Spend Analysis in Procurement: Strategic Sourcing and Cost Savings for Higher Education

Procurement in higher education is a multibillion-dollar enterprise. Every year, colleges and universities spend billions on goods and services, from cutting-edge technology to office supplies and food services. With today’s renewed emphasis on cost control amid increasing budget constraints, procurement teams can be leaders in reducing costs.

One area that can produce significant savings is spend analysis in procurement.

Procurement spend analysis takes an in-depth look at data to find efficiencies and opportunities for reducing costs by consolidating spending, negotiating better deals, and driving more strategic sourcing decisions.

The Procurement Spend Analysis Process

There are several key steps to take in procurement spend analysis to ensure you generate the insights you need:

1. Data collection and cleansing: Data must be accurate and comprehensive. Your data collection and formatting need to be consistent.
2. Spend categorization: The data is separated into categories to provide insights into spending patterns.
3. Reporting: Data analysis provides visualizations and reports areas for savings and actionable insights.

Spend Analysis and Strategic Sourcing

Spend analysis can play a significant role in strategic sourcing. By identifying high-spend areas and categories, you can focus on their potential for cost savings, investigate alternate supplier sources and new suppliers, and compare your spending to current market pricing.

Here are examples of how spend analysis works:

• Technology: Procurement spend analysis can identify redundancies in hardware or software, opportunities to negotiate more favorable contracts, or switch to cloud services to reduce costs.
• Facilities management: Spend data can surface areas for optimization, such as utilities, maintenance services, or janitorial supplies. This area is often ripe for consolidating contracts or adjusting procurement to find more energy-efficient and sustainable solutions.
• Office supplies: The cost of office supplies and equipment across campus can add up quickly. Spend analysis can uncover opportunities for standardizing and centralizing purchasing, consolidating suppliers, or buying in bulk.
• Academic resources: Analysis might look for opportunities for negotiating better pricing with publishers for textbooks and software, consolidation, or exploring open educational resources (OERs) or subscriptions to lower costs.

You can also use this data as a baseline for tracking improvements over time by categories and seeing the impact of any changes.

E&I Cooperative Services: Strategic Spend Assessments for Procurement

E&I Cooperative Services offers Strategic Spend Assessments (SSAs) for its members. Procurement analysts review and analyze your spending data for opportunities to reduce costs, control spending more effectively, and maximize spending control and efficiencies.

Typically, this involves a review of 12 months of spending data, readily accessible in your A/P and P-card systems. You get a detailed report broken down by categories and top suppliers.

Contract Alignment

The E&I Cooperative Services team will also match your category spending and the Cooperative’s contracts against your supplier base. This uncovers any opportunities to lower costs by bringing more spending under E&I contracts.

Cooperative agreements, and tapping into collective purchasing power, can produce significant savings. According to a study by the American Association of State Colleges and Universities (AASCU), using sourcing and purchasing cooperatives was rated by procurement professionals as a leading source for cost containment.

Consolidation Potential

Exploring consolidation opportunities can unlock substantial savings. E&I’s SSA will demonstrate the financial impact of consolidating purchasing within categories by reducing your supplier base and taking advantage of savings, rebates, and supplier incentives.

Alternate Suppliers

You also receive a breakdown of alternate suppliers that are active in your spending categories. This allows you to compare contracts and costs to identify if there are better deals available than those offered by your current suppliers. Benchmark pricing information can help you negotiate more favorable agreements if you decide to continue working with your current suppliers.

Patronage Refunds

As a non-profit, E&I Cooperative Services provides patronage refunds to members based on spending levels. This year the Cooperative returned $3.35 million to members in cash through its patronage program.

No Cost to Members

Strategic Spend Assessments are provided at no cost to E&I members. There is no obligation to take action based on the findings, although most reports uncover significant ways for colleges and universities to save.

E&I Cooperative Services is the only non-profit, member-owned sourcing cooperative focusing solely on the education sector. Leveraging bulk purchasing power from members, E&I negotiates contracts with leading suppliers, helping members realize significant savings opportunities. Members can choose to opt into cooperative contracts, and there is no obligation or minimum spending threshold.

Contact E&I Cooperative Services to discuss procurement spend analysis for your institution.