1 / 41

AZ Capitol Chapter of NIGP October 16, 2014

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

carla-wynn
Download Presentation

AZ Capitol Chapter of NIGP October 16, 2014

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

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

  2. THE REALITY TODAY 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.

  3. THE REALITY TODAY 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.

  4. THE REALITY TODAY 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.

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

  6. IN THE SPIRIT OF TRANSPARENCY

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

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

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

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

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

  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. COMMON PITFALLS • 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.

  15. COMMON PITFALLS • 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.

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

  17. WHAT CAN BE ACHIEVED? 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.

  18. WHAT CAN BE ACHIEVED? 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.

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

  20. POTENTIAL SOLUTIONS - DIY

  21. POTENTIAL SOLUTION – 3RD PARTY

  22. 5 PIECES OF DATA TO START • Supplier Name • Supplier Address • Transaction Number • Transaction Date • Transaction Value

  23. INVOICE CONSOLIDATION • 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?

  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. LONG TAIL 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?

  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. IMPROVED TERMS • 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?

  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. CATEGORY RATIONALIZATION • 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?

  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. MAVERICK EXPENDITURE • 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?

  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. COLLABORATIVE OPPORTUNITIES • 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?

  34. REACTIVE COLLABORATION Ok thanks anyway. We’ll make sure it has a piggyback clause in it for you later. 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.

  35. PROACTIVE COLLABORATION From looking at the numbers, out of the 12 of us, we’re using 58 different furniture companies. I’m about to source office furniture – anyone else? 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. pCARD pCARD pCARD pCARD AP AP AP AP E-Proc E-Proc E-Proc Org 3 Org 2 Org 4 Org 1 • CONSISTENCY ENABLES COLLABORATION DATA DATA DATA DATA DATA

  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. CONCLUSION AND NEXT STEPS • 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

  41. CONCLUSION AND NEXT STEPS 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

More Related