1. Why are data analysis skills and thinking so important to spend analysis? Can’t software applications be used to generate the information needed automatically? In today’s world, advanced technology has provided us with a lot of tools to help sift through and process huge amount of data. However, in spite of all this, the fact remains that data is useless without the skills to analyze it. Critical thinking is still a skill inherent only to humans. Software applications are much capable of generating data automatically, however, only one equipped with data analysis skills can translate that data into information that can support corporate decision-making. Equipped with the right data analysis skills, one would be able to select the significant data from the wide array available and turn it into actionable information. These skills are important in spend analysis as the most critical stage is making sense of the output and deriving strategic solutions based on the information available. The employment of data analysis skills and critical thinking in spend analysis is necessary to reach the goal of enjoying the benefits of spend data management which include reduced material and services costs, better supplier and product management, and lower inventory costs.
2. How might a structured process such as Six Sigma methodology be useful here?

The Six Sigma Improvement Model known as DMAIC can be used in implementing spend management in the enterprise with the aim of continuous improvement. At the Define stage, the team will outline their business goals pertaining to the spend analysis initiative, which could include decreasing total cost of ownership and enterprise spend visibility. The team would also have to identify which data need to be secured in relation to the objectives. Moving on to the Measure stage, the spending process is defined and measured, and data is collected. Key metrics in the spending process are also established. Methods such as benchmarking against best practices and calculating variances from set baselines can be used. Having done so, the team now proceeds to the Analyze stage where the information is reviewed to identify opportunities for improvement in the spending process and derive strategic options to achieve the company’s goals in initiating spend management. This stage translates data collected into actionable information. Tools such as cause-and-effect diagrams, flowcharts, and histograms can be employed. In the next stage Improve, the opportunities and strategic options determined are now translated into processes and procedures which can be implemented in the organization. The successful implementation of such would translate to improvements in process quality, which in continuity would ultimately lead to excellence in spend management. At the final stage, Control measures that are significant to the business goals of the initiative are put into place to make sure that improvements have been achieved and if so, that performance levels are sustained.
3. Why is it important to get other functional areas, notably finance, involved in spend analysis efforts? Can you think of some other functional areas that should be involved?

A representative/s from finance is necessary in spend analysis efforts as they have access to enterprise data which are essential to understanding organizational spending. As the keeper of the company’s financial records, finance has the data on how the company’s resources are utilized and allocated. Furthermore, they manage accounts payables and therefore have a good idea of the company’s spending per supplier, including the timing of spending. Along such information are the invoices kept by finance, which is important to determine items purchased, the quantity, and the unit costs. These data can serve as a basis of what additional data need to be extracted. Furthermore, on a higher level, finance has the data on product and/or services costing, which would give the team an insight on how the purchased inputs contribute to the final output. This establishes the significance of each input in the firm’s production or service processes, and therefore is a good basis of ranking cost drivers in the company. Aside from finance, representatives from operations such as the inventory or raw materials manager, maintenance manager, and logistics manager should be part of the team, as these people/groups are the biggest end-users in the company’s spending process. Majority of the company’s annual spending are to serve the requirements of these departments. Therefore, they should be onboard the spend management initiative for easier implementation of any improvements in the sourcing process.
4. What Opeman concepts in the case will help increase productivity?

In order to produce goods and services, a firm needs utilize and convert various resources. In order to increase productivity, a firm can either reduce input while achieving the same level of output or seek to maintain input while increasing output. Spend management pertains to the former, as it seeks to improve enterprise spending while still being able to produce the goods and services required by the market. The various resources that go into the production process have costs; thru spend management we take a closer look into the expenditures for these resources and use information derived from such exercise to better utilize and allocate the company’s financial assets in sourcing the needed inputs for the business. By managing spending while still achieving desired output, spend management ultimately adds value to the company, as it drives down cost by pursuing informed strategic sourcing strategies.