ISM-Dallas August 8 th, 2013 Data – The Communicator in the Procurement Lifecycle: Spend Analysis and Supply Chain Business Intelligence David M. Cravens.

ISM-DallasAugust 8th, 2013

Data – The Communicator in the Procurement Lifecycle: Spend Analysis and Supply Chain Business Intelligence

David M. Cravens

Iasta

http://www.iasta.com/

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Top Pressures Facing Procurement Leaders

Top down directive to identify & cut costs

Inflationary pressures on critical spend categories / commodities

Increased complexity in supply chain due to globalization

Increasing supply risk (suppliers financial health & ability to

perform)

Lack of category expertise in strategic spend areas

Lack of proper data to drive category strategies

65%

48%

41%

34%

31%

41%

30% 40% 50% 60% 70%20%

Source: AberdeenGroup, June 2011

In 20 years, the corporate profile of

procurement has heightened.

This has led to an

increased focus on a diverse set of

pressures.


Procurement Enablement – Leading Enablers

Best-in-Class

Industry Average

Laggards

CPO’s view Spend Analysis as the most important enabler.

Access to data is a

critical component to a Best-in-Class

procurement team.

Category Specific Solutions

(Expense, VMS, SMS)

eProcurement (Requisitioning &

PO generation)

Contract Management

(repository, authoring, compliance)

eSourcing (Rfx - RFI, RFQ, RFP,

reverse auction)

Spend Analysis

50%

25%

14%

54%

57%

46%

58%

43%

55%

59%

39%

32%

89%

63%

46%

50% 60%40%30% 70% 80%20%10% 90%



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Procurement Maturity

Best-in-Class groups realize 12 times more

negotiated savings when compared to

Laggards.

Furthermore, they have 4 times more of their

spend under management.


Spend formally negotiated

Spend formally negotiated & realized

Spend under management

Best-in-Class

Industry Average LaggardMetric

51% 27%

18%

70%

11%

Top Procurement KPI’s by Maturity Class

5%

21%85%

60%


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The Evolution of Purchasing

CentralizedDecentralized Category Management Integrated Category Management Center-Led

DECENTRALIZED“Procurement? Elevator to the basement, past the furnace room, last door on your left.”

Easy to implement, flexible for small companies

Sourcing duplicated across departments

Sourcing initiatives uncoordinated & fragmented

No direction, vision, not a company focus

No tools

Procurement has little impact

Procurement’s Role in the Organization

REACTIONARY TRANSFORMATIVE


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CATALYTIC COMMENT

“There’s got to be a better way to combine spend to save money – and to work with low-cost suppliers.”- CFO



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CENTRALIZED“Everything goes through Joe. Why? I guess we can’t be trusted with the corporate card.”

A central group who sources for the entire organization

Increased direction and vision

Use of basic tools

No category expertise

Little departmental buy-in

Procurement has limited impact





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CATALYTIC COMMENT

“I know my department’s needs better than Procurement does. Pinching pennies is killing us.” - Department Head



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CATEGORY MANAGEMENT“Procurement is good for the areas where it makes sense to ask for Procurement’s input.”

Cross-functional group who collaborates on strategy for particular categories

Categories reviewed more holistically – not just sourcing – now SRM, CM, etc.

More robust tools but still operational usage

Execs initially committed but not long term

No vested interest from departments for Procurement to succeed. Dwindles over time.

Procurement’s impact is improving, but less than average





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CATALYTIC COMMENT

“The Departments have different KPIs than Procurement – or even the whole company has. If they ignore our guidance, we can’t win.” - Procurement



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CENTER-LED“Procurement helps us do our jobs better, and saves the company money along the way.”

Cross-functional group

Sourcing category managers now sit with each department

Proactive – initiatives and ideas are caught right at the starting point

Tools are expected

Still requires internal selling effort

Very dependent on particular group

Procurement’s impact improving but still not fully realized





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CATALYTIC COMMENT

“We need to align the KPIs of Procurement with the KPIs of our various business units.”- CFO



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INTEGRATED CATEGORY MANAGEMENT“Procurement? It’s part of how our team works, and a guiding voice for how our company succeeds.”

High level execs have dotted-line reporting to CPO with long term executive support

Executives understand value of Procurement

Tools are mandatory part of business

Departments incented to participate – report up

Category managers given one direction

No longer an internal sales job

Procurement has maximum impact





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SUMMARY COMMENT

“… a majority of those in procurement leadership (i.e. “CPO” role) are bound in helping transform it.”



Struggling with spend analysis, the merger compounded the situation

• No central data repository

• Oracle extraction efforts were “blunt force” efforts, no legacy Nortel SAP data was included in the deal

• Indirect data wasn’t a focus until shortly before the deal was announced

• Data wasn’t cleansed or structured

• High degree of manual effort to determine basics (top vendors, top categories, total spend)

• Push to identify merger synergies fast

• Huge demand for analytics

• Budget made available

• Willingness to try new solutions

• On-demand solutions met the price point

• Nothing to lose, everything to gain


Data – The Communicator in Unique Deployments BPO Deployments

Communication is the primary differentiator between successful and unsuccessful Procurement BPO efforts

Spend Analysis is an accelerant in BPO scenarios, but also a common source of information shared by in-house and remote teams

Multinational Deployments When combined with other data (sourcing, resource

planning data), as with Iasta’s CPO Dashboard, a spend analysis platform allows collaboration


Spend Analysis – The Classic (OLD!) View

Cost CenterVendor

Com

mod

ity

Electronic OutputMultiple (3+) extracts

Electronic OutputLimited value

Manual data collectionMixed quality

QSI Application

Enrichment: • Vendor grouping• Commodity assignment• Integration of additional information

(approved vendors, contracts, etc.)• User feedback

Paper

Invoices

GLDataAP

Data

E-ProcData

Purchasing Card

InvoiceDetail

AP Systems- Transactions- Vendors - Cost centers - Material Groups 200- GL Codes

Procurement Card- Transactions- Vendors- Cost centers- GL Codes

Invoices- Transactions- Vendors

Create UsefulOutput

Analyze Data

TransformData

(Including user feedback)

Refresh Data(Real time, monthly

or quarterly)

Collect Data

(Multiplesystems)

The goal of spend analysis is never simply “clean data”.

This process is not an end in itself. Rather, it is a means by which to create clarity and therefore make leverage available to organization(s).


Spend Analysis as Business Intelligence (BI)

Business Intelligence (BI) is about connecting people using a proper information infrastructure, enabling them working more closely together towards company and personal goals. This means collaboration with data and people.


Means vs. Ends

Most of the “Means” of Spend Analysis are similar… Raw data is cleansed, rationalized, or enriched Data transformation occurs in software to ensure

iterative refresh success Data is delivered and experienced by end user through

interactive reporting

…but the “Ends” often differ. Procurement Transformation Category-Specific Savings Regional/Departmental Politics! Data Control (IT) Most importantly - Collaboration


ISM-Dallas August 8 th, 2013 Data – The Communicator in the Procurement Lifecycle: Spend Analysis and Supply Chain Business Intelligence David M. Cravens.

Documents

management best

tools procurement

category strategies

procurement lifecycle

procurement leaders

decentralized procurement

procurement kpis

class procurement team