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

martin.bolden@spikescavell.co.uk

FOR MORE INFORMATION