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Reining in Elusive Tail Spend with Spot Buy Purchasing
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 2 Customer
Today’s Presenter’s:
James Tucker Vice President, Go-to-Market Strategy & Operations, Ariba Spot Buy
Scott LaGois Manager, Business Process & Operations, Global Procurement
SUPPLIERS 20% 40% 60% 80% 100%
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Vilfredo Federico Damaso Pareto
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 4 Customer
ProcureCon Survey Results
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 5 Customer
The Long-Tail Challenge There is nothing “one-off” about “one-off” purchases
TACTICAL • 20% of indirect spend • 80% of suppliers • 1-4 weeks
STRATEGIC • 80% indirect spend • 20% of suppliers • 4+ weeks
SUPPLIERS 20% 40% 60% 80% 100%
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1. Inefficient purchasing 2. Reduced transparency
3. Higher transaction costs 4. A long tail of one-off suppliers
15% of indirect goods are from one-off purchases resulting in
‘Shining a Light on ‘One-Off’ Purchases’ , Procurement Leaders, 2016
SPOT BUYS • 15% of indirect goods – both
Strategic and Tactical • Non-sourced / non-contracted • Not in company catalog • Need immediately
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 6 Customer
Common Spot Buy Categories Example spot buy purchases
Other Urgent and Unanticipated Items
Facilities and Maintenance
Office Furniture & Supplies
Electrical and Test Equipment
Technology and Accessories
MRO and Industrial Supplies
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 7 Customer
ProcureCon Survey Results
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 8 Customer
Ariba Spot Buy: Find and Buy Non-Sourced Goods The perfect balance of convenience and control
• Simple user experience • Configuration and workflow • Secure payment • Visibility into transaction details
* The use of Ariba Spot Buy is subject to regional availability and is currently available for U.S. domestic buying only.
SHIP
Spot Buy Ecosystem
APPROVE PAY
SEARCH
BUYERS
Ariba Procurement
ANALYZE FILTER
Marketplaces
Ariba Network Suppliers
• Filtered suppliers and content • Thousands of categories • Ecosystem of supply from Marketplaces and
Ariba Network Suppliers*
Company Catalog
Spot Buy Catalog
SUPPLIERS
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 9 Customer
Ariba Spot Buy Quickly and easily find items not available in your company catalog without leaving the Ariba Procurement tool
Simple search refinement filters:
• Price range • Location (zip code) • Condition (new, used) • Seller Name • Seller Type
A submitted Purchase Requisition is routed for approval
Select item you want
Add item to shopping cart
Find non-sourced goods in your approved P2P tool without risk of buying on the web
• Can’t find what you need from the Company Catalog tab?
• Find and buy non-sourced goods from the Spot Buy Catalog tab
(0)
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 10 Customer
Ariba Spot Buy Business Value
“Spot Buy is a game changer for non-sourced goods. We’ve seen 25% savings over non-catalog orders.”
- Biopharmaceutical Company
Eliminate non-catalog, invoice, etc. saves $400 per trans
Sources: CAPS Benchmarking
Improve Process for Finding and Buying Non-Sourced Goods
“Spot Buy has improved customer satisfaction ratings by simplifying one time purchases.”
- Enterprise Software Company
Increase Procurement’s strategic value
Accelerate User Adoption and Improve Customer Satisfaction
“We look at Spot Buy as a real opportunity to help focus on higher value procurement.”
- Nuclear Technology Company
Average P-Card rebate about 1.0%
Increase P-Card Rebate Savings
“We’ve cut 20% of our long-tail one-off vendors and replaced with Spot Buy.”
- Specialized Polymer Company
Savings estimate of about $100 per vendor
Source: 2015 Ariba survey
Reduce Vendor Management and Long-Tail Supplier Costs
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 11 Customer
Eliminate Long-Tail Issue using a single proxy vendor with Ariba Spot Buy
Suppliers
Spe
nd
1. Current long-tail suppliers
Annual spend with ad-hoc suppliers
Annual spend with Spot Buy suppliers
Suppliers
Spe
nd
2. Target ad-hoc suppliers to replace with Spot Buy
Suppliers
Spe
nd
3. Reduce ad-hoc suppliers
Suppliers
Spe
nd
4. Vendor management savings with Spot Buy
Savings estimate of about $100 per vendor
Source: 2015 Ariba survey
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 12 Customer
Long-Tail Rationalization from customer presentation at Ariba LIVE 2016
“Every purchase with Ariba Spot Buy
supports and sustains the
progress of this key objective.”
Spot Buy at Pfizer Scott LaGois – Global Procurement, BP&O
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 14 Customer
Pfizer Overview
PFE Numbers (2015)
$49B Revenue
63 Manufacturing Sites Worldwide
>175 Markets in which Pfizer sells products
>97,000 Colleagues around the world
7 Products with sales greater than $1 Billion
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 15 Customer
Pfizer’s Ariba Footprint
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 16 Customer
Spot Buy Opportunity Analysis
To estimate the potential usage and benefit of Spot Buy, an analysis on non-catalog orders was performed
Items were “sourced” through Spot Buy – to determine availability and compare pricing
Results:
32% PO line items were available in Ariba Spot Buy
Of the items available, prices were generally lower than paid by Pfizer (average savings 25%, weighted average savings 20%)
0%
25%
50%
75%
100%
-
5
10
15
20
25
30
35
40
Maintenance,Repair &
Operations (MRO)
Lab & MedEquipment And
Supplies
Packaging &Shipping Materials
IT Hardware,Supplies &Software
Facilities Environmental(ES&H) Waste
Disposal Services
Lab Chemicals,Biologicals AndRadioactives
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 17 Customer
Drivers for Implementation
Key decision factor for 9r2 upgrade Significant shift for procuring non-sourced goods Other benefits and business drivers:
Process Automation
• Reduction in transactions routing to Procurement • Consistency within standard controls and business rules
Vendor Maintenance
• Fewer (one-time) adds and reduction in overall vendor maintenance requirements
P-Card Activity • Spot Buy purchases help Increase P-Card rebate
Hard Savings • Cost savings of marketplace items versus ad hoc
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 18 Customer
Spot Buy at Pfizer
Pfizer Spot Buy Supply
Order Confirmation sent and validated
2 Buyer receives OC
Purchaser Order (PO ) PO validates inventory and price
purchase request (PR)
approval workflow
Advanced Ship Notice sent 3
and ASN
1
Company Catalog
Spot Buy Catalog
Ariba Procurement Content
Supplier ships goods upon payment receipt
ship
spot buy catalogs
Ariba Network Suppliers
Spot Buy Supply
Level 2/3 enriched data 4
pay
eBay Marketplace Sellers paid via PayPal funded with a ghosted Amex P-Card
CAR
AMEX routes data to Pfizer’s CAR Tool
SAP CAR uses enriched data to perform reconciliations and upload to SAP G/L
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 19 Customer
Current Status and Best Practices
Current Status
Live since Feb. 23rd
Phase I – Early Access to Spot Buy • ~45 colleagues invited, 29 trained • Selected based on spend profile
Phase II – Broad Spot Buy Adoption • ~4K colleagues invited • Higher anticipated volume
Best Practices
Change management
Policy
Training
Communication
Conclusion James Tucker
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 21 Customer
World-Class Organizations have 80% of Spend Under Management; however…
Source: The Hackett Group
Non-world-class organizations typically influence only 55% of overall spend compared to eighty percent for world-class
Ariba Spot Buy can help • Improve process for finding and
buying non-sourced goods • Accelerate user adoption and
satisfaction • Increase P-Card rebates • Reduce long-tail supplier problem
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 22 Customer
Q&A Take control of your spot buy spend today
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Buy spend assessment
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Buy video on YouTube
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A r i b a Sp o t B u y
Scott LaGois
Manager, Global Procurement BP&O +1 212-733-6415 [email protected]
James Tucker
Vice President, Ariba Spot Buy Go-to-Market +1 650 390 1702 [email protected]
jbtucker3
James Tucker
Vice President, Ariba Spot Buy Go-to-Market +1 650 390 1702 [email protected]
jbtucker3
Thank you Contact Information: