Healthcare Procurement Spend Analysis: Identifying Opportunities and Value — A Case Study Example

Context

This case study is based on practical guidance shared during Health Procurement Africa’s (HPA) Ask the Expert webinar on healthcare procurement spend analysis. The session was delivered by HPA procurement experts from Kenya and Nigeria.

Introduction

Spend analysis is the process of collecting, cleansing, categorising, and analysing procurement expenditure data to gain visibility over what is being bought, from whom, and at what cost. In public health procurement, it is a strategic management tool — not simply a cost-saving exercise. It supports national health prioritisation, supplier relationship management, inventory planning, and data-driven sourcing decisions.

The six steps of spend analysis are: identify data sources; extract and consolidate data into a central repository; cleanse data to remove errors, gaps, and inconsistencies; enrich data where basic records need enhancement; classify by supplier, category, and cost centre; and analyse to identify value opportunities. The process is resource-intensive and often requires specialist input, but the quality of the output depends directly on the quality of the data entering it.

Case Application: Spend Analysis at KEMSA, Kenya

KEMSA’s mandate is to procure, warehouse, and distribute health products and technologies to all 47 counties across Kenya’s public health system. Spend analysis is conducted at both operational and executive level, aligned to KPIs across five performance parameters: right quality, right price, right quantity, right time, and right place.

Product Classification: ABC and VEN Analysis

KEMSA classifies its entire product list using two complementary frameworks, drawing on integrated data from its SAP ERP system and Logistics Management Information System (LMIS).

The two frameworks are used together: a product may be Class C commercially but Vital clinically, requiring it to be stocked regardless of volume or value. The output includes product line availability tracked in real time for all stakeholders, month-cover projections to guide replenishment and avert expiries, and pipeline stock visibility to support decisions on expediting or holding deliveries.

Vendor Classification and Supplier Relationship Management

KEMSA uses spend data to rank suppliers by the number of stock-keeping units (SKUs) they hold and by total procurement value. This produces a tiered view of supplier criticality — identifying which suppliers require strategic relationship investment, which offer economies of scale, and which procurement methods are most appropriate for each engagement. Supplier performance is tracked against purchase order fulfilment, delivery timelines, and cost. Debt tracking against outstanding balances informs fund release decisions, enabling management to prioritise payments to critical suppliers and avoid supplier freezes on essential medicines.

Challenges and Mitigations

Case Application: Spend Analysis at NASDSMA, Nigeria

NASDSMA (Nasarawa State Drugs and Supply Management Agency) was established in 2021 and began operations in 2022. Its mandate covers the procurement, storage, and distribution of quality, affordable medicines and health commodities across Nasarawa State, with a focus on supply continuity. Spend analysis is used to identify price and fulfilment opportunities across pharmaceutical, consumable, and diagnostic/laboratory product categories.

ABC Analysis and Procurement Impact

NASDSMA applies ABC analysis to its full product range, calculating annual spend per item (unit price multiplied by annual quantity), ranking items from highest to lowest spend, and assigning classes using standard thresholds: Class A (approximately 70% of annual spend, 10% of product lines), Class B (20% of spend, 20% of lines), and Class C (10% of spend, 70% of lines). Analysis of 2024 and 2025 data identified that approximately 70% of spend was concentrated across five therapeutic categories — antibacterials, fluids and electrolytes, antacids and antiulcer drugs, antiprotozoals, and antipyretics — pointing to the highest-value areas for category management and specification review.

A procurement impact analysis covering 2025 found a 35% positive spend variance year on year, with 40% cost savings achieved through quarterly mini-competitions across 180 product lines affected by price inefficiency in 2024. Quarterly mini-competitions — a sourcing strategy based directly on spend analysis findings — have become a standing mechanism for price intelligence and supplier competition.

Supplier Performance and Payment Discipline

NASDSMA uses spend data to manage supplier performance across four contractual obligations: on-time delivery, full quantity, product registration compliance, and shelf life (all products must be delivered with at least 75% of shelf life remaining). A structured supplier development programme tracks performance against these standards each quarter.

Payment discipline is treated as a strategic lever. Invoice ageing analysis tracks payment timelines upstream to suppliers and downstream to facilities. From Q1 to Q4, NASDSMA improved timely supplier payments by 90 percentage points and on-time delivery by 32 points. The principle: reliable payment leads to supplier investment in capacity, which improves fulfilment for the agency.

Lessons Learned

• Spend analysis is a strategic management tool, not a reporting function. Its value lies in driving sourcing decisions, supplier development, and inventory planning — not in producing historical reports.

• Product classification using ABC and VEN frameworks together provides both commercial and clinical visibility, enabling prioritisation that reflects national health goals rather than cost alone.

• Data quality is the foundation. Fragmented systems, manual processes, and non-compliance by data collectors undermine analysis before it begins. System integration and cross-functional data governance are prerequisites.

• Supplier performance management and spend analysis are complimentary. Ranking suppliers by spend value and SKU criticality, and tracking payment and delivery performance, converts data into relationship strategy.

• Payment discipline is a procurement lever. Paying suppliers on time improves their capacity to invest and deliver, generating supply chain reliability that spend analysis alone cannot achieve.

• For capital goods, unit price comparison is insufficient. Total cost of ownership — covering acquisition, operation, maintenance, and disposal — must be the basis of meaningful spend analysis and benchmarking.

Conclusion

This case study demonstrates that spend analysis, when properly structured and sustained, transforms procurement from a transactional function into a source of strategic intelligence. KEMSA’s experience shows how integrated systems, dual product classification, and vendor ranking can drive procurement prioritisation across a national supply chain. NASDSMA’s experience shows how even a young agency can use spend data to generate measurable savings, build supplier performance programmes, and create a foundation for category management. In both cases, the goal is the same: full visibility of procurement spend, used to make better decisions for health system performance.