Conference Title Date 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 questions How 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 HAVE A GOAL IN MIND

Your supplier base Your spend categories Common suppliers (Non) Contracted spend Commodity detail 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 DATA SOURCES

1.Supplier Name 2.Supplier Address 3.Transaction Number 4.Transaction Date 5.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:

WHAT YOU DO TO THE DATA… Spend M.I. 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 Spend Data Deliver Savings Improve Processes Change Buyer Behaviour Manage Supplier Relationship Manage 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? Spen d 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 Heads Buyers Spend Data

EXAMPLES OF SPEND MANAGEMENT PROJECTS Long Tail Consolidation Invoice Consolidation Finding Savings Improved Terms Category Extension Category Rationalisation Compliance, Contracted Suppliers Collaboration Category Reengineering

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 FOR MORE INFORMATION