1 / 23

Spend and Channel Analysis Report and Presentation February 12th, 2008 Dr. Kevin McCormack

Spend and Channel Analysis Report and Presentation February 12th, 2008 Dr. Kevin McCormack. Executive Summary. Sourcing Events Coaching Workshops. (Future) Sourcing Events. NATCO Phase II Project Plan. Project Updates. Dead 12/24, 12/31. Focus of this proposal. 12/10. 12/17, 1/7/08.

stan
Download Presentation

Spend and Channel Analysis Report and Presentation February 12th, 2008 Dr. Kevin McCormack

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. Spend and Channel AnalysisReport and PresentationFebruary 12th, 2008Dr. Kevin McCormack

  2. Executive Summary

  3. Sourcing Events Coaching Workshops (Future) Sourcing Events NATCO Phase II Project Plan Project Updates Dead 12/24, 12/31 Focus of this proposal 12/10 12/17, 1/7/08 1/14,1/21 1/28, 2/4 2/11 – report out Phase II Week 0 Week 1-2 Week 3-4 Week 5-6 Week 7-10 Week 11-12 Week 13 - n Prep Kick off Buying Channel Analysis Charter & Organize Channel Plan (Future) Implement Base Channel Plan (pcard, etc.) Follow up TBD Build teams Project plan details. Gather Data Workshop Sourcing Plan Project Team Spend Analysis Project Updates Approve Charter Kick off Status Review Review and Approve Review Build sponsorship team and schedule involvement Sponsorship Team Charter and Organize Analyze and Plan Deliver Roll Out

  4. Executive SummaryApproach • Used a data set consisting of 18 months (July 06 to Jan 08). • US Data only, All Sites • 252,000 lines, $278 million ($185 mil/yr), 3460 Suppliers • Organized and classified the data using advance analytics and UNSPSC coding (text analytics, multi-dimensional matrices, classification, graphical and cluster analysis) • Conducted buying channel analysis (PO count and size by supplier, class and location) • Conducted Spend analysis (Suppliers and class spend concentration and leverage by class, location and overall) • Develop Sourcing Event Charters to address the opportunities

  5. Multidimensional Data Set Class Location Report Supplier Class Concentration Report Class Usage Class Coverage (Range) Supplier Location Report Location Coverage (reach) Location Spend Density Spend Concentration Class Spend Density Supplier Spend Report Location Spend Report Class Concentration Report Class Count PO Count Ave PO $ Supplier Count Supplier # Supplier Name PO # UNSPSC Class PO Spend Location Line Description Line Spend

  6. Classification Benchmarks UN/SPSC Code • Universal Standard Product and Service Classification Code. A Global commodity standard - 10 digit, hierarchical code used to consistently classify products and services The UNSPSC is a hierarchical classification with five levels. These levels allow analysis by drilling down or rolling up to analyze expenditures. Each level in the hierarchy has its own unique two-digit code: • An example follows: • Code: 43 20 15 01 14, • Segment: 43, Information Technology Broadcasting and telecommunications • Communications Devices and Accessories. • Family: 20, Components for information technology or broadcasting or telecommunications Computer Equipment and Accessories. • Class: 15, Computers Computer accessories • Commodity: 01 Computer switch boxes Docking stations • Business Function:14, Retail

  7. Executive SummaryApproach • Buying channel - is a process to specify a need, locate the supplier of that need, determine the terms of acquiring the need and executing an agreement for the supplier to fulfill the need. An efficient and effective procure to pay process contains processes and buying channels that are designed to “fit” different situations and circumstances encountered by end users of the P2P process . • Buying channel analysis examines requester need, material type, location, transaction cost, supplier, PO count and size ($). • Balances transaction cost, responsiveness, tracking and risk to identify the right channel mix. 

  8. Transaction Cost per Channel NATCO = 0 NATCO = 0 NATCO Currently 48,000 PO / Year Ave Cost: $150 / PO Cost per PO = $10-15 Cost per PO = $40-60 NATCO = 0 NATCO = 100% Cost per PO = $5-10 Cost per PO = $150 plus

  9. Transaction Cost per Channel NATCO = 20% NATCO Currently 48,000 PO / Year Ave Cost: $150 / PO NATCO = 40% Cost per PO = $10-15 Cost per PO = $40-60 NATCO Objective 48,000 PO / Year Ave Cost: $106/ PO NATCO = 30% NATCO = 10% Cost per PO = $5-10 Cost per PO = $150 plus NATCO Savings 48,000 PO / Year 20 man years

  10. Procurement Capacity Benchmarks NATCO Currently 48000 POs per year FTEs on Org Chart = 14 (not including Engineers time) My Estimate – 650 POs per FTE Requiring 74 FTEs to process (Not including AP) Today = 3428 Ouch! Very painfully With current process Using a lot of Engineers’ And others time The Last Unautomated Frontier: How Technology Is Streamlining The Invoice-To-... Scott Dunlap, AFP Exchange; Jan/Feb 2005; ABI/INFORM Global pg. 14. The Purchasing Card Benchmark Report, Aberdeen, March 2005.

  11. High Freq High Value e-candidates Low Freq High Value Buyer assisted Medium Freq Medium Value E-catalog or pcard pcard

  12. Executive Summary • Spend Analysis- the ongoing analysis of spending, or expenses, usually focused in the Procurement area. Companies find savings opportunities through gaining a thorough understanding of past and ongoing spending. • Having a thorough understanding of past spend behavior provides a blueprint for selecting the categories of spend that should be addressed first for sourcing and compliance activities. • Balances leverage, competition and risk to identify the right supplier mix. 

  13. Executive SummaryResults • $278 million in data set (18 months) or $185 million annual spend with 3460 active suppliers. • 80% of spend with 5.5% of suppliers. Benchmark – 80% with 20% of suppliers. Must remove 2500 suppliers to reach benchmark. • 72% are unique to one NATCO location • 33% provide only one class of materials to NATCO • 65% of suppliers have spend less than $1000 per PO

  14. Executive SummaryResults

  15. Top 50 Suppliers by Spend

  16. Top 50 Classes by Spend

  17. 4014 FamilyFluid and Gas Distribution

  18. Sourcing Event Opportunities Areas • Supplier Integration - implementation of e-catalog or e-connectivity with a supplier that is currently a major Natco strategic supplier. • pCard implementation – implement a pcard program for small value transactions, single transactions with a supplier or field transactions in order to reduce transaction costs and improve requester responsiveness. • Concentration / Leverage – reduce the number of suppliers and concentrate spend to gain leverage (price), reduce transaction costs (fewer, larger POs) and reduce relationship / coordination costs of fewer suppliers.

  19. Executive SummaryRecommendedSourcing Events • Site Spend Optimization • (pcard implementation, spend optimization) • Family Spend Optimization • 4014, 3010, 2411, 4111 • Supplier Consolidation, national contracts and pcard • Strategic Supplier Integration • IPS, Invalco, Norriseal, Metals USA • General Supplier Consolidation • Vendor Master Cleansing and Development

  20. Executive SummarySourcing Events – Anticipated Results • Site Spend Optimization • (6-7 man-years, $200K spend savings - rebates) • Family Spend Optimization • 4014, 3010, 2411, 4111 • (12-13 man-years, $2 million spend savings) • Strategic Supplier Integration • (1-2 man-years, $2-5 million spend savings) • General Supplier Consolidation • (make the savings sustainable)

  21. Sourcing Events- Project Plan Project Updates Week 0 Week 1 Week 2-3 Week 4 Week 5-10 Week 11-12 Week 13 - n Prep Kick off Business Analysis Charter & Organize Clarify Opportunity Develop Plan Build teams Project plan details. Gather Data Roll Out Workshop Project Team Implement Base Channel Plan (pcard, etc.) Market Analysis Follow up TBD Project Updates Approve Charter Kick off Status Review Review and Approve Review Build sponsorship team and schedule involvement Sponsorship Team Charter and Organize Analyze and Plan Deliver Roll Out

  22. Sourcing Events – Team Structure NATCO Sourcing Management Team NATCO Sourcing Team Leader Sourcing Team Coach Engineering Review, Involvement & Assistance as Needed Maint. / Operations Review & Involvement as Needed Event 1 Team Leader Event 2 Team Leader Event 3 Team Leader Event 4 Team Leader Sourcing Analyst Sourcing Analyst Sourcing Analyst Sourcing Analyst

More Related