Spend Analysis: What Your Data Is Telling You and Why It’s Worth Listening

Rohit Namdeo - Deloitte Consulting SEA
Michael Koch - SAP Ariba / August 30, 2016
Spend Analysis: What Your Data Is Telling You
and Why It’s Worth Listening
Public

© 2016 SAP SE or an SAP affiliate company. All rights reserved. 2Public
Important information
This information reflects the status of SAP Ariba solution planning as of June 2016. All such
information is confidential information (per the contract between our companies), and must not
be further disclosed, as stated in the confidentiality clause of that contract. This presentation
contains only intended guidance and is not binding upon SAP or Ariba to any particular course
of business, product strategy, and/or development. Its content is subject to change without
notice. SAP and Ariba assume no responsibility for errors or omissions in this document. SAP
and Ariba shall have no liability for damages of any kind including without limitation direct,
special, indirect, or consequential damages that may result from the use of these materials.

Agenda
Welcome
Session Overview
Deloitte Industry Overview
Q&A

Good spend management begins with good spend visibility
The spend management ecosystem

86% of companies say spend
visibility is very important …
Source: SAP / Procurement Leaders Survey 2011
But only 40% of
companies have
good visibility into
their spending.

Traditional business intelligence is just the tip of the iceberg
Data aggregation
Dashboards and reporting
Commodity
classifications
Supplier data enrichment
Market insights
and benchmarks

It doesn't matter how
many "resources" you
have if you don't know
how to use them.
Spend analysis:
What your data is telling you and why it’s worth listening

Panelists
Rohit Namdeo
Manager, Deloitte
Consulting SEA
Michael Koch
Director, Solutions
Marketing, SAP Ariba

Spend Analysis
What Your Data Is Telling You and Why It’s Worth Listening
Rohit Namdeo, Manager, Deloitte Consulting Pte Ltd

In procurement, improvement goals and strategy are often well defined,
but execution lacks in several areas
Should we negotiate new
contracts? Are our
contracts aligned with
what we actually buy?
How much of our buying
is covered by contracts
anyway?
What categories are
experiencing maverick
buying?
How can we monitor
purchasers and make them
accountable?
Should we limit the number of
suppliers? What are the
consequences? (costs & risks)
Can we improve efficiency in our
procurement department by
cutting down on small orders?
Are different Opco’s
experiencing
different prices?
© 2016. For information, contact Deloitte Touche Tohmatsu Limited.

Decision making becomes difficult due to common challenges and problems which exist
across organizations
Issues
• Difficult to identify improvement opportunities because of inaccessible information
• Hard to measure project success or failure
• Improvement activities are one-time only
• Continuous improvement is only possible with timely, complete information
• Impossible to drill down to individual orders which limits problem solving to strategic level
Cumbersome and
incomplete ERP
reporting does not
allow for meaningful
analysis
Manually creating an
Excel snapshot might
take weeks or months.
By then, the data is
expired
Disparate data
sources make it a time
consuming job to
gather all spending
data
Incongruent master
data (supplier naming,
categories) leads to
data cleansing
activities
Common Challenges

Analysis of spend leads to deep insight into the composition of the volume and in
savings opportunities
Which Departments or
Business Units determine
the size and composition
of the total spend?
Who are the
biggest
Suppliers and to
what cost center
do they supply?
To what Categories
do the supplier
belong and what is
their contribution to
the total spend?
Insights Opportunities
• Improve process efficiency
• Expel maverick buying
• Negotiate better contracts
• Make right decisions on
what to buy from whom
• Maximize value creation
• Reduce costs by
optimizing purchase to
pay process

Traditionally, Spend Analysis required multiple manual activities in order to
achieve end results
Issues
Static Data
Reports
Time-
Consuming
Up-to-date
reports not
available
Dedicated &
Expert
resources

Ariba Spend Visibility has simplified this Spend Analysis process
Data enrichment processes in
Ariba Spend Visibility
Customer data
source systems
Raw data loaded
into Ariba Spend
Visibility portal (input) 1
Extract, transform, and
load process
ERP 1 ERP 2 P- Card
…….
portal
powered by SAP HANA
in the cloud
Market data
benchmarks
4
6
Enriched data
loaded to
portal
(output)
Quality
assurance
5
Commodity
classification
Supplier data
enrichment
2 3
Source: SAP Ariba

Ariba Spend Visibility supports a wide variety of views, all associated to the same data
set and filters
Dashboard
Supplier View
Price Analytics

Ariba Spend Visibility gives procurement manager the total spend of the organization
in one single overview
Who
Business Unit A determines the
spend volume
• To be able to run the Procurement department, the CPO needs to have insight into Who buys What and Where
• This insight enables him to create the necessary reports for boardroom meetings
• Knowing the exact spend at all times enables the CPO to make quick decisions and act swiftly when necessary
What
Direct materials determine the
spend volume
Where
Supplier 2829 is the biggest
supplier
Scenario

Ariba Spend Visibility gives insight into process efficiency due to fragmentation of
spend and the amount of invoices received
• An inefficient process taps heavily in the available time of your purchasers and administrative personnel
• Identified inefficiencies can be discussed with supplier
• Synergy between departments enables an increased efficiency
• Insights provide the business case to implement e-Invoicing
Scenario
Pareto
Pareto shows a long tail of small
suppliers
Top 20 based on # invoices
More than 1,000 invoices are
received from top suppliers
Identify synergy
Synergy is identified and enables a
significant reduction

With Ariba Spend Visibility, the purchasing manager gains insight into contract
compliance to expel maverick buying
• The procurement manager identifies product categories with a substantial amount of spend on non-contracted
suppliers
• He identifies the product category with most spend savings based on the average price of the preferred suppliers
• He finds out who are responsible for buying from these non-contracted suppliers and he can enter the dialog to find
out what is needed to prevent this
Scenario
Proportion
Non-contracted suppliers cover 20%
of the spend
Missed spend savings
Spend savings can be realized in
specific product categories
Responsible purchasers
Maverick buying of 5 individuals
identified

With Ariba Spend Visibility, the category manager gains insight into the supply base for
better contract negotiations
• The Category manager selects the product category with the highest number of suppliers
• He identifies the suppliers that account for 80% of the spend in the selected category
• The number of suppliers can be reduced by excluding the least stable suppliers for better contract negotiations
Scenario
Product categories
Products within this category are
delivered by >200 suppliers
80-20 rule
80% of the spend in this category is
covered by 20 suppliers
Reduce supply base
A significant reduction of the supply
base is possible

Ariba Spend Visibility Delivers Comprehensive
Insights on Supplier and Spend Data
Organization
Boliden Group
Headquarters
Stockholm, Sweden
Industry
Mining and metals
Products and Services
Exploration, mining, smelting
and metals recycling
Employees
4,800
Revenue
€3.8 billion
Web Site
http://www.boliden.com/
Solutions
Top Objectives
 Create a single source for all spend and supplier information that resided in multiple systems
 Improve sourcing and procurement strategies based on insights gained from spend analytics
 Drive continuous improvement through benchmarking and comparison of spending patterns
between business units
Resolution
 Deployed the Ariba Spend Visibility solution as a stepping stone to drive strategic sourcing
initiatives
 Classified all spend data using a blend of custom and industry standard taxonomies
 Leveraged the unified D&B database offered within Ariba Spend Visibility to enrich all supplier
data
 Enabled rapid user adoption through intuitive and simple user interface and training sessions
Key Benefits
 Gained an aggregated view of spend data across all seven procurement sites, resulting in
better cross-site visibility and identification of spend reduction opportunities
 Identified linkages and parentage hierarchies across a portfolio of 6,000 suppliers, thus
enabling supplier optimization and better negotiation clout
 Increased data quality standards and analytics coverage for spend data spanning €800 million
annually
340,000Transactions classified
€2 billionTotal spend analyzed
6,000Supplier records enriched
“Using Ariba Spend Visibility, Boliden was able to apply a baseline for performance improvement
across all of our procurement sites. With this greater visibility and a user-friendly approach, we are able
to identify the cross-site and cross business unit leverage that that will lead to reduced spend and
greater efficiency.”
Simon Miller, Sourcing Project Manager, Boliden Group

Good Data and Analytics Pave the Way for
Strategic Sourcing Excellence
Organization
Air Products & Chemicals, Inc
Headquarters
Allentown, Pennsylvania, USA
Industry
Chemicals
Products and Services
Chemicals, Gases, Equipment,
Services and Solutions
Employees
20,000
Revenue
US$10.2 billion
Web Site
www.airproducts.com
Solutions
Ariba Sourcing
The company’s top objectives
 Improve spend data quality to identify hidden sourcing opportunities and subsequently execute
confident strategies
 Reduce maverick spending and increase total spend under management by leveraging state-of-
the-art sourcing platform
 Gain visibility on depth and breadth of supplier relationship with accurate supplier data
enrichment
The resolution
 Deployed Ariba Sourcing to execute strategic sourcing initiatives for indirect and direct products
with suppliers across multiple regions
 Ariba Spend Visibility was used to analyze over USD 8 Billion worth of spend data across large
spend categories as well as difficult to categorize groups such like indirect spend, non-PO based
spend and text-description based purchases
 Created 820 online rules for weak material groups and non PO payments. Over 188 material
groups were mapped to UN codes
The key benefits
 Realized full return on investment (ROI) on Ariba Spend Visibility within a year of implementing
the solution
 Over 400,000 materials that were previously unclassified were categorized at 95% + accuracy
based on UNSPSC standards
 Identified sourcing synergies in newly acquired entities by rapidly scaling up and integrating
spend data from the new sources
$3 MillionSavings realized per year
400,000+Goods and services categorized based on
industry taxonomies
98.6%Data classification accuracy achieved
“Ariba Spend Visibility has provided us the capability to leverage spend data to reduce costs. It has
enabled us with the insights to mobilize our sourcing team towards areas of opportunities that have the
maximum impact to our business”
Tony Verheggen, Sourcing Process Owner Air Products

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