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Leading global excellence in procurement and supply
Sandy Duncan CIPS Yorkshire Branch Chair
Tuesday 20th August, 2013 Email: [email protected]
LinkedIn Group: CIPS Yorkshire Branch
Tail-Spend Management Webinar
Leading global excellence in procurement and supply
• Welcome to the Yorkshire branch’s first webinar – “Tail-Spend Management - How to squeeze savings from the most fragmented 20% of spend” in partnership with PROACTIS
• Agenda – Tail-Spend Overview
• What is Tail-Spend? • The opportunity
– Tackling Tail-Spend • What actually matters?
– Q&A – Summary
• Webinar Etiquette – Your phones are muted so to ask a question type it into the question panel – Any questions we can’t answer today we will reply to off-line later – The recording of this webinar and a copy of the presentation will be posted on
the CIPS web site, within the branch events section
Leading global excellence in procurement and supply
Why this topic?
Price Reduction
(up to 15%)
Increase Controllable
Spend (up to 85%)
Increase Compliance
(up to 95%)
Efficiency Increase
(up to 20%)
Significant
Value
Opportunity
Increase & Maintain
Customer Satisfaction
Tail-Spend Management:
Extract Savings from the Most
Fragmented 20% of Spend
Simon Dadswell
Marketing Director
What is Tail-Spend?
A large number of categories
Spend spread across business locations
Suppliers not known
Non-compliance
Low value, high transaction volumes
Overview
Issues High transaction costs?
Fire fighting?
Cavalier attitude to risk?
Wasted opportunity?
Why is it often ignored?
Poor data visibility
Lack of effective controls
Little market coverage
Seemingly low potential savings
Lack of interest from other stakeholders
Lack of category expertise
…..It’s not just the ‘trivial’ purchases!
Overview
The main causes:
Lack of compliance and, therefore, spend visibility
Emergency purchases
Spend not covered by current contracts
The real cost:
Paying higher prices
Large invoice-handling workload
Exposure to risk
Overview
Things to consider:
Spend visibility
Filtering & reclassification
Sourcing
Online eRFx & eAuction tools
Spot buys
Repeat spot buys onto contract
Accelerated sourcing techniques
Purchase-to-Pay
P-cards, online catalogues, punch-outs
Accounts Payable
Overview
Analysing Tail-Spend:
Overview
Type II:
Low Value/ High
Risk or Sole
Sources
Type I:
High Value/ High
Risk or Single
Sources
Type III:
High Value/ Low
Risk and/ or
Multiple Sources
Type IV:
Low Value/ Low
Risk and/ or
Convenience
Sources
Ris
k
Value
Categories:
• Stationery
• Copiers
• Fleet
• Couriers
• Contract Labour
• Professional Services
• Marketing Services
• Equipment costs
Analysing Tail-Spend:
Overview
Type II:
Low Value/ High
Risk or Sole
Sources
Type I:
High Value/ High
Risk or Single
Sources
Type III:
High Value/ Low
Risk and/ or
Multiple Sources
Type IV:
Low Value/ Low
Risk and/ or
Convenience
Sources
Ris
k
Value
Categories:
• Limited supply markets
• Emotive issues
• Services
• Travel
• Legal, Audit etc.
Broader Classification
Overview
Short Tail Spend that can be identified
Classified with contracts
e.g. office supplies
Broader Classification
Overview
Long Tail None standard requirements
Requires sourcing effort
e.g. marketing services
Broader Classification
Overview
Steady Tail None contractable spend
High price volatility
Use appropriate techniques:
Overview
Segment Techniques
Misclassified items Reclassify & incorporate into existing contracts
Low price, high frequency Sourcing, Pcards & use of managed services
One time, high value Rapid RFP & eAuction methods
Fragmented spend Consolidate & source centrally
Maverick spend Introduce P2P checkpoints to ensure compliance
Low price, low volume Remaining true tail-spend
If you do, you will see:
Noticeable cost savings
Better visibility of where you spend money
A reduction in maverick buying
A sizeable cut of invoices
A reduction in time needed to manage suppliers
Also…
Better supplier relationships
Better payment terms
Overview
Practical Steps
Our approach:
Increase your capacity for Spend Under Management
Establish purchase controls
Automate invoice processing
…. Plus, incremental refinement & expansion!
Practical Steps
Increase your capacity for Spend Under Management
On-boarding
Data Maintenance
Catalogues
Orders
Invoices
Queries
Suppliers Buyers
Practical Steps
e.g. PROACTIS Supplier Portal
PROACTIS Supplier Portal:
Practical Steps
Supplier Directory & Intelligence
Commodity Categories/ Classifications
• Rationalisation
• Registration
• Accreditation
• Appraisal
• Self Service
Supplier Management
• RFQ
• RFI
• RFP
• eAuction
• Multi Stage
• Advertisement
eSourcing
RFx
• Repository
• Classification
• Collation
• Review
• Monitor
• Tasks/ Events
Contract Management
Spend Control:
Practical Steps
Source-to-Contract (Value Creation)
Purchase-to-Pay (Value Capture)
Practical Steps
Invitation
for
relationship
Approved
Status
RFx competitive
sourcing
Contracted
arrangements
POs Non-contract
spend Initial registration
Continual review
Supplier qualification & approval:
Before a transaction
Before an opportunity to compete for business
More than a quick finance check
Establish purchase controls
Purchase-to-Pay
Supplier Catalogues & Punch-Outs
On-boarding
Data Maintenance
Catalogues
Orders
Invoices
Queries
Suppliers Buyers
Practical Steps
Identify need Multi-source
search
Automatic account
coding
Routing &
approvals
Ordered
Practical Steps
Requisitions & Purchase
Order Processing
Receive or reject
goods & services
Invoice
processing
Release
to
payment
Goods & Services Receipt
& Invoice Processing
Controlled
route-to-market
Automatic
budget checking
Identify need Multi-source
search
Controlled
route-to-market
Automatic
budget checking
Automatic account
coding
Routing &
approvals
Ordered
Receive or reject
goods & services
Invoice
processing
Release
to
payment
Multi-Source
• Catalogues
• Contracts
• Punch Out
• Data Entry
• Supplier Network
Practical Steps
Route-to-Market
• PO
• Request to buyer
• RFx Initiative
• Quick quote
Order
• XML
• Portal
• Fax
On-boarding
Data Maintenance
Catalogues
Orders
Invoices
Queries
Suppliers Buyers
Automate Invoice processing:
Practical Steps
Practical Steps
Capture
invoice data,
review &
validate
Receive mail,
open, sort,
batch, scan
Invoice Receipt
Electronic Invoice
Managed Service
Manual
entry
PO Box
XML
PO Flip
PCards
OCR Output
Stand alone
Invoice
PO
Invoice
Code Invoice Authorisation
Match Resolve
Outside
Tolerances
Release
to
payment
Release
to
payment
Invoice Processing
Incremental refinement & expansion:
Increase the range of sourcing & supplier management
activities
Expand the range of suppliers in your purchase
catalogue
Move suppliers through more efficient electronic
commerce
Practical Steps
Summary
In short:
Don’t overlook Tail-Spend!
Address “pockets of opportunity”
Requires technology & process improvement
Tactics:
Establish purchasing controls
Help procurement free up time
Use the best methods for each category
Automate invoice processing
Summary
Leading global excellence in procurement and supply
Question Time
Leading global excellence in procurement and supply
Thank You for your time
Leading global excellence in procurement and supply
Some Reminders
2. Maintain your ‘MyCIPS’ Profile
http://www.cips.org
1. Join Our LinkedIn Group
http://www.linkedin.com/groups
4. Keep in Touch with your branch Email us – [email protected]
3. Update Your CPD
About PROACTIS
Who we are:
100% focused on Spend Control & eProcurement
About PROACTIS
Source
to Contract
Purchase
to Pay
• Cloud-based solutions • Source-to-Contract
& Purchase-to-Pay
• Across all sectors
Who we are:
Proven success
About PROACTIS
customers countries
active licensed users
How we help:
Reduce the overall cost of purchased goods & services
Improve financial control
Mitigate risk
About PROACTIS
• It takes a 10% increase in revenues to
achieve a 20% increase in EPS…
• It only takes a 1% decrease in operating
costs to gain the same result
Spend Control & eProcurement
PROACTIS
Transition
Services
Advisory
Services
Category
Services Managed
Services
Purchase-to-Pay (Value Capture)
Source-to-Contract (Value Creation)
Sourcing
Supplier Management
Contract Management
Catalogue Management
Purchasing
Invoice Receipt
Invoice Matching
Employee Expenses
What we do:
About PROACTIS
Commercial:
Our clients include:
About PROACTIS
Public Sector: Not-for-Profit:
www.proactis.com
Self-assessments
Source-to-Contract
SRM
Sourcing
Contract Management
Catalogue management
Purchase-to-Pay
Purchasing
Invoice Processing
About PROACTIS
Leading global excellence in procurement and supply
FORTHCOMING EVENTS • CIPS Yorkshire branch’s first webinar
“Tail-Spend Management - How to squeeze savings from the most fragmented 20% of spend” – 1.00pm on Tuesday 20th August 2013
• Supply Chain Risk in the real world – 5.30pm for 6.15pm on Tuesday 24th September 2013 at
Novotel, Leeds
• To register for either event go to the CIPS web site / Branch Events
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