getting started in spend analysis - spikes … started in spend analysis a guide to identifying...

GETTING STARTED IN SPEND ANALYSISA GuIDE To IDENTIfYING PRocuREmENT SAvINGS

ThE fIRST STEP To IDENTIfYING PRocuREmENT SAvINGS IS To uNDERSTAND ThE cuRRENT SITuATIoNTo know where money can be saved, you need to know where it’s spent. But, the reality for the majority of public and education sector procurement teams is that finding the answer to questions is much more difficult than it ought to be.

Spend and contract information is often incomplete, inappropriately classified for procurement purposes, distributed across multiple systems and, difficult to access. fix that and you’re well on your way to having the visibility you need to respond to the challenge of delivering procurement savings and improving efficiency.

But where to start? This first section shows examples of the sort of information most commonly used for this purpose by the many public bodies and education organizations we’ve worked with over the last 10 years using the observatory.

STEP 1% spend with top 10

non-contracted vendors

Spikes cavell Analytic Inc.151 Spring Street, herndon, vA 20170 1-800-990-0228www.spikescavell.com www.spotlightonspend.org

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SummARY STATISTIcSBelow are some summary statistics which provide a useful start in understanding the current spend situation:

SPENDTotal Spend $ 95,467,286

Number of Suppliers 911

Spend with the top 20% of suppliers $ 88,959,191

% Spend with top 20% suppliers 93.18%

Number of suppliers in the top 20% 182

Average spend per supplier $ 104,794

TRANSAcTIoNSNumber of transactions 16825

Average value per transaction $ 5,674.13

% of spend on pcards 1.47%

% of transactions on pcards 41.94%

coNTRAcTS% of spend with top 10 contracted suppliers 23.75%

% of spend with top 10 non-contracted suppliers 15.09%

SPEND wITh coNTRAcTED vENDoRSEvery dollar spent is important and savings opportunities can be missed through off-contract purchases. Is your organization’s percentage of spend under contract moving in the right direction?

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Spikes cavell Analytic Inc.151 Spring Street, herndon, vA 20170

1-800-990-0228www.spikescavell.com www.spotlightonspend.org

vcoDE cATEGoRY ANALYSISAllocating spend to meaningful ‘buckets’ makes the data easier to navigate, understand, and provides the basis for better understanding of your current spend situation than is normally possible with internal codes alone.

vcode is a supplier classification with a three tier hierarchical taxonomy which clusters the spend information into appropriate category groupings.

ToP 10 vcoDE cATEGoRIES BY SPENDhaving an overview of spend, suppliers and transactions by category makes it possible to quickly begin identifying outliers and provides the basis for further investigation.

vCode Business Subsector Total Spend Total Invoices Total Vendors % Of Spend % Of Invoices % Of Vendors

Construc�on Trades 77,915,021.72$ 2,996 85 25.00 3.06 5.72

General Contractors 57,507,587.32$ 582 25 18.45 .60 1.68

U�li�es 23,842,741.49$ 153 4 7.65 .16 .27

Road Vehicles 15,026,255.57$ 6,131 47 4.82 6.27 3.16

Systems Integra�on & Services 13,376,439.75$ 1,622 72 4.29 1.66 4.85

IT Hardware & So�ware 11,253,023.55$ 6,152 110 3.61 6.29 7.40

Construc�on Consultants 9,108,711.41$ 1,066 22 2.92 1.09 1.48

Clinical & Medical 8,483,491.37$ 661 22 2.72 .68 1.48

Educa�onal Equipment 7,966,116.55$ 9,076 165 2.56 9.28 11.10

Construc�on Materials 7,412,075.42$ 3,047 65 2.38 3.12 4.37

ToP 10 vcoDE cATEGoRIES BY SuPPLIERScategories of spend with large numbers of suppliers, but low spend per supplier can be indications of maverick purchasing or undermanaged categories.

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vCode Business Subsector Total Vendors

Educa�onal Equipment 165

IT Hardware & So�ware 110

Construc�on Trades 85

Systems Integra�on & Services 72

Construc�on Materials 65

Business Services 62

Marke�ng 60

Road Vehicles 47

Retail 45

Sports & Playground 38


ToP 10 vcoDE cATEGoRIES BY TRANSAcTIoNSIt costs staff time and resources to process invoices. Identifying categories where reductions in invoice volumes could be made can increase efficiency in the finance, accounts payable and procurement teams.

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vCode Business Subsector Total Invoices

Sta�onery 18,027

Educa�onal Equipment 9,076

Retail 8,767

IT Hardware & So�ware 6,152

Road Vehicles 6,131

Food 4,160

Construc�on Materials 3,047

Construc�on Trades 2,996

Beverages 2,885

Educa�on Service Providers 2,589

SPEND wITh SmALL BuSINESSESSpend with small businesses is often underestimated by elected officials and/or the local community. Being able to accurately report the current situation can help in making policy decisions and dealing with calls to increase spend with small or mBE businesses.

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SPEND BY STATEA perception exists that little is spent with local or in-state businesses. understanding where you are today can help decide if a local preference initiative is necessary.

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23.71%

12.18%

6.59%

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% Vendors - number of transac�ons

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SPEND wITh oNE-TImE SuPPLIERSwhere there are a large number of occurrences of suppliers with a low number of transactions, it can be an indication of inefficiencies in purchasing process and non-compliant buying behaviour within an organisation.

Number of transactions

1 2 3 4+ Total

% vendors 23.71% 12.18% 6.59% 57.63% 100%

% Spend 3.84% 4.01% 3.11% 89.04% 100%

Suppliers 216 111 60 525 911

Spend $3,666,854 $3,830,800 $2,964,905 $85,004,724 $95,467,286


76.40%

Spend with Top 20% Vendors

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You may even find that some of the projects currently underway are not nearly as important as newly discovered opportunities. But you don’t just need a list of all of the projects that you could do, you need a list that allows you to rank and prioritize what is worth working on first.

The process doesn’t have to be overwhelming because once you understand your current situation, the data can tell you what to do next. from consolidation of vendors, to identifying maverick buying, or streamlining your procure to pay operations, having clear management information can actually make the process pretty simple.

Below are six example activities routinely used to identify savings and efficiencies in public bodies:

STEP 2

A. ImPRovED TERmSwho are your largest and most important vendors and can you use that information to ensure that you are getting the best pricing and terms based on your spend?

IDENTIfIcATIoN of oPPoRTuNITIES foR SAvINGS AND EffIcIENcIESThe second step is arguably even more important - getting started and actually using the new clear view of expenditure to identify and pursue opportunities for savings and efficiencies.

Suddenly having much clearer visibility of how much is spent, on what and with whom can raise as many new questions as the data answers old questions.



B. cATEGoRY RATIoNALIzATIoN:which categories do you have too many vendors in where aggregation to fewer vendors could help drive costs down?

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c. coNTRAcT comPLIANcEwhere is off contract spend occurring and are there any instances of vendors you don’t have a contract with but should?

Number of vendors per categoryvCode Business Subsector Total Vendors vCode Business Subsector Total Vendors vCode Business Subsector Total VendorsMachinery and Electronics 79 Farming 9 Employment Services 3Construc�on Trades 67 Clothing & Footwear 9 Waste Management 3Construc�on Materials 61 Furniture 9 Property and Real Estate Management 3Systems Integra�on & Services 56 Insurance Services 8 Events and Event Facili�es 3Road Vehicles 50 Fi�ngs 8 Recycling 2Laboratory Equipment & Services 36 Other Goods & Services 8 Healthcare Services 2Security Equipment 33 Logis�cs 7 Animals 2Construc�on Equipment 31 Broadcas�ng 7 Other Transporta�on Management 2Grounds Maintenance 29 Cleaning & Janitorial Equipment 7 Technical Services 2Marke�ng 28 Vehicle Fuels & Lubricants 6 Emergency Services 2IT Hardware & So�ware 26 Security Services 6 Arts 2General Contractors 25 Other Vehicles 6 Government 1Informa�on Services 24 Training 6 Human Resources Consultants 1Environmental Services 19 Hotels and Other Accommoda�on 6 Financial Services 1Telecommunica�ons Services 18 Data Communica�ons 5 Document Storage & Management 1Retail 18 Legal Services 5 Educa�onal Equipment 1Road Transporta�on Management 17 Mail Services 5 Metal & Metal Products 1Energy Management 14 Sports & Playground 5 Administra�on Services 1Waste Disposal 13 Travel 4 Economic Development 1Construc�on Consultants 13 Cleaning & Janitorial Services 4 Catering Equipment 1Clinical & Medical 13 Other Energy Sources 4 Vending Machines 1Business Services 13 Chemicals 4 Drugs & Pharmaceu�cals 1U�li�es 10 General Facili�es Management 4 Catering Services 1Technical Consultants 10 Recrea�on Services 3 Ea�ng Establishments 1Business & Management Consultants 9 Adver�sing 3Sta�onery 9 Accoun�ng & Audi�ng 3

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D. cooPERATIoN - commoN vENDoRSwhere are you working with the same vendors as other public organizations where cooperation could save you time and money through aggregation?

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Security Equipment

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Construc�on Consultants

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Recycling

% Spend With Contracted Vendors

Common spend between City, School and Park District

Spend with common vendors

Spend with unique vendors

E. INvoIcE coNSoLIDATIoNwhere can you reduce the number of transactions that the AP and Procurement teams handle so that those people can be focussed on more strategic tasks?

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f. LoNG TAIL coNSoLIDATIoNwhere could you reduce the number of one time and low spend suppliers as they represent a cost to set up and administer for the AP and procurement teams?

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vCode Business Sector Total Spend Total Transac�ons Total Suppliers % Of Spend % Of Invoices % Of SuppliersConstruc�on 29,515,804.92 4,621 207 30.92 27.47 22.60Financial Services 17,580,291.26 184 12 18.42 1.09 1.17U�li�es & Energy 13,576,382.87 559 28 14.22 3.32 2.94Waste & Environmental Services 8,270,213.27 474 37 8.66 2.82 4.11Informa�on Technology 6,017,390.00 819 110 6.30 4.87 12.04Security Equipment & Services 5,192,492.45 1,216 39 5.44 7.23 4.99Vehicles 2,896,852.96 2,265 62 3.03 13.46 6.75Professional Services 2,672,840.30 160 19 2.80 .95 1.86Facil i�es Management 2,400,015.99 1,359 76 2.51 8.08 8.32Transporta�on Management 2,266,467.48 201 19 2.37 1.19 2.25

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STEP 3

cATEGoRY ovERvIEwwhat high level categories do we spend the most in now?

BuILDING A DETAILED cATEGoRY ANALYSISThe next stage of the process is to analyze spend by category at a more detailed level. A category management approach in procurement marks a distinct organizational change between departmental budget holders “going shopping” and well-organized, planned procurement efforts which offer better value and efficiency, leveraging the organization’s buying power.

Allocating spend consistently into meaningful ‘buckets’ makes the data easier to navigate, interpret and understand. The following shows an example of the sort of information most commonly used to support a category management approach.

which categories represent the best opportunity for internal collaboration?

vCode Business Sector Number of Departments Total Value Total VolumeInforma�on Technology 57 6,021,300.06 826Retail & Wholesale 54 95,133.68 559Business Support Services 52 701,033.27 523Facili�es Management 52 2,407,707.53 1,378Construc�on 51 29,518,708.64 4,633Office Supplies 41 213,322.74 774Marke�ng & Media 37 638,745.52 245Industrial Goods 35 1,137,005.81 1,325Security Equipment & Services 33 5,193,457.49 1,220Healthcare 29 669,021.53 390


having the high level overview of spend by category allows you to begin identifying categories where it makes the most sense to take action. which categories are chosen and which projects are undertaken will be based on a number of criteria such as increased internal collaboration, delivered savings, strategic importance to the organization, possible impact on staff or operations, level of risk, or simply identifying the category currently undermanaged the most.

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DRILL IN To cATEGoRYwithin the category of IT, what are the spends by subcategory?

vCode Vendor Category Total Spend Transac�ons Total Vendors % Of Spend % Of Invoices % Of VendorsComputer Systems Integrators 2,541,236.93 114 25 42.23 13.92 23.58IT Resellers 786,176.36 131 7 13.07 16.00 6.50So�ware Developers 590,718.61 56 27 9.82 6.84 23.58Managed & Outsourced IT Service Providers 430,502.43 26 4 7.15 3.17 4.88Fixed Telecommunica�ons Service Vendors 421,942.75 214 5 7.01 26.13 4.88Mobile Communica�ons Service Vendors 316,845.88 50 2 5.27 6.11 1.63Printers, Copiers & MFD Vendors 315,806.58 59 7 5.25 7.20 7.32Installed So�ware Providers 132,667.42 5 4 2.20 .61 3.25Networking Service Providers 109,069.59 27 5 1.81 3.30 4.07Other Telecom Equipment Vendors 100,030.64 9 1 1.66 1.10 .81

which IT sub-categories represent the best opportunity for internal collaboration?

vCode Vendor Category Number of Directorates Total Value Total VolumeIT Resellers 40 787,977.28 134So�ware Developers 20 590,718.61 56Computer Systems Integrators 18 2,541,236.93 114Managed & Outsourced IT Service Providers 12 430,502.43 26Printers, Copiers & MFD Suppliers 12 315,806.58 59Fixed Telecommunica�ons Service Suppliers 11 421,942.75 214Networking Service Providers 9 109,069.59 27Radio Communica�ons Equipment Providers 6 27,822.95 58Computer Hardware Suppliers 5 99,884.47 10Mobile Communica�ons Equipment Suppliers 5 8,544.38 11

IT is often seen as a high priority because of the large amount of spend and it’s distribution across the organization. As IT spend is a broad category it makes sense to drill into specific sub-categories. for this example, hardware and Software.

”“The most significant achievement to date has been the identification of

opportunities to initiate bid processes in several previously overlooked categories. we’ve already started to deliver savings by rationalizing the number of vendors in a category and getting better terms from the smaller number of vendors from whom we’re now purchasing.

Bill ward, city of Lee’s Summit

DETAILED cATEGoRY ANALYSISBelow are some summary statistics for spend in the category of IT hardware & Software:

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SPEND

Total Spend $ 3,764,305.00

Number of vendors 57

Spend with the top 20% of vendors $ 3,351,791.37

% Spend with top 20% of vendors 89.04%

Number of vendors in the top 20% 11

Average spend per vendor $ 66,040.44

TRANSAcTIoNS

Number of transactions 324

Average value per transaction $ 11,618.23

% spend on pcards 1.78%

% of transactions on pcards 50.62%

SPEND wITh coNTRAcTED vENDoRSEvery dollar spent is important and savings opportunities can be missed through off-contract purchases. Is your organization’s percentage of spend under contract moving in the right direction?

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comPARISoN wITh PREvIouS YEARShow has the pattern of spend in the category changed over time?

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with access to detailed information on spend by category, you’ll have the necessary data to determine priorities and resource allocation to deliver the highest return on investment for the level of effort required.

”“I wanted to have the ammunition that would

help me get better control over the university’s spend and in particular identify maverick spend. when I looked at the observatory, it was clear that it was a very cost effective way to help me do that and a lot more besides.

Don Buffum, mississippi State university

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STEP 4

SummARY STATISTIcSBelow are some summary statistics for spend in the example category of Grounds maintenance services.

PREPARE foR ThE coNTRAcTING PRocESSThe next stage is to prepare for the contracting process by having a thorough understanding of the spend in a specific category, which stakeholders to engage with and whether there is the opportunity to piggy-back on contracts owned by other organizations.

Being able to see all of this information combined into a single reporting view makes the data quick to navigate, interpret and understand. The following are examples of the sort of information most commonly used to prepare for the contracting process.

SPEND

Total Spend $ 3,000,020.00

Number of vendors 33

Average spend per vendor $ 90,910

TRANSAcTIoNS

Number of transactions 224

Average value per transaction $ 12,295

% spend on pcards 27%

% of transactions on pcards 54%

how is the spend spread across suppliers that have been used in the last year? It appears that there is a reasonable amount of one off, low dollar spending going on in this category which might be an opportunity for consolidation into one or more contracts for grounds maintenance services.

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how does that look at the more detailed category level? what opportunities are there for internal collaboration? There are 14 departments utilizing 12 different Landscaping contractors. There is likely to be an opportunity for consolidation in that particular sub-category.

vCode Vendor Category Total Spend Total Vendors Total DepartmentsTree Service Contractors 2,025,250 5 7Landscaping Contractors 528,480 12 14Garden Centers & Nurseries 152,579 2 6Grounds Maintenance Providers 79,246 5 5Lawn Care Contractors 78,736 4 4Street Furniture Suppliers 58,185 1 2External Display Providers 57,265 1 1Gardening Equipment Suppliers 20,278 3 3

Department Descrip�on Total Spend Vendors Used Total Transac�onsWorks & Construc�on 1,481,082 5 174Parks & Recrea�on 425,303 3 24Central District 344,293 2 8Electrical Supply 283,535 1 5Public Works - Transport 222,778 1 4Planning Services 141,768 1 17Buildings & Grounds 101,263 1 12

Drilling to internal account codes might provide further information on the services bought although this is dependent on the quality and completeness of coding in your finance system. classifying the vendors according to their main business type helps to overcome account coding inconsistencies and inaccuracies and for this

ENGAGING wITh STAKEhoLDERSBeing able to quickly engage with those in the organization that have bought the service in the recent past, what service needs they have and why they have a preference for a particular vendor, will ensure that these considerations are included in the procurement specification. The more requirements covered and the more stakeholders engaged in the preparation phase will increase usage of the contract and reduce maverick buying. The chart below shows the breakdown of spend by department within the organization.

Account Code Descrip�on Total SpendPLANNED MAINTENANCE 974,563MISCELLANEOUS EXPENSES 404,243UNPLANNED REPAIRS 344,293GROUNDS MAINTENANCE GENERAL 301,263TREES & SHRUBS 283,535EQUIPMENT REPAIR & MAINTENANCE 212,823STREET MAINTENANCE 170,609HORTICULTURAL SUPPORT 141,767PLANT PURCHASE 94,511REPAIRS & MAINTENANCE GENERAL 27,987PURCHASE - MATERIALS 27,467WALL REPAIRS 16,959

organization, actually makes category analysis possible.

cuRRENT coNTRAcTING SITuATIoNwhat contracts are already in place and when are they due to expire? Is there a short, medium or long term opportunity to consolidate spend on contracts with a smaller number of suppliers leading to a higher discount? Are there any contracts that have recently expired that have caused the organization to become legally non-compliant with their own procurement code?

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Vendor Name Expiry Date Descrip�on Contract ValueABC LANDSCAPES LTD 15/08/2013 Planning services and landscaping 2,500,000D & M LANDSCAPING LTD 15/08/2013 Planning services and landscaping 2,500,000INSCAPES 15/08/2013 Planning services and landscaping 2,500,000LANDCRAFT PROJECTS LTD 15/08/2013 Planning services and landscaping 2,500,000SYLVESTER LANDSCAPES LIMITED 15/08/2013 Planning services and landscaping 2,500,000BOSCOME NURSERIES LTD 27/11/2013 Trees & Plants 47,000RICHARDSON TREE SERVICES 31/08/2014 Tree work 3,500,000US MOWERS LTD 31/12/2014 Grounds Maintenance Equipment 600,000HUNT LAWN MOWERS 31/12/2014 Grounds Maintenance Equipment 600,000NORTHCROFT LANDSCAPES LTD 31/03/2015 Planning services and landscaping 59,000

Are there any opportunities to piggy-back on collaborative contracts which might save considerable time, effort and money?

Vendor Name Status Expiry Date Descrip�on Contract OwnerFROZEN LANDSCAPES LTD In Use 15/08/2013 Planning services and landscaping State Control BoardLANDCRAFT PROJECTS LTD No Spend 15/08/2013 Planning services and landscaping State Control BoardDAVIDSON TREE SERVICES No Spend 31/08/2014 Tree work Nextdoor CityUS MOWERS LTD Not Used 31/12/2014 Grounds Maintenance Equipment Nextdoor CityGAIMAN LAWN MOWERS No Spend 31/12/2014 Grounds Maintenance Equipment State Control Board

what is the current spend with contracted suppliers in the category? Think about setting an aspirational target of spend to bring under contract.

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STEP 5

SummARY STATISTIcSBelow are some summary statistics for comparison of spend across multiple years.

moNIToRING PRoGRESS ovER TImEAlmost as important as identifying and delivering savings for your organization, is tracking how your efforts are paying off over time.

monitoring your progress makes it possible to highlight positive achievements in the procurement function in relation to delivering savings, but also in terms of monitoring spend with specific groups of vendors, like small and local businesses. making your savings or efficiency projects turn out well relies on having the right management information that allows you to make the necessary adjustments along the way.

having access to cleansed and consistently classified spend data means that monitoring your progress is possible.

Financial Period Spend on Goods & Services # Vendors # Invoices Avg Spend per Vendor Avg Invoice per VendorFY 10-11 $106,025,946 1,914 19,947 $55,395 10 FY 09-10 $111,703,718 2,481 36,249 $45,024 15 FY 08-09 $128,464,141 2,702 46,098 $47,544 17

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% Spend with Top 20% of Vendors

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ToP cATEGoRIES of SPENDSignificant differences in spend across categories may suggest evidence of efficiencies implemented or a lack of control over spending, particularly in categories where spend is widely distributed across the organization.

Construc�on FinancialServices

Waste &Environmental

Services

U�li�es &Energy

Informa�onTechnology Vehicles

SecurityEquipment &

Services

Facili�esManagement

Transporta�onManagement

ProfessionalServices

FY 09-10 49% 17% 1% 10% 4% 1% 5% 1% 4% 2%FY 10-11 45% 20% 1% 8% 4% 5% 4% 1% 4% 2%FY 11-12 31% 18% 14% 9% 6% 5% 3% 3% 3% 2%

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SPENDING PATTERNDoes the pattern of spend over time give an indication of trend? Are there any months where spend has spiked that would indicate that budget is being used up at the end of the year? Looking at this picture by category or department will highlight specific areas where there may need to be more control.

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coNTRAcTED SPENDTracking contracted spend as part of the organizations monthly or quarterly KPIs provides evidence of whether buying is becoming more compliant over time. having the evidence of performance against an aspirational target makes this visible to all heads of department who can influence buying behaviour as a result. Knowing how many and which contracts are due to expire in the next 3 to 6 months helps with procurement resource planning.

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SPEND wITh SmALL BuSINESS AND LocAL vENDoRSSpend with small and local businesses is often underestimated by elected officials and/or the local community. Being able to accurately report the current situation can help in making policy decisions and dealing with calls to increase spend with small or mBE businesses.

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6%

7%

8%

9%

10%

11%

12%

13%

FY 10-11 FY 09-10 FY 08-09

Share of Spend with Local Vendors

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STEP 6

ToTAL QuARTERLY SAvINGSIn many cases, the team simply wants to be able to put an overall dollar figure on the amount saved and to show that information over time.

REcoRDING AND REPoRTING DELIvERED SAvINGSThe final, and critical step is to record and report your savings.

Reporting savings may simply be for internal purposes, providing evidence of the return on investment that effective procurement has delivered. Being able to present this evidence to senior managers and elected representatives, in universally understood ‘dollars and cents’ language, means that your department is more likely to get the resources it needs to operate most efficiently in the future.

having an easy to use data capture system that supports the recording of detailed information about how savings were achieved means that those responsible for specific projects can enter the relevant information as the project happens.

The following examples represent the type of savings information that many of our customers record as part of their ‘business as usual’ processes.

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Jul 10-Sep 10

Oct 10-Dec 10

Jan 11-Mar 11

Apr 11-Jun 11

Jul 11-Sep 11

Oct 11-Dec 11

Jan 12-Mar 12

Apr 12-Jun 12

Jul 12-Sep 12

Oct 12-Dec 12

Jan 13-Mar 13

Apr 13-Jun 13

Cash Savings

Efficiency Savings

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SAvINGS BY PRoJEcT TYPEfurther, what fund type was saved? Is it general fund or capital budgets that have been most heavily influenced by the procurement function with regard to savings? Should one be prioritized over the other?

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

Opera�ng Capital - Non-Construc�on Capital - Construc�on Other

SAvINGS BY oBJEcTIvEAreas of focus and targets might be set as to what the team believes to be the most easily recognized savings opportunities. Tracking progress towards those goals is important.

0 20,000 40,000 60,000 80,000 100,000 120,000

Reduce IT spending by 3%

Savings through increasing spend under contract to 20%

Iden�fy and use coopera�ve agreements

Increase volume of pCard spend for transac�ons <$1,000

Aggregate demand across departments/consolidate vendors

Goal Progress

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SAvINGS BY REcuRRENcEAre the savings being generated repeatable or are they mainly on one off purchases? It may be that one-off savings are much easier to accomplish in the short term, and that recurring savings (such as reductions over a two year period in fuel prices) are more difficult, but actually lead to a greater value of savings over time.

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

FY09 FY09 FY10 Fy10 FY11 FY11 FY12 FY12 FY13 FY13

One Time Recurring One Time Recurring One Time Recurring One Time Recurring One Time Recurring

SAvINGS BY how ThEY wERE AchIEvED

Price Reduc�on

Revenue Genera�on

Added Value

Cost Avoidance

Sustainable Procurement

Process Re-Engineering

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SAmPLE PRoJEcT REPoRTLast but certainly not least, when savings figures are reported, they are often questioned. Recording savings in a consistent and robust fashion automatically creates the audit trail, should you or your team be challenged to back up the savings figures presented with real examples.

Project Reference 123 Sample Road

Project Title Training Facility - Fit Out

Total Actual Gain $14,500.00

Total # Efficiencies 4

Contrac�ng Authority My Organiza�on

Department Facili�es

Project Type Capital - Non-Construc�on

Project Category Furnishings and Related Services

Source of Funds My Organiza�on

High Level Objec�ve Providing Value

Internal Objec�ve Iden�fy and use coopera�ve agreements

Project Start Date 02/15/2013

Project End Date 05/30/2013

”“Spikes cavell was able to complete the project

two weeks ahead of schedule with the team being beyond helpful. we are already zeroing in on initial opportunities for collaboration and savings – and we expect a great deal more moving forward. Spikes cavell has performed beyond our expectations.

Tom Roberts, california State university

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APPENDIX

vcoDE - A vENDoR cLASSIfIcATIoN TAXoNomYwhere categories of spend are shown within this guide, the categories are based on Spikes cavell’s vcode vendor classification taxonomy. most publically available classification taxonomies in use today were designed for use in the classification of specific goods and services (not vendors), or for directory and listing services. while these taxonomies have their place in other applications, they were not designed specifically to describe the business activities of suppliers or to be used in spend analytics in the public and higher education sectors.

Based on 10 years of classifying suppliers to the public and higher education sectors, input from procurement category experts and review of all other available taxonomies, Spikes cavell designed and developed the vcode taxonomy. The vcode taxonomy was:

• developed exclusively for the classification of vendors to the public and higher education sectors,

• organized so that the levels of the taxonomy match the way that our customers typically analyze their data into category groupings and sub-groupings,

• written so that the category labels were simple and straightforward to understand, and

• designed to incorporate vendor categories which are not applicable to the private sector or available in other taxonomies, and

• enhanced in categories of significant expenditure by the public and higher education sectors including construction Trades, Professional Services, Social care, Business Services, outsourcing and Information Technology.

As the vcode is owned and managed by Spikes cavell, it will continue to evolve over time as the spending habits of the public and higher education sectors change and new requirements are established.

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DATA TRANSfoRmATIoNSpikes cavell has focused on the transformation of data into management information for more than 25 years. for the last 10 years we have turned those skills exclusively to the collection, cleansing, classification, enrichment, redaction and collation of expenditure and related data for the public and higher education sectors. our data transformation techniques and methodologies have underpinned the efforts of hundreds of such organizations to find the type of procurement savings demonstrated in this guide.

we’ve processed over 2,500 datasets and in the process accumulated an unrivalled body of real-world experience. we know that public and higher education sector spend data is often poorly organized, inappropriately classified and difficult to access. To be cost-effectively made ‘fit-for-purpose’, transformation is necessary and automation essential. Spikes cavell leverage a sophisticated data transformation called ‘resequence’ which is designed to support the capture, transformation, aggregation, standardization and enrichment of public and higher education sector spend and contract data.

The output from the ‘resequence’ data transformation process is then used to provide visibility of the spend data in a format that is relevant to the audience that it is intended to serve. Procurement practitioners typically access the ‘observatory’, an intuitive and easy to use suite of online applications designed to make complex financial data easier to analyze, understand and interpret. And irrespective of whether the information will be used to identify procurement savings in the ‘observatory’, or to provide spend transparency to the general public and enhance citizen engagement through our ‘spotlightonspend’ service, both must be based on data which has been through a reliable and tested verification process to ensure accuracy and fitness for purpose.

we equip procurement teams, finance directors, senior management and the citizens they serve, with actionable business intelligence essential for the effective management of spend and the monitoring of operational efficiency. To be useful, business intelligence must be actionable. And that means much more than delivering improved visibility. It’s about ensuring that the data is robust, reliable and contains all of the information required for analysis.

we have a unique and unrivalled reference database compiled over almost 10 years which is comprised of more than $400bn of consistently classified spend data covering over one thousand public sector and higher education organizations in the uS and uK.

At the heart of Spikes cavell’s proposition is the observatory – an online platform that facilitates the delivery of spend and contract visibility quickly, affordably and with little effort on your part.

ABouT SPIKES cAvELLTo fIND ouT moRE

To set up a meeting to discuss your own organization’s analytics and business intelligence needs, or for more information, we look forward to hearing from you:

Phone: (571) 313-5257

E-mail: [email protected]

General Information: www.spikescavell.com

Spend Transparency: www.spotlightonspend.org

STRATEGIc ALLIANcE PARTNERS

The six part Guide to Procurement Savings from Spikes cavell demonstrates how the practitioner can use spend analysis to:

1. gain a better understanding of their current spending situation,

2. identify savings opportunities,

3. carry out a category analysis,

4. prepare for their contracting processes,

5. monitor their progress over time, and

6. record and report the savings and efficiencies they deliver to their organizations.

The Guide to Procurement Savings takes you through those six steps, and provides you with examples and descriptions of each step of the process. The potential return on investment of following these six steps, both in terms of dollars and cents and in reputation for your department, is huge. And we’ve made the costs of getting started in spend analytics so that you can carry out the six steps affordable for organizations of any size.

we at Spikes cavell are proud of the skills and processes we have developed, but even more proud of the impact that our services have had for the customers who have implemented change in their organizations as a result of the analysis services we provide.

PRocuREmENT SAvINGS, SPEND ANALYSIS - So whAT?

NIGP has been developing, supporting and promoting the public procurement profession through premier educational and research programs, professional support, technical services and advocacy initiatives that benefit members and constituents since 1944. with over 2,600 member agencies representing over 16,000 professionals across the united States, canada and countries outside of North America, the Institute is international in its reach.

ABouT NIGP ThE INSTITuTE foR PuBLIc PRocuREmENT

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