microforum spend analytics

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  • 1. SAP ANALYTICSmicroforum 3/21

2. Global TrendsIncreasing Costs & Reaction to Risk Limited Spend Visibility75% of CFOs under pressure to increase savings and 34% of enterprises still do not have an automated means to decrease risk (Aberdeen Group, 2010) collect and aggregate spend data from various sources(G/L, AP, ERP, etc.) to achieve timely, accurate and completeLess than 40% of finance professionals are currently information (Aberdeen Group, 2010) enriching their spend data with risk information, making savings erosion an even more critical problem (Aberdeen Inadequate or too late spend insights Group, 2010)Shifting CPO FocusGrowing Need for Reliable Data70% of CPOs expressed a need to focus on Competitive 56% of ISM members rate data reliability as the number one Insight, Risk, Compliance, and Supplier Management vs. challenge in strategic sourcing (Institute of Supply Transaction Management (CPO Research)Management, 2009)86% of purchasing and finance professionals rate Spend 62% of all enterprises are still using manual means to Analysis as a high value function (Aberdeen Group, 2010) classify and cleanse spend data (Aberdeen Group, 2010)Procurement is taking on a strategic role to deliver value US Department of Defense reports that 40% of excess costs and bottom line savingswere the result of unreliable data Customers want an integrated, repeatable process toensure reliable analyses 2011 SAP AG. All rights reserved. 2 3. Collaborate Effectively With Stakeholders On Cost Savings &Supply Continuity InitiativesVisibility to enterprise wide spending and supply base enables sourcing strategies that deliver measurable results to key stakeholderssuch as Finance and Supply Chain organizations. ProcurementFinanceSupply Chain CIO Accelerate CostSupply Savings, Reduce Supplier Cost Savings IT Cost Savings Continuity Risk Analyze Supply Identify1 Budgets Supply Data StandardizationBaseSavings Planand EnrichmentIdentifySourcing Negotiate SavingsBudget vsTrack SupplierInitiatives Supplier Trigger Sourcing ActionsSavingsTargets Actual Performance Risks Monitor 2 EstablishContract Contracts Actionable AlertsUtilizationSupplierIdentify Cost To Measure Risk One Solution , Multiple Alternate Mitigate RiskActual SavingsAnalysis Suppliers Deployment Options1. Identify and Act on Savings2. Identify and Act on Supplier Risk 2011 SAP AG. All rights reserved.3 4. Analytics for Everyone, Everywhere, AnytimeOPERATIONS l HR l FINANCE I IT I SALES l MARKETING MANUFACTURING l RETAIL l HEALTHCARE l BANKING l UTILITIES l TELCO IPUBLIC SECTOR What What isWhat will happened? happening now?happen? How and why What is the risk if itHow do you prevent / ensure did it happen? does/doesnt happen? it happens again? Tom Davenport International Institute for Analytics 2011 SAP AG. All rights reserved.4 5. Analytics for Procurement Analytic ApplicationsAnalytics for Procurement Decision Support for SupplierData SupplierSpendthe ProcurementPerfor-Reliability RiskAnalytics Functionmance 2011 SAP AG. All rights reserved. 5 6. SAP Procurement PortfolioIntegrated Solutions that Support the Process SpendSourcingContractOperational InvoiceAnalyticsManagement Procurement Management Supplier Management SAP SupplierLifecycle MgmtSAP SpendSAPSAP SRM, SAP ERP SAP Invoice MgmtPerformance SAP Sourcing Contract Lifecycle& SAP Cart Approvalby OpenTextManagement MgmtSAP Data Enrichment & Supplier Connectivity via SUS andSAP Sourcing OnDemandClassificationCrossgate / Hubwoo* New! 2011 SAP AG. All rights reserved.6 7. Information is key for procurement performanceTo meet strategic business .and this requiresgoals, procurement needs to Drive improvement in sourcing Enterprise wide visibility to spend andstrategies buying patterns Effectively manage savings Complete, accurate, trustworthy dataopportunities Powerful information at the hands Develop healthy supplier of the business userrelationships Improve compliance If I can take the data from my spend analysis tool and understand where it comes from and tie it to performance, then I can easily address the opportunities to drive savings and reduce spend.CPO, Large North American Insurance Company 2011 SAP AG. All rights reserved.7 8. Data Enrichment and Classification OnDemandSolution OverviewA cloud-based, network application that combines spend data with global contentand services to improve data reliability for strategic sourcing and spend analytics.Data Collection Enrichment ClassificationRevisionHow can I aggregate allMy supplier identities areHow do I know what ImHow can I add my own my spend data in oneobscured due to poorreally buying? knowledge into the place and be sure its data quality and lack ofprocess? accurate? content! Manage accuracy and Increase leverage opportunities Increase visibility to both direct Incorporate subject mattercompleteness of company-wide with normalized suppliersand indirect spend expertise with the Revision toolspend data from multiple sources Apply changes to the current Improve decision-making withImprove understanding of spend Gather data from SAP and non-enriched content activity with a consistent structure cycle and future cycles forSAP sources for goods and services continuous improvement 2011 SAP AG. All rights reserved. 8 9. The SAP Global Business Compendium Additional Location Location (Address, Linkage (Parent Information (Mail, Fax etc) ZIP, Country etc) Company etc) Contact Info (CEO, Officers, Phon Financial & Risk e numbers, email Indicators addresses etc) (Filings, suits, liens, b Diversity (women ankruptcy etc) owned, SDB, minoriti es etc)Line-of-Business(Standard Industrial Cortera Risk (viaClassification Code incl. Endorsed Businessfunction)Business InfoSolution: risk(employees, sales, TIsegment, paymentN, non-US Tax Sanctions (OFAC) score, trend etc) 2011 SAP AG. All rights reserved.number etc) 9 10. Validation and EnrichmentImproves leverage and decision-makingSupplier ValidatedLegal OwnershipIndustry SpendGrafix GraphCorr LLC (Grafix) RockTenn Company Packaging $75,000Parc Industrial, St. Marie QC433 2nd Ave, Sainte-Marie QC G6E 3C6 CASmurfitSmurfit-Stone Container Corp RockTenn Company Packaging $150,000PO Box 93095, Chicago, 60673 150 N Michigan Ave, Chicago, IL 60673 USStone ContainerSmurfit-Stone Container Corp RockTenn Company Packaging $200,000150 N Michigan, IL 60673 150 N Michigan Ave, Chicago, IL 60673 USVerizonVerizon Business Verizon Communications Telecom $250,000295 Maple Ave, Basking Ridge NJ1 Verizon Way, Basking Ridge NJ 07920 USVerizon WRLS#12RKCellco Partnership (Verizon Wireless)Verizon Communications Telecom $50,000NJ 7920 USA1 Verizon Way, Basking Ridge NJ 07920 USTraditionalSAP Grafix $75,000 Verizon Comm. Verizon WRLS $300,000$50,000 Verizon$250,000 Employees: 194,400RockTenn Sales (mil): $106,565Smurfit $425,000 $150,000Risk, etc. Employees: 10,400 Sales (mil): $3,000Stone ContainerRisk, etc. $200,000Accelerate Savings 2011 SAP AG. All rights reserved.10 11. The SAP Transaction Knowledge BaseIndustry Wide Coverage $350+ billion in spend20,000+ lines of businesses 20+ key variables 50+ industries20+ years of history 2011 SAP AG. All rights reserved.11 12. Methods of Spend ClassificationItem Description Cataloging Industry Vendor Coding(SIC, NAICS, UNSPSC) Not all items have valid descriptions Not organized for sourcing resource based Assumes repetitive similarity in description Too generalized for in-depth sourcing Forces micro vs. strategic focus Assumes a supplier sells one thingAccountingSAP Method Limited depth Focuses on what was purchased by analyzing Frequently misapplied due to budgets multiple variables on the transaction Indicates why not what was purchased Improves leverage with a more complete andaccurate understanding of spend Supports strategic sourcing 2011 SAP AG. All rights reserved. 12 13. Spend ClassificationImproves accuracy and understandingSupplier IndustryItemAccountBusiness Unit SpendGrafix Packaging Not assignedPromotions Graphics $130,000RockTenn Packaging DisplaysAccounts payable trade Advertising$475,000RockTenn Packaging DisplaysFreight-inboundAdvertising $38,000VerizonTelecom Not assignedUtilitiesFacilities $285,000VerizonTelecom BlackberryOffice suppliesSales $72,000 TraditionalSAPSupplierPackaging TelecomApproach $643,000 $357,000 Freight $38,000ItemCell Phones DisplaysUnknown Multi- Displays Telecom PTP Graphic DesignApproach$72,000 $513,000$415,000variate $475,000 $285,000 $130,000 Approach Cell Phones Advertising $72,000$130,000Account UnknownOffice Sup.Utilities $285,000Approach$475,000$72,000 Freight $38,000Accelerate Savings 2011 SAP AG. All rights reserved.13 14. How does Revision help? Process support vs. Excel spreadsheets 1 During the revision phase, classifications can be changed or refined as needed The revision tool itself can be used to review and apply changes on-the-spot Out of box reports are also available to2 facilitate review Example 1. During classification review, the datasteward notices that some transactionshaving account freight provision shouldbe in the freight category 2. Using the revision tool, the data stewardxfilters on freight provision and selectsthe transactions to reclassify x 3. Updated results are applied forxcontinuous improvement 3 2011 SAP AG. All rights reserved.14 15. Solution Summary: SAP BusinessObjects Spend PerformanceManagementMaximize Savings Minimize Supplier RiskGain full spend visibility Automated data capture from SAP and non-SAP Data accuracy for faster insightsIncrease spend under management Set up performance targets Collaborate effectively to act on insightsData Enrichment & ClassificationRapidly identify savings opportunities Find and act on savings potential ERP Pro-actively monitor contract compliance GL BIReduce supplier risk P-Cards T&E Pin-point supplier risks and supply concentration * Note: The Data Enrichment &amp

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