Supplier Analysis: Three steps to more powerful purchasing

Powerful purchasing maximizes any organization’s efficiency and ability to respond to customer demands. But the complexity of enterprise-level procurement can make it hard for managers to identify areas for improvement that will have real impact.

When we have a problem to solve, we start by looking at the data—and fortunately—purchasing is rich with it. Data reveals employees’ purchasing behavior—what they’re buying, how much, from where, and how much time it takes to get what they need—and makes it easier to pinpoint the steps you can take to improve. But many purchasing leaders don’t have time for data analysis or don’t know which patterns to look for.

Amazon Business can help with a free Supplier Analysis. We’ll look at your company’s spend data (honing in on tail spend—more on that in a moment), to 1) reveal patterns and trends, 2) identify opportunities for improvement, and 3) build a roadmap to take your purchasing to the next level—three steps toward a better purchasing process that can move your organization forward.

Before we dive into the details of this complimentary benefit, let’s talk about tail spend, and why we focus there first.

Tail spend—the blind side of procurement

Tail spend goes by many names: non-contract, non-catalog, unmanaged spend. Essentially, it’s the unplanned purchases for which you don’t have a negotiated price or planned purchasing agreement. Tail spend can include categories like maintenance, repair, and operations (MRO), IT peripherals, office supplies, breakroom products, and more. It usually accounts for about 20 percent of purchases,¹ and depending on the size of the organization, it can involve hundreds of internal buyers freely using their p-cards across an immense variety of retailers.

Managing tail spend through traditional methods is prohibitively time consuming for management and staff, so purchases are often overlooked or made under the radar. This makes tail spend an ideal hiding place for waste, and even fraud.

The good news? Tail spend is an ideal area for transformation. Data analytics, automation, and machine learning are helping companies get their tail spend under control, without it controlling their time. In fact, it has become a strategic lever they can pull to accelerate efficiency. As a result, organizations are moving more categories from managed to “unmanaged” to save time and reduce costs.

For your Supplier Analysis, we’ll focus on tail spend that is occurring within your corporate card program. It’s a great place to start to empower your organization with visibility and insights that can lead to immediate improvement.

Here are the three steps of Supplier Analysis and how your business can benefit.

Step 1: Reveal patterns in your company spending

To get started, we will connect you with an Amazon Business Customer Advisor (CA). You’ll provide some data from your company credit cards (p-cards or T&E cards will give the most actionable data, but if those aren’t available, we can use data from your expense management system). In about a week, your CA will set up time with your team to walk through the data and show you what we found.

Findings will focus on specific patterns and trends among teams and within product categories. You will learn more about your employees’ purchasing behavior, especially those habits that might be creating unnecessary hard and soft costs.

Our goal is to give you a level of insight you haven’t had before. Many companies tell us that this is the first time they have seen a full picture of their tail spend.

Step 2: Identify opportunities to improve efficiency, transparency, and reduce costs

Once you understand the patterns, the next step is to identify opportunities for improvement. These insights will be tailored to you. For example:

• Inefficiencies: How many hours are your employees spending making trips to the store? What are the labor costs (i.e., time spent in transit and expensing receipts)? How might that be affecting productivity?
• Transparency: How much tail spend, in total, is happening across suppliers, both local and e-commerce? Where is contract leakage happening? How could that inform changes to your purchasing policies? Are your employees expensing personal subscriptions for work purchases (e.g., Amazon Prime)?
• Cost savings: How much could you potentially be saving on miscellaneous purchases, strategic products, across categories? What is your potential exposure to high freight costs? Could you reduce costs by streamlining payment channels?

Step 3: Build a roadmap to more powerful purchasing

You know your opportunities; now it’s time to talk strategy. Your CA will demonstrate concrete actions you can take to help you achieve immediate savings, and where to adjust your procurement strategy for long-term success.

Immediate savings

Immediate savings, both hard and soft, can often be realized by moving your tail spend to Amazon Business, a digital solution for business purchasing and procurement management. Amazon Business offers business-relevant selection from hundreds of thousands of suppliers. We will show you how savings in key categories can have real impact on your bottom line and how we can help drive compliance with your internal purchasing policies.

For one leading frozen foods manufacturer, Supplier Analysis identified $25K in unmanaged spend on Amazon.com, plus nearly $400K in purchases by corporate cardholders that, if they were to transition to Amazon Business, the company could potentially access better prices and reduce labor costs by consolidating suppliers and cutting down on trips to physical stores.

For a nationwide propane dealer, Supplier Analysis revealed significant labor costs associated with the purchase of supplies at physical stores. As a result, the company has added 163 users to its Amazon Business account where they can promote more efficient procurement behavior and have greater visibility into spending.

And for Cortland, an apartment community management firm, a Supplier Analysis of 12 months of purchasing data revealed that community managers were using their personal Amazon accounts to source supplies. The community employees were comfortable navigating Amazon as in their personal lives, but ordering on individual accounts posed a possible security risk to the business. Cortland leadership has added employees to an Amazon Business account so they can continue to order from the familiar interface, while leveraging business features to standardize and scale purchasing.

For Scott Purcell, Community Manager of Cortland Peachtree Corners in Atlanta, the benefits are evident. “We’re able to source most of our standard day-to-day items, like office supplies and bottled water as well as difficult-to-find maintenance parts. We’ve even seen a 50 percent cost savings with water filters. It’s also been easy to use Amazon Business, especially now that we’ve integrated it into our billing system,” says Purcell. You can learn more about Cortland on our customer success page.

Long-term strategy

Your long-term procurement strategy will look beyond tail spend toward holistic digital transformation across all sourcing categories. We will show you how you can transition entire categories of indirect spend for even greater savings, integrate Amazon Business with 90+ e-procurement tools, get unparalleled visibility into employee purchases, and automate reporting and inform strategy with the latest advancements in AI and machine learning.

Finally, we will look at how, over time, digital purchasing solutions can positively affect employee satisfaction and retention. A recent study by the Hackett Group noted that 89 percent of companies surveyed saw an increase in internal customer satisfaction when they shifted to digital B2B e-commerce.

After we worked with global marketing research firm Nielsen on Supplier Analysis, their Sr. Sourcing Analyst noted, “We hadn’t had that level of insight before and having it reviewed and summarized for us saved us a great deal of time. It also allowed me to begin refining certain elements of our Amazon strategy and management of our rogue spend.”

Learn more about Supplier Analysis in the on-demand webinar. Watch now

Ready to get started? Request a free Supplier Analysis

References

1. “Overcoming Procurement Challenges in the Age of AI and Digital Transformation.” IDC. 2020.