1. An Introduction to Spend Analysis and Spend Management Optimizing Your Spend

2. Spend Analysis and Spend Management What are they? Who uses them? Who are they relevant to? Why bother? How are they done? What does the Spend Analysis process look like? What spend management projects could I undertake after a spend analysis to identify savings?

3. In the name of transparency…

4. Let’s agree on a few things first… You already have the raw data in your AP, FMS, ERP systems What do you call spend outside of contract? Do you trust your current data to answer procurement questions? Ask questions

5. Spend Analysis: What you do to the data… Spend Management: What you do with the data… What are they?

6. Spend Analysis Enhance Classify Cleanse Spend Data pCard Data AP Data PO Data

7. Spend Management Spend Data Deliver Savings Improve Processes Manage Maverick Spend Manage Supplier Relationship Manage Risk Recover Over- payments Procure Co- operatively Reduce Disparity Source More Locally Ensure Legal Compliance Benchmark Relative Position Quantify Savings

8. Spend Analysis 84.4%

9. Spend Management Spen d Data Buyers Procurement Managers Contract Managers Finance Department Accounts Payable Environmental Officers Equality Officers Economic Development Legal Department Audit Department Budget Holders Spend Data

10. Why bother? Challenges Cut spending but not services Collab orate within and across sectors Local/ Small/ Diverse/ Sustainable Suppliers Be transparent Obstacles Incomplete and poor quality data Multiple poorly integrated systems No standard FMS implementation Time and support

11. Why bother? Solutions Software AP system tools E-Procurement Analytics/ BI tools Data Spend Analysis Provider Hire a Data Analyst / Excel or Access Expert Guidance Customized consultancy project

12. How is spend analysis done? 1.Supplier name 2.Supplier address 3.Invoice number 4.Invoice date 5.Spend value 5 Pieces of Data

13. How is spend analysis done? DIY Export from AP, pCard and PO systems Sense check exports Stitch exports together Manually classify suppliers Enhance data on top 25 suppliers Manipulate in Excel, Access etc.

14. How is spend analysis done? External Export from AP + pCard + PO Systems Standardize exported data Check fitness/ accuracy of data export Validate value and volume with organization De-duplicate supplier records Classify to common taxonomy Manually validate classification Enhance supplier information Link to a master record Provide MI tools and export function Spend Data

15. Common Pitfalls Assuming classification is easy Assuming data can be stitched together Assuming software can do it for you Finance or IT teams too busy to extract Data extracted incorrectly and not checked Relying on user entered classifications Existing tools are designed for analysts

16. Using the results of spend analysis 1 Invoice Consolidation Long Tail Consolidation 2 Duplicate Payments 3 Improved Terms 4 Category Extension 5 Category Rationalisation 6 Compliance, Contracted Suppliers 7 Cooperation, Common Suppliers 8 Price Variance 9 Category Reengineering 10 The 10 Point Plan

17. Example Savings Opportunity If I could answer these questions, I could find savings… If I want to answer those questions, this is the data I need…

18. Invoice Reduction Which suppliers should I seek weekly/monthly invoices from? Which category 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? $ Supplier Names Aggregate number of invoices per supplier Average invoice value per supplier Invoices by value range per supplier

19. 43,979 invoices < $500

20. Long Tail Consolidation $ Supplier Name Aggregate spend per supplier Aggregate number of invoices per supplier Category of supplier Department spend per supplier Which suppliers do I spend less than $1000 per year with? Which suppliers do I only have one transaction with per year which I could lose? Which departments are using a lot of “one time” suppliers? Which categories do we have a lot of small suppliers in?

21. 1829 suppliers < $1000

22. Terms in the Top Tier Identifying Savings: 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? $ 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

23. 84 suppliers > $250k

24. Contract Compliance $ Supplier Name Aggregate spend per supplier Category of supplier Other suppliers in the same category Dept. spend per supplier Current contracts Categories with no contracts Monthly spend information Identifying Savings Which departments aren’t using the preferred/ contracted supplier in a given category? Which categories of spend don’t have any contracts in them? Is my data source up to date enough to deal with off- contract spend quickly?

25. 36% average with contracted suppliers

26. Category Rationalization / Extension $ Supplier Name Aggregate spend per supplier Category of supplier Other suppliers in the same category Department spend per supplier Current contract expiry date Identifying Savings: Which suppliers enjoy a relative monopoly of supply to my organization? 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 rationalize or extend my supplier base?

27. 44 Sporting Goods Suppliers

28. Identifying Savings: 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? $ Standardized supplier name/number Standardized 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 …where are the opportunities to collaborate with other public sector bodies? Aggregation with other organizations

29. 18 Suppliers, $38m aggregate spend

30. Next Steps: Spend Analysis really is the first step Get the data in shape first Internal or External Start thinking about problem areas Let the data guide your projects Analytical/business intelligence tools are step two. A Spend Management plan is step three.

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32. Spend Analysis and Spend Management The images, charts, and graphs in this presentation were exported directly from the NIGP Observatory. For more information about how the NIGP Observatory could help your agency to identify real savings, collaborate more effectively, increase contract compliance, and record your success, please contact Spikes Cavell, NIGP’s strategic partner: Jonathan White: (571) 527 - 8310 jonathan.white@spikescavell.net