The Business Case for Spend Analysis

October 8, 2014

• What is spend analysis?• What could you do with better spend visibility?• Where does the data come from?• Why not do spend analysis yourself?• What have other organizations done?• Why you should consider Spikes Cavell.

Outline

What is spend analysis?

Accounts PayableSpendPurchasingCard Spend eProcurement

Transactions

Contract

Record

Accounts PayableSpend

eProcurement

TransactionsPurchasingCard Spend

What is spend analysis?

Enrich

Classify

Cleanse

Spend data that you trust

and that contains as much detail as possible

Contract Record

What is spend analysis?

Takeaway 1

A spend analysis project starts with

data that you trust and tools you can use.

• Deliver savings and efficiencies by:• always getting the ‘best rates’;• using data in competitive processes and negotiations;• using category analysis to drive down costs;• identifying internal and external collaborative

opportunities; and • spending time using the data rather than cleaning and

classifying it.

What could you achieve?

• Bring spend under management by:• providing a solid foundation for decision making that

includes all data sources;• identifying areas of spend that should be targeted by

professional procurement teams;• identifying non-compliant spend;• profiling and managing suppliers accordingly; and• benchmarking and measuring performance.

What could you achieve?

• Change buying behavior by:• providing key stakeholders with visibility;• creating departmental spend reports to help budget

holders better manage their spend;• identifying non-compliant spend and using data to

have informed conversations;• monitoring processes to identify potential efficiencies;

and• engaging departments in collaborative procurements.

What could you achieve?

• Maximize the impact of dollars spent:• with small businesses;• with local companies;• with minority owned businesses; and • assess the potential impact of procurement

decisions on these groups.

What could you achieve?

What is the ROI?

Calculating an ROI for spend analysis can be difficult without actually seeing the data, so some pragmatism is required. No one wants to

overpromise and under-deliver.

• What is the breakeven point?– Calculate percentage of overall spend you would have to save

to break even and assume you can do much better. – This gives an ROI of 0.– Spend analysis project cost/annual goods and services

expenditure = percentage of total spend saved to break even

What is the ROI?

$13k/$20m = 0.065%of total spend would have to be saved to

break even.

• What if we could do a bit better?– Calculate the ROI if you saved 0.2% of total spend.– (Savings-Investment Cost)/Investment Cost = ROI

What is the ROI?

$20m*0.2% = $40k($40k-$13k)/$13k = 2.08 ROI

meaning that in this situation, just over $2 was made for every $1 invested

• How much spend would we need to bring under management?– Calculate value of spend you would have to bring under

management to break even – Spend analysis project cost / (Annual expenditure * avings

through bringing spend under management) = percentage of spend to bring under management to break even.

What is the ROI?

$13k / ($20m * 15%) = 0.43% of spend brought under management to break

even.

Takeaway 2

A spend analysis project provides the necessary basis for you to

deliver savings, bring spend under management, change buying

behavior and maximize the public benefit of your expenditure.

Where does the data come from?

PurchasingCard Spend

(Some transaction detail but < < 20% of spend)

eProcurementTransactions

(Usually orders, not spend and < 20% of spend

comes through eProcurement)

Contract Record(Software system, Excel,

or Manual)

Accounts PayableSpend

(100% of spend, but not necessarily 100% of the

detail)

What are some common hurdles?

Hardware Duplicates

AT&T• ATT Mobility• AT& T• ATT Reston• ATTM• ATT Wirless• A T & T• AT and T• AT & T Wireless• ATTM Store #2323

Classifications

Dell• Computer

hardware• Classroom Supplies• Software Licenses• Other Supplies• Misc. Contracted

Services• Capital Project

equipment <$10k

Takeaway 3

Raw data from AP, pCard, eProcurement and contract

management systems needs to be aggregated, cleansed, classified

and enriched in order to be made fit for analysis by the procurement team.

We need good quality spend data. Getting that data will require us to extract the data from multiple systems, validate the extract, consolidate it together, then cleanse, de-duplicate, classify and enrich that data each and every time we want to update our analysis. It would be more cost effective to have this done for us rather than by us.

Why not do it yourself?

Accounts PayableSpend

PurchasingCard Spend eProcurement

Transactions

Contract

Record

We need analysis tools we can use. We don’t have to install or configure, can use without a steep learning curve, that were built for business users, that multiple people can use at the same time, preferably with pre-built reports so we aren’t starting from scratch, and which can support strategic as well as tactical decision making.

Why not do it yourself?

Takeaway 4

A spend analysis project will allow you to focus your time and energy in developing your procurement function, monitoring compliance and strategic sourcing rather than

data transformation and report writing.

1. A spend analysis project starts with data that you trust and tools you can use

2. A spend analysis project provides the necessary basis for you to deliver savings, bring spend under management, change buying behavior and maximize the public benefit of your expenditure.

3. Raw data from AP, pCard, eProcurement and contract management systems needs to be aggregated, cleansed, classified and enriched in order to be made fit for analysis by the procurement team.

4. A spend analysis project will allow you to focus your time and energy in developing your procurement function, monitoring compliance and strategic sourcing rather than data transformation and report writing.

Recap of the takeaways

• We need good quality spend data without having to do it ourselves.• Transformation of the data is done for you

by an experienced team.• Data Fitness Checks are carried out on

your raw expenditure at the beginning.• Collection, cleansing, classification and

enrichment are low touch on your staff.• You want to know more about your spend

than is available in your raw data today.• Join contract and expenditure data

together.

Why consider Spikes Cavell?

• We need analysis tools we can use.– The analytical tools (the Observatory)

were built for procurement and finance business users

– There are over 200 reports pre-built and ready to use on day 1.

– Compare and collate your expenditure data with other organizations.

– Record and report your achievements.

Why consider Spikes Cavell?

• We want to work with a company who:• has done spend analysis for

organizations like ours before; • are specialists in data transformation

and spend analysis for public sector and higher education organizations;

• work with professional associations that we know and trust; and

• have competitive pricing and contracting options that will work within our procurement rules.

Why consider Spikes Cavell?

Takeaway 5

Spikes Cavell has worked with over 1,000 public sector organizations

like yours, transformed over $550b of spend, and can provide the data and tools that you need to transform your procurement

function.

1. A spend analysis project starts with data that you trust and tools you can use

2. A spend analysis project provides the necessary basis for you to deliver savings, bring spend under management, change buying behavior and maximize the public benefit of your expenditure.

3. Raw data from AP, pCard, eProcurement and contract management systems needs to be aggregated, cleansed, classified and enriched in order to be made fit for analysis by the procurement team.

4. A spend analysis project will allow you to focus your time and energy in developing your procurement function, monitoring compliance and strategic sourcing rather than data transformation and report writing.

5. Spikes Cavell has worked with over 1,000 public sector organizations like yours, transformed over $550b of spend, and can provide the data and tools that you need to transform your procurement function.

Recap of the takeaways

For more information or to request a copy of the business case in Word format, contact Spikes Cavell by:

Phone: (571) 313 – 5257Toll Free: (800) 990 – 0228Online: Request a call back

E-mail: info@spikescavell.com