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Michelle Lax and Michael Barker
Vulcan Materials Company’sSpend Analytics Journey
About Vulcan Materials
• Vulcan Materials Company is the nation’s largest producer of construction aggregates—primarily crushed stone, sand and gravel—and a major producer of aggregates-based construction materials including asphalt and ready-mixed concrete. Our coast-to-coast footprint and strategic distribution network align with and serve the nation’s growth centers. We are headquartered in Birmingham, Alabama.
Vulcan Materials Organization
• We are organized into 7 Divisions and 1 Corporate Office.
• Approximately 400 aggregate, asphalt and ready mix plants report up through the 7 Divisions across the country.
Vulcan Materials Organization
Contents
• Why Spend Analytics?• Why Now?• Why Spend Radar?• Our Implementation• Specialty Applications• Early Victories• Questions
Why Spend Analytics?
• Classification of Spend Currently Inaccurate– Enable our Analysts to Analyze – Prior to Spend
Radar, our analysts spent the majority of their time cleansing, reconciling, validating and consolidating data
• Internal Challenges with Reporting – Many Requisitioners, Buyers and Approvers
resulted in Inconsistent Data– Level 3 PCard Data wasn’t feasible– Multiple Vendor records in Oracle
Why Spend Analytics? Continued
• Consolidation of our Spend– Multiple Sources Consolidated to One View
• PCard• T&E Cards• Legacy Systems• Oracle ERP – Purchase Orders and Invoices
• Capability of Answering Supplier Questions Quickly– Total spend by supplier– Total spend by category– Total spend by geography– Supplier potential if an agreement were made
Why Now?
• Difficult Economy– Cost Cutting was a major driver– Intel needed to renegotiate contracts– Need to identify additional spend categories to
manage
• Multiple Organizational Structure Changes– Divisions > Regions– Regions > Divisions– VP – General Manager Changes
Why Now? Continued
• Optimal Time for Selling to Management– Engagement with consultant
• Demonstrated value of data and graphical information
• Easier for management to digest• More forward looking actionable intelligence
rather than historical information – Management saw the value - wanted more
of this style of information and presentation
Why Now? Continued
• Departmental Vision Aligned with the Need for Spend Analytics– Departmental Efficiency– Knowledge of our own data gives us an
advantage in negotiations– Credibility in the field– Wanted 80 / 20 Data Analysis vs Data
Cleansing– Wanted Vendor Normalization capability
Why Spend Radar?• Researched Major Suppliers in the Industry
– Noted differences in the “classification model” of each vendor
• Multiple proofs of concept / demos• Black Box methodology• Review by Humans on the Front End• Less Auditing required on the Back End
• Excellent Service Track Record– References– Our confidence in their capabilities– Professionalism– Flexibility
Our Implementation
• Taxonomy Development– Custom Taxonomy
• No overlap in categories• Purchases are classified as what they are, not
which department they serve or account they go into
• Our preference was for maximum granularity
– Taxonomy Levels (Example)
Our Implementation ContinuedLevel 1 Level 2 Level 1 Level 2 Level 1 Level 2
Administrative Products
Benefits
Non-sourceable
Building
Equipment
AttachmentsEmployee Relations Charitable Electrical EquipmentEmployee Relocation Reimbursements Community Relations Equipment Rental
Facilities Products Debt Repayment Fixed EquipmentInsurance Discounts / Refunds FleetSales Promotions Dividends GeneratorSupplier Awards Escrow Accounts HydraulicsTraining Materials Fees IT Equipment
Services
Administrative Services Fines and Penalties Lab EquipmentBenefits Services Garnishment Lubricating SystemCompensation Services Intercompany Spend Marine EquipmentContract Labor Land Purchase Mobile EquipmentProduct Delivery Services Licensing & Permits Office Equipment
Production / Support Services Memberships / Dues / Subscriptions Parts
Services - Other Pension PneumaticsShipping Services Political Contributions Power Transmission
Consumables
Blasting Rents & Royalties Rail EquipmentChemicals Restocking Fee Rock BreakerDrill Accessories Settlement Scale
Energy & Utilities Severance / Non-Compete Support Equipment
Filters Sponsorships Surveying EquipmentFluids Tax TankGases Union DuesMRO
MaterialsBuilding Materials
Office Supplies Raw MaterialsSHE SteelTiresWear Products
Our Implementation ContinuedCategory Level 1 Category Level 2 Category Level 3 Category Level 4
Consumables Wear Products
Cheek Plates Cheek Plate - Upper (Non-Manganese)Cheek Plate - Lower (Non-Manganese)
Chute Liners
Chute Liners - OtherRubber Chute LinersCeramic Chute LinersSteel/AR
FeedersLinersGrizzly BarsWobbler Bars
Ground Engaging ToolsGround Engaging Tools - OtherBlades / Cutting EdgesTeeth / Adaptors
HSI BlowbarsHSI - Other
Manganese
Manganese - OtherCone CrushersGyratory CrushersJaw CrushersCheek Plates
Rubber Liners -
Screen Media
Wire Cloth-Rubber ClothUrethane Cloth
Steel - Wear Resistant Steel Wear PlateSteel Wear Parts - Other
VSIAnvilsShoesVSI - Other
Wear Products - Other -
Our Implementation Continued
• Consulted with a Network of Vulcan Subject Matter Experts in the Field– Determine what is important to be classified– Determine what can be classified– Determine what changes we can make to aid
in classification in the future
Our Implementation Continued
• Working with SciQuest– Effective Project Management - Deliverables
and timeline were clearly defined and delivered upon
– Good Product Knowledge - Initial Classification was highly accurate
– Resource Availability• The SciQuest team was available to answer our
questions whenever we needed them• Specialized reporting requests were
implemented as needed
Our Implementation Continued
• Data Preparation– Level 3 Procurement Card Data Enrichment
• Bank provides a file• Many vendors provide poor data• Match good data to the corresponding purchase
– Summarization of Standardized Purchases - Haulers
– Integration of Additional Data Fields• Expense Reports
– Expense Justification– Employee Name as Supplier
Our Implementation Continued
• Consolidated Our Data Uploads to 3 Files– Haulers– PCard– Other Transactions
• Classification– Initial Classification to 95% - 5 weeks– Additional Classification to 98% (as of
January 2015) by Vulcan personnel
Our Implementation Continued
Main Dashboard: Spend by Classification, Spend by Supplier, Spend by Region, Spend by Month
Our Implementation Continued
If the user clicks on a category, a filter is applied. This “drill-down” functionality is fast and powerful, and it applies the filter to all charts and data in the tool. Here, we clicked “Equipment”. Now notice the Spend by Classification chart. Parts, Mobile Equipment, Fixed Equipment, etc are all level 2 categories of Equipment. Now only the top suppliers of our “Equipment” category are now listed at the top right.
Our Implementation Continued
We can continue to drill deeper into the spend categories. In this case, we clicked “Parts”. Notice the data has now drilled down to the different categories of Parts (e.g. Loader Parts, Crusher Parts, etc). And, now we see that our top suppliers for the “Parts” category are listed at the top right. Note: all charts and tables have drill down functionality.
Specialty Applications
• Compliance Reporting– Market Share Reports – for contract compliance
and rebate documentation• Custom Market Share Report Dashboard• Classification Greater Than 95%• More detailed and accurate reports (Level 3
Enrichment)
• Custom Lookup Tables– Reporting Parent– Manufacturer Parent– PT/MRO Primary
Specialty Applications Continued
• Assume Responsibility for Data Manager– Create Our Own Classification Rules - Allows
us to get classification % as high as we need• Effort vs Results
• Cross Functional Uses Outside of Procurement– Financial Analysis– Tax– Audit– Operations
Specialty Applications Continued
Market Share Report – Tires - Setup
Specialty Applications Continued
Market Share Report – Tires - Result
Specialty Applications Continued
• Managing Organizational Change– Multiple Organizational Changes in Past
Months / Years– Lookup Tables
• Data Contains Organizational coding for point in time of transaction
• Use lookup tables to map spend to current organizational structure
Specialty Applications Continued
• Custom Quick Filters
– Exclude Divested– Exclude Non-Sourcable– Exclude Cap-Ex Spend– Exclude Sold Assets to External Company
Early Victories
• Capturing misclassified data - Electric Motors Spend
• Travel & Entertainment Spend Detail – Hotel or Restaurant Chain
• Discovering major suppliers that were obscured– Consolidated Electrical Distributors– Big Box Retailers (Home Depot, Lowes, etc)
• Enhances Identification of New Sourcing Opportunities – – Vocational Truck Upfitters– Outside Services
Questions?