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Conference TitleDate
Martin Bolden
An Introduction to Procurement Management Information
IN THE SPIRIT OF TRANSPARENCY…
• Why are we doing this?• What problem are we solving?• Is this actually useful?• Who is it useful to?• Will this change behaviour?• Is there an easy way?
PROCUREMENT MANAGEMENT INFORMATION
How many people in the room have conducted a
spend analysis in the last year?
Ask questionsHow many of you found
it useful?
• You’re likely being asked to cut spending, but not services.
• Increased pressure to collaborate internally and externally
• Concern with local/small/ sustainable suppliers
• Spend transparency or FoI
WHY BOTHER DOING SPEND ANALYSIS?
Spend analysis has little value as an intellectual
exercise. When it is used as a strategic business tool it becomes a key enabler for change.
TAKE ACTION
• Manage spend more strategically• Manage spend activity more
efficiently• Change buyer behaviour• Increase spend under contract• Procure sustainably• Buy collaboratively• Deliver savings
Solid Box
HAVE A GOAL IN MIND
• Your supplier base• Your spend categories• Common suppliers• (Non) Contracted spend• Commodity detail
Solid Box
WHAT DO YOU NEED TO ANALYSE?
• What sources of data are readily available to you?– Accounts Payable– PCard– Purchase Orders– Contracts
• Think about how complete a picture is necessary to achieve your goal
Solid Box
DATA SOURCES
1. Supplier Name2. Supplier Address3. Transaction Number4. Transaction Date5. Transaction Value
THE FIVE PIECES OF DATA YOU NEED TO GET STARTED
• Data:– raw, unorganised facts that need to be
processed. Data can be something simple and seemingly random and useless until it is organised.
• Information:– When data is processed, organised,
structured or presented in a given context so as to make it useful, it is called Information.
Transforming Data into Information
Source: http://www.diffen.com/difference/Data_vs_Information
WHAT YOU DO TO THE DATA…
Enrich
Classify
Cleanse
SpendM.I.
pCard Data
AP Data
PO Data
Implement a repeatable process if you want to track performance over time!
THE TYPICAL APPROACH TO IN-HOUSE SPEND ANALYSIS
Export spend data from all
systems
Combine data exports
Sense check combined data
Manually classify suppliers/spend
Enhance vendor information
(largest suppliers)
Manipulate in Excel
IF YOU USE A THIRD PARTY, YOU SHOULD EXPECT
Export spend data from all systems
Standardise exported data
Check fitness/accuracy of
data exports
Validate exports with you
De-duplicate supplier records
Classify vendors/spend to a common taxonomy
Validate classifications
Enrich vendor information with third party data
Group common suppliers across
datasets
Provide MI tools with pre-built
reports
POTENTIAL SOLUTIONS
Software Focused• Financial system reporting tools• Analytics/BI tools
Data Focused• Spend analysis service provider• Hire a data analyst (or two)
Guidance Focused• Customised consultancy project
• Raw data is frequently incomplete and of poor quality
• Access to data may be difficult• Multiple and poorly integrated
systems (AP, pCard etc.)• Time, skilled resources and
support may be lacking
WHAT CHALLENGES MIGHT YOU FACE?
• Software tools are not automatic.• Accurate classification is not easy.• Data will arrive in many formats.• Data must be checked for errors.• Access to the raw data isn’t
necessarily straightforward.• Secure the support you need.• Get a set of tools you can use or
learn to use the ones you have.
KNOW WHAT YOU ARE GETTING INTO AT THE BEGINNING
WHAT THE INFORMATION CAN FACILITATE
SpendData
Deliver Savings
Improve Processes
Change Buyer
Behaviour
Manage Supplier
RelationshipManage Risk
Recover Over-
payments
Buy Collaboratively
Support more SMEs
Source More Locally
Ensure Legal Compliance
Benchmark Relative Position
Evidence Success
WHO COULD USE THE INFORMATION?
Spend
Data
Procurement Buyers
Procurement Managers
Contract Managers
Finance Department
Accounts Payable
Environmental/Sustainability
Officers
Economic Development
Diversity Program Manager
Audit/Legal Departments
Budget Holders
Department HeadsBuyers
SpendData
EXAMPLES OF SPEND MANAGEMENT PROJECTS
Long Tail Consolidation
2
3 4
5 6
7 8
1Invoice Consolidation
Finding Savings
Improved Terms
Category Extension
Category Rationalisation
Compliance, Contracted Suppliers
Collaboration CategoryReengineering
• Which suppliers should I seek weekly/monthly invoices from?
• Which categories of suppliers are giving me an invoice volume problem?
• Which suppliers would be best to move order and payment to pCard?
• How much could I save by moving to pCard?
INVOICE CONSOLIDATION
£Supplier Names
Aggregate number of
invoices per supplier
Average invoice value per supplier
Invoices by value range per supplier
• 5,457 invoices were processed where the value of the invoice was less than £50.
INVOICE CONSOLIDATION
• Which suppliers do I spend less than £1,000 per year with?
• Which suppliers do I only have one transaction with per year?
• Which departments are using a lot of ‘one off’ suppliers?
• Which categories do we have a lot of small suppliers in?
LONG TAIL CONSOLIDATION
£Supplier Name
Aggregate spend per supplier
Aggregate number of
invoices per supplier
Category of supplier
Department spend per supplier
• 935 vendors where less than £1,000 was spent in a 12 month period. That’s 55.92% of the vendors, but only 1.68% of expenditure.
LONG TAIL CONSOLIDATION
• Which suppliers do I spend the most with and how many departments do they supply?
• How many other suppliers are in the same category as my top tier suppliers?
• Are all of my departments getting the same “best rate?”
• How much do my top tier suppliers rely on my business?
• How dependant am I on a supplier?
£Supplier Name
Aggregate spend per
supplier (de-duplicated)
Category of supplier
Department spend per supplier
Other suppliers in
the same category
Percentage of supplier’s
turnover represented
Contracts already in
place
MANAGE STRATEGIC SUPPLIERS
• 61.79% of this college’s spend is with the top 20% of suppliers (125)
MANAGE STRATEGIC SUPPLIERS
• Which suppliers enjoy a relative monopoly of supply to my organisation?
• Which categories do I have too many suppliers in where aggregation could drive costs and prices down?
• What contracts are coming up for renewal where I could rationalise or extend my supplier base?
CATEGORY RATIONALISATION/ CATEGORY EXTENSION
£Supplier Name
Aggregate spend per supplier
Category of supplier
Other suppliers in
the same category
Department spend per supplier
Current contract
expiry date
• 11 Printing Services Providers one large, 2 medium and 8 small.
CATEGORY RATIONALISATION/ CATEGORY EXTENSION
• Which departments aren’t using the preferred/ contracted supplier in a given category?
• Which categories of spend don’t have any contracts in them?
• Are there instances where we spend more than was on the original contract?
• Is my data source up to date enough to deal with off-contract spend quickly?
COMPLIANCE, CONTRACTED SUPPLIERS
£Supplier Name
Aggregate spend per supplier
Category of
supplier
Other suppliers in same category
Dept. spend per supplier
Current contracts
Categories with no
contracts
Monthly spend data
• 36% on average spent with contracted suppliers.
COMPLIANCE, CONTRACTED SUPPLIERS
• Which suppliers does my group already share and how much is spent with those suppliers?
• Which categories does the group have the greatest spend/ greatest number of suppliers?
• When are the current contracts for members of the group expiring so that we can collaborate?
COLLABORATION, COMMON SUPPLIERS
£Standardised supplier
name/number
Standardised public sector
body name/number
Aggregate spend per supplier)
Category of supplier to common
classification Current contract expiry
date
Centrally hosted and maintained
database
Common tools that all
contributors can use
• There are 16 suppliers who supply all 4 colleges, with a cumulative spend of £3.5m. 62 suppliers provides goods and services to 3 colleges who spend £12.2m with them.
COLLABORATION, COMMON SUPPLIERS & SPEND
• Analysis tools are simply there to assist you in your search to extract valuable information and direction from data.
• The greatest tools can only deliver limited information if the data they are analysing is incomplete or inaccurate
ANALYSIS SOFTWARE
• The #1 impediment to information management success?– Accessing relevant, timely or
reliable data.
ANALYSIS SOFTWARE
Source: Information Week – November 2013
• Have objectives in mind• Spend Analysis is really the first step– Get the data in shape first
CONCLUSION
QUESTIONS/THOUGHTS/COMMENTS
For more details about how Spikes Cavell can help you to transform your data into valuable
spend management information contact :
Martin Bolden 07500 081425
FOR MORE INFORMATION