1. AZ Capitol Chapter of NIGP October 16, 2014 Optimizing Your Spend An Introduction to Spend Analysis and Spend Management

2. In order to identify cost savings opportunities and efficiencies in public procurement, practitioners first need better visibility over how much is being spent, on what, with and by whom. THE REALITY TODAY

3. The good news is that your organization probably paid the right vendor, the right amount, the right number of times and the data about that transaction exists somewhere in your systems. THE REALITY TODAY

4. The unfortunate reality is that public sector and higher education spend data is often poorly organized for procurement purposes, inappropriately classified, exists in many different systems and is difficult to access. THE REALITY TODAY

5. What are they? Who should use them? What are the common pitfalls? What can be achieved? How are they done? Real examples SPEND ANALYSIS AND SPEND MANAGEMENT

6. IN THE SPIRIT OF TRANSPARENCY

7. Does your procurement team have easy access to data about how much is spent, on what, and with whom? ASK YOURSELF

8. Does your procurement team trust that the spend data they have access to is reliable, complete, without too many duplicate suppliers and classified accurately? ASK YOURSELF

9. Spend Analysis is what you do to the data… Spend Management is what you do with the data. A TWO PART PROCESS

10. Contract Record Accounts Payable Spend eProcurement Transactions Purchasing Card Spend Enrich Classify Cleanse Spend data that you trust and that contains as much detail as possible SPEND ANALYSIS

11. 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 Spend Data SPEND MANAGEMENT

12. WHO SHOULD USE THE DATA? Procurement Directors Contract Managers Buyers Business Officers/Vice Presidents Finance Directors Accounts Payable Audit/Legal Departments Economic Development Diversity Officers Sustainability Officers

13. WHO SHOULD USE THE DATA? Department heads, budget holders and anyone who spends the organization’s money.

14. Access to data may be difficult and it may come from multiple systems in multiple formats. Relying on the raw data to be accurate for procurement analysis. Trying to use encumbrances, budgets or contract award values as the basis for analysis. COMMON PITFALLS

15. Software based classification tools are not automatic & accurate classification is not easy. Analysis tools aren’t always built for business user and may not be quickly deployable. Time, resources and support may be lacking. COMMON PITFALLS

16. Deliver savings and efficiencies by using data to get better pricing, leverage data in competitive/ negotiation processes & identifying opportunities for internal and external collaboration. WHAT CAN BE ACHIEVED?

17. Bring spend under management by providing a solid foundation for decision making that includes all data sources, profiling and managing suppliers according to importance & identifying non- compliant spend. WHAT CAN BE ACHIEVED?

18. Change buying behavior by providing stakeholders with visibility of their spend, creating departmental spend reports to influence behavior & using data to have more informed discussions. WHAT CAN BE ACHIEVED?

19. POTENTIAL SOLUTIONS AP System Tools eProcurement Tools Analytics/BI Tools Spend analysis service Hire a data analyst Consultancy Project

20. Export spend data from all systems Sense check exports Stitch exports together Manually classify suppliers/spend Enhance vendor information (top 25) Manipulate in Excel POTENTIAL SOLUTIONS - DIY

21. Export spend data from all systems Standardize exported data Check fitness/accuracy of data exports Validate exports with organization De-duplicate supplier records Classify vendors/spend to a common system Manually validate classifications Enrich vendor information fro third party sources Link to a master record number Provide BI tools and an export function POTENTIAL SOLUTION – 3 RD PARTY

22. 1.Supplier Name 2.Supplier Address 3.Transaction Number 4.Transaction Date 5.Transaction Value 5 PIECES OF DATA TO START

23. 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 time and resources could I save by moving to pCards or consolidated invoices? INVOICE CONSOLIDATION

24. 2,544 (36%) all invoices processed were for less than $100. The value of all of those invoices accounted for less than 1% of expenditure. INVOICE CONSOLIDATION

25. 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

26. Less than $1,000 was spent with 555 suppliers (54%) in the year, and the total spend with all of those suppliers equaled 1.32% of expenditure. LONG TAIL CONSOLIDATION

27. 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? IMPROVED TERMS

28. The top 20 suppliers represented 62% of the total expenditure for the year. If these 20 suppliers/projects are well managed, 62% of spend is well managed. IMPROVED TERMS

29. Which categories do I have too many suppliers in where aggregation could drive costs and prices down? Which departments are spending with which suppliers in the category? What contracts are coming up for renewal where I could rationalize or extend my supplier base? CATEGORY RATIONALIZATION

30. The data can be used to identify categories of expenditure with too many suppliers in them – good opportunities to aggregate demand and push prices down. CATEGORY RATIONALIZATION

31. 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? MAVERICK EXPENDITURE

32. Spend analysis can be used to track spend over time and find out whether the contracts that the organization has in place are being used. MAVERICK EXPENDITURE

33. 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? COLLABORATIVE OPPORTUNITIES

34. REACTIVE COLLABORATION I’m about to source office furniture – anyone else? We are, but we won’t be ready until December. We just finished our new office furniture contract. We went with ABC Company We’re using a cooperative contract. Ok thanks anyway. We’ll make sure it has a piggyback clause in it for you later.

35. PROACTIVE COLLABORATION I’m about to source office furniture – anyone else? From looking at the numbers, out of the 12 of us, we’re using 58 different furniture companies. And it looks like there are piggybacking clauses in 5 existing contracts, plus there are a couple of coop contracts you could use. And our group’s spend is pretty concentrated in 8 vendors at the top – they are getting about 75% of our group’s business already.

36. CONSISTENCY ENABLES COLLABORATION DATA pCARD AP E-Proc Org 1 pCARD AP E-Proc Org 2 pCARD AP Org 3 pCARD AP E-Proc Org 4

37. Across 24 colleges, over 62% of their expenditure was with common suppliers. COLLABORATIVE OPPORTUNITIES

38. Where aren’t we using common vendors and we might be able to do so because we already all spend money in the same categories? COLLABORATIVE OPPORTUNITIES

39. What contracts are available to use, either from within our group, a GPO, or a state contract? COLLABORATIVE OPPORTUNITIES

40. Spend Analysis is really the first step – Get the data in shape first – Start thinking about problem areas Using tools to analyze the data – Let the data guide you Decide what spend management projects are worth undertaking CONCLUSION AND NEXT STEPS

41. If you would like more information about spend analytics, a copy of the presentation sent directly to you, or would like to provide feedback on this session, please drop off a business card at the front or fill in out a 3 question survey here: https://www.surveymonkey.com/s/SpendTACCBO Jonathan White: (571) 527 - 8310 jonathan.white@spikescavell.com CONCLUSION AND NEXT STEPS