Glossary · Management
Spend analysis
Collecting, cleaning and classifying an organisation’s purchasing data to show what is bought, from whom and at what cost, as the basis for category strategies.
- Field
- Management
- Examined in
- CBA-CPM
- Learning objectives
- 1
Where the CBA Standards examine it
In the specimen paper
Al Munira Hospital Group in Kuwait asks for a spend baseline before its category strategies are rewritten. The analyst draws the report from the operating expenditure ledger, which totals USD 180m, and mentions in a footnote that a further USD 140m of medical equipment and building works was capitalised in the same year. What is the most important defect in the baseline as drawn?
Answer
It omits capitalised spend, so nearly half the buying is unexamined.
Why that is the answer
A spend baseline is a map of what leaves the organisation to third parties, and the accounting treatment of a purchase has no bearing on whether it can be sourced. Equipment and building works are bought from suppliers on terms that can be competed, so capitalising them moves them off the operating ledger but not out of the supply market. Here USD 140m of a USD 320m total sits outside the analysis, which means the largest single block of buying never reaches a category strategy at all. Build the baseline from third-party spend first and reconcile it to the ledgers afterwards, rather than accepting whatever one ledger happens to hold.
Related terms
- Category managementManagement
Managing a group of related purchases as a single strategic unit, with a plan based on the organisation’s demand and the supply market for that category.
- Maverick spendManagement
Purchasing that bypasses agreed contracts, approved suppliers or procurement procedures.