Unlocking the Spend analysis myth
- 1. 1 Unlocking spend analysis myth
- 2. Topics Definition of spend analysis Why its important Benefits of analyzing spend Why you should do it? Ways of analyzing spend. How to do it? Deliverables How to measure the outcome? Solutions Who can help me?
- 3. Why The Need to Manage Your Spend Data?
- 4. Can you answer these questions? Which is the most critical categories for your business? Which supplier supplied for maximum contract value? What was your unplanned or maverick spend? How many suppliers were active in past 6 months? What other geographies are acquiring? For how many categories you have a global contract and shortlisted suppliers? Which categories represent the most spend reduction opportunities? What is your direct/indirect classification? What is the percentage of quality issues you had with individual suppliers?
- 5. Decision Making in spend analysis Using Maverick spending as a KPI. To discover maverick spend, find out the items which were procured by specific units of your organizations and the orders were placed with unlisted suppliers and without contracts.
- 6. Key Spend analysis Opportunities Three key reasons for planning and implementing best practices in spend management are: Compliance and Process improvement Visiblity
- 7. Business Drivers for spend analysis Strategic Sourcing Procurement 1. Identify non-preferred spend 2. Identify disparate terms and conditions 3. Identify potentially over-represented categories. 4. Identify unplanned and over-budgeted spends. 1. Identify spend volume with contracted suppliers. 2. Identify quality issues with contracted suppliers. Supplier Management 1. Evaluate supplier performance via financial and operational metrics 2. Collect and manage key supplier documents in order to meet contractual and social obligations 3. Evaluate supply base for risk (denied/debarred parties)
- 8. Spend Analysis Steps • Standardize, Normalize, and Enrich your spend information • Identify Exceptions Extract, Cleanup and Validate the Data • Get all the supplier spend linked to the corporate parent • Categorize supplier spend • Understand supply base risk, dependencies, and socio-economic breakdown Rationalize your Suppliers • Categorize spend data to a sourceable commodity structure • Does your system capture good descriptions? • Do you use them to allocate to the right category? Code for Insight & Assess the Details • Uncover strategic sourcing opportunities for immediate savings • Improve internal controls • Comply with government controls Identify and Act • Standardize on commodity framework across the company • Capture intelligence closer to the transaction for higher compliance • Supplier on-boarding & detail coding Implement Process Improvement
- 9. What spend analysis delivers? Data Quality • Standardized – consistent formatting • Cleansed – identify duplicates, fix errors • Consistent – data represented in the same manner • Current – ongoing updates to manage business change • Grouped – categorized and classified • Granular – detailed data available Knowledge Enrichment • Completeness – fill in missing data for master information, hierarchies, demographics, relationships • Expand – provide new insight • Risk – identify possible disruption in supply or supplier support Process Improvement • Spend Visibility – access to enterprise view of corporate expenditures • Supplier Evaluation and On-boarding – pre-qualification of suppliers • Policy Compliance – exception handling, workflow and monitoring
- 10. Spend Analysis Benefits Baseline for strategic sourcing initiatives Enabler for process improvement Measurement device for cost reduction programs Comprehensive spend visibility across direct and indirect commodities and services Significant cost-savings opportunities through supplier and commodity consolidation Enhanced compliance through effective spend and supplier monitoring
- 11. Thanks Visit Procurepack.com for more information on e-procurement/ e-sourcing.