Conference Title
Date
Martin Bolden
An Introduction to Procurement
Management Information
IN THE SPIRIT OF
TRANSPARENCY…
PROCUREMENT MANAGEMENT
INFORMATION
•
•
•
•
•
•
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?
How
many
people
in
the
How many of you found
questions
roomAsk
have
conducted a
it useful?
spend analysis in the last
year?
WHY BOTHER DOING SPEND
ANALYSIS?
• 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
TAKE ACTION
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.
HAVE A GOAL IN MIND
• Manage spend more strategically
• Manage spend activity more
efficiently
• Change buyer behaviour
• Increase spend under contract
• Procure sustainably
• Buy collaboratively
• Deliver savings
WHAT DO YOU NEED TO
ANALYSE?
•
•
•
•
•
Your supplier base
Your spend categories
Common suppliers
(Non) Contracted spend
Commodity detail
DATA SOURCES
• 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
THE FIVE PIECES OF DATA YOU
NEED TO GET STARTED
1.
2.
3.
4.
5.
Supplier Name
Supplier Address
Transaction Number
Transaction Date
Transaction Value
Transforming Data into
Information
• 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.
Source: http://www.diffen.com/difference/Data_vs_Information
WHAT YOU DO TO THE DATA…
Implement a repeatable process if you
want to track performance over time!
Cleanse
Spend
M.I.
Classify
Enrich
THE TYPICAL APPROACH TO INHOUSE SPEND ANALYSIS
Export spend
data from all
systems
Combine data
exports
Sense check
combined data
Manipulate in
Excel
Enhance vendor
information
(largest suppliers)
Manually classify
suppliers/spend
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
Enrich vendor
information with
third party data
Validate
classifications
Classify
vendors/spend to a
common taxonomy
De-duplicate
supplier records
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
WHAT CHALLENGES MIGHT YOU
FACE?
• 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
KNOW WHAT YOU ARE GETTING
INTO AT THE BEGINNING
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•
•
•
•
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.
WHAT THE INFORMATION CAN
FACILITATE
Improve
Processes
Change
Buyer
Behaviour
Manage
Supplier
Relationship
Manage Risk
Recover
Overpayments
Buy
Collaboratively
Support
more SMEs
Source More
Locally
Ensure Legal
Compliance
Benchmark
Relative
Position
Evidence
Success
Deliver
Savings
Spend
Data
WHO COULD USE THE
INFORMATION?
Procurement
Buyers
Procurement
Managers
Contract
Managers
Finance
Department
Budget
Holders
Department
Heads
Buyers
Spen
Spend
d
Data
Data
Accounts
Payable
Audit/Legal
Departments
Diversity
Program
Manager
Economic
Development
Environmental
/Sustainability
Officers
EXAMPLES OF SPEND
MANAGEMENT PROJECTS
Finding Savings
Invoice 1
Consolidation
Long Tail
Consolidation
2
Improved
Terms
3
Category
Extension
4
Category
Rationalisation
5
Compliance, Contracted
Suppliers
6
7
Category
Reengineering
8
Collaboration
INVOICE CONSOLIDATION
• 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?
Aggregate
number of
invoices per
supplier
Supplier
Names
Average
invoice value
per supplier
£
Invoices by
value range
per supplier
INVOICE CONSOLIDATION
•
5,457 invoices were processed where the value of the invoice was less
than £50.
LONG TAIL 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?
Aggregate
spend per
supplier
Supplier
Name
Aggregate
number of
invoices per
supplier
£
Category of
supplier
Department
spend per
supplier
LONG TAIL CONSOLIDATION
•
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.
MANAGE STRATEGIC SUPPLIERS
• 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?
Category of
supplier
Department
spend per
supplier
Aggregate
spend per
supplier (deduplicated)
Supplier
Name
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)
CATEGORY RATIONALISATION/
CATEGORY EXTENSION
• 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?
Other
suppliers in
the same
category
Category of
supplier
Aggregate
spend per
supplier
Supplier
Name
Department
spend per
supplier
£
Current
contract
expiry date
CATEGORY RATIONALISATION/
CATEGORY EXTENSION
•
11 Printing Services Providers one large, 2 medium and 8 small.
COMPLIANCE, CONTRACTED
SUPPLIERS
• 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 offcontract spend quickly?
Category
of
supplier
Other
suppliers
in same
category
Dept.
spend per
supplier
Aggregate
spend per
supplier
Supplier
Name
Current
contracts
Categories
with no
contracts
£
Monthly
spend
data
COMPLIANCE, CONTRACTED
SUPPLIERS
•
36% on average spent with contracted suppliers.
COLLABORATION, COMMON
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?
Aggregate
spend per
supplier)
Category of
supplier to
common
classification
Standardised
public sector
body
name/number
Standardised
supplier
name/number
Current
contract expiry
date
Centrally
hosted and
maintained
database
£
Common tools
that all
contributors
can use
COLLABORATION, COMMON
SUPPLIERS & SPEND
•
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.
ANALYSIS SOFTWARE
• 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.
Source: Information Week – November 2013
CONCLUSION
• Have objectives in mind
• Spend Analysis is really the first step
– Get the data in shape first
QUESTIONS/THOUGHTS/COMMENTS
FOR MORE INFORMATION
For more details about how Spikes Cavell can
help you to transform your data into valuable
spend management information contact :
Martin Bolden
07500 081425
[email protected]