cost control, continuity, and long-term value. By applying the strategies in this guide alongside powerful procurement tools, you can better equip your teams to align spend with business goals and scale with confidence.