ISM-Dallas August 8 th , 2013

1. ISM-DallasAugust 8th, 2013 Data – The Communicator in the Procurement Lifecycle: Spend Analysis and Supply Chain Business Intelligence David M. Cravens Iasta

2. Top Pressures Facing Procurement Leaders Top down directive to identify & cut costs 65% Inflationary pressures on critical spend categories / commodities 48% In 20 years, the corporate profile of procurement has heightened. This has led to an increased focus on a diverse set of pressures. Increased complexity in supply chain due to globalization 41% Increasing supply risk (suppliers financial health & ability to perform) 41% Lack of category expertise in strategic spend areas 34% Lack of proper data to drive category strategies 31% 20% 30% 40% 50% 60% 70% Source: AberdeenGroup, June 2011

3. Procurement Enablement – Leading Enablers Best-in-Class 50% Category Specific Solutions (Expense, VMS, SMS) Industry Average 25% Laggards 14% CPO’s view Spend Analysis as the most important enabler. Access to data is a critical component to a Best-in-Class procurement team. eProcurement(Requisitioning & PO generation) 54% 57% 46% 58% Contract Management (repository, authoring, compliance) 43% 55% 59% eSourcing (Rfx - RFI, RFQ, RFP, reverse auction) 39% 32% 89% Spend Analysis 63% 46% 10% 20% 60% 80% 90% 30% 40% 50% 70% Source: AberdeenGroup, June 2011

4. Procurement Maturity Top Procurement KPI’s by Maturity Class Best-in-Class Industry Average Laggard Metric Best-in-Class groups realize 12 times more negotiated savings when compared to Laggards. Furthermore, they have 4 times more of their spend under management. Spend formally negotiated 51% 27% 11% Spend formally negotiated & realized 60% 18% 5% Spend under management 85% 70% 21% Source: AberdeenGroup, June 2011

5. The Evolution of Purchasing DECENTRALIZED “Procurement? Elevator to the basement, past the furnace room, last door on your left.” Easy to implement, flexible for small companies Sourcing duplicated across departments Sourcing initiatives uncoordinated & fragmented No direction, vision, not a company focus No tools Procurement has little impact Procurement’s Role in the Organization REACTIONARY TRANSFORMATIVE Decentralized Centralized Category Management Center-Led Integrated Category Management

6. The Evolution of Purchasing CATALYTIC COMMENT “There’s got to be a better way to combine spend to save money – and to work with low-cost suppliers.” - CFO Decentralized Centralized Category Management Center-Led Integrated Category Management

7. The Evolution of Purchasing CENTRALIZED “Everything goes through Joe. Why? I guess we can’t be trusted with the corporate card.” A central group who sources for the entire organization Increased direction and vision Use of basic tools No category expertise Little departmental buy-in Procurement has limited impact Procurement’s Role in the Organization REACTIONARY TRANSFORMATIVE Decentralized Centralized Category Management Center-Led Integrated Category Management

8. The Evolution of Purchasing CATALYTIC COMMENT “I know my department’s needs better than Procurement does. Pinching pennies is killing us.” - Department Head Decentralized Centralized Category Management Center-Led Integrated Category Management

9. The Evolution of Purchasing CATEGORY MANAGEMENT Cross-functional group who collaborates on strategy for particular categories Categories reviewed more holistically – not just sourcing – now SRM, CM, etc. More robust tools but still operational usage Execs initially committed but not long term No vested interest from departments for Procurement to succeed. Dwindles over time. Procurement’s impact is improving, but less than average “Procurement is good for the areas where it makes sense to ask for Procurement’s input.” Procurement’s Role in the Organization REACTIONARY TRANSFORMATIVE Decentralized Centralized Category Management Center-Led Integrated Category Management

10. The Evolution of Purchasing CATALYTIC COMMENT “The Departments have different KPIs than Procurement – or even the whole company has. If they ignore our guidance, we can’t win.” - Procurement Decentralized Centralized Category Management Center-Led Integrated Category Management

11. The Evolution of Purchasing CENTER-LED “Procurement helps us do our jobs better, and saves the company money along the way.” Cross-functional group Sourcing category managers now sit with each department Proactive – initiatives and ideas are caught right at the starting point Tools are expected Still requires internal selling effort Very dependent on particular group Procurement’s impact improving but still not fully realized Procurement’s Role in the Organization REACTIONARY TRANSFORMATIVE Decentralized Centralized Category Management Center-Led Integrated Category Management

12. The Evolution of Purchasing CATALYTIC COMMENT “We need to align the KPIs of Procurement with the KPIs of our various business units.” - CFO Decentralized Centralized Category Management Center-Led Integrated Category Management

13. The Evolution of Purchasing INTEGRATED CATEGORY MANAGEMENT “Procurement? It’s part of how our team works, and a guiding voice for how our company succeeds.” High level execs have dotted-line reporting to CPO with long term executive support Executives understand value of Procurement Tools are mandatory part of business Departments incented to participate – report up Category managers given one direction No longer an internal sales job Procurement has maximum impact Procurement’s Role in the Organization REACTIONARY TRANSFORMATIVE Decentralized Centralized Category Management Center-Led Integrated Category Management

14. The Evolution of Purchasing SUMMARY COMMENT “… a majority of those in procurement leadership (i.e. “CPO” role) are bound in helping transform it.” Decentralized Centralized Category Management Center-Led Integrated Category Management

15. Struggling with spend analysis, the merger compounded the situation • Huge demand for analytics • Budget made available • Willingness to try new solutions • On-demand solutions met the price point • Nothing to lose, everything to gain • No central data repository • Oracle extraction efforts were “blunt force” efforts, no legacy Nortel SAP data was included in the deal • Indirect data wasn’t a focus until shortly before the deal was announced • Data wasn’t cleansed or structured • High degree of manual effort to determine basics (top vendors, top categories, total spend) • Push to identify merger synergies fast

16. Data – The Communicator in Unique Deployments • BPO Deployments • Communication is the primary differentiator between successful and unsuccessful Procurement BPO efforts • Spend Analysis is an accelerant in BPO scenarios, but also a common source of information shared by in-house and remote teams • Multinational Deployments • When combined with other data (sourcing, resource planning data), as with Iasta’s CPO Dashboard, a spend analysis platform allows collaboration

17. AP Systems • - Transactions • Vendors • Cost centers • Material Groups 200 • - GL Codes Procurement Card - Transactions - Vendors - Cost centers - GL Codes E-Proc Data GL Data AP Data Purchasing Card • Invoices • - Transactions • Vendors Invoice Detail Paper Invoices Spend Analysis – The Classic (OLD!) View Electronic Output Multiple (3+) extracts QSI Application Electronic Output Limited value Commodity Manual data collection Mixed quality Vendor Cost Center • Enrichment: • Vendor grouping • Commodity assignment • Integration of additional information (approved vendors, contracts, etc.) • User feedback • The goal of spend analysis is never simply “clean data”. • This process is not an end in itself. Rather, it is a means by which to create clarity and therefore make leverage available to organization(s). Collect Data (Multiple systems) Transform Data (Including user feedback) Analyze Data Create Useful Output Refresh Data (Real time, monthly or quarterly)

18. Spend Analysis as Business Intelligence (BI) • Business Intelligence (BI) is about connecting people using a proper information infrastructure, enabling them working more closely together towards company and personal goals. This means collaboration with data and people.

19. Means vs. Ends • Most of the “Means” of Spend Analysis are similar… • Raw data is cleansed, rationalized, or enriched • Data transformation occurs in software to ensure iterative refresh success • Data is delivered and experienced by end user through interactive reporting • …but the “Ends” often differ. • Procurement Transformation • Category-Specific Savings • Regional/Departmental Politics! • Data Control (IT) • Most importantly - Collaboration