The Business Case for Spend Analysis

1. The Business Case for Spend Analysis October 8, 2014

2. Outline • 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.

3. What is spend analysis? Accounts Payable Spend Contract Record Purchasing Card Spend eProcurement Transactions

4. What is spend analysis? Accounts Payable Spend Purchasing Card Spend eProcurement Transactions Contract Record Spend data that you trust and that contains as much detail as possible

5. What is spend analysis?

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

7. What could you achieve? • 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. What is the ROI? • 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 • $13k/$20m = 0.065% • of total spend would have to be saved to break even.

13. What is the ROI? • 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 • $20m*0.2% = $40k • ($40k-$13k)/$13k = 2.08 ROI • meaning that in this situation, just over $2 was made for every $1 invested

14. What is the ROI? • 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. • $13k / ($20m * 15%) = 0.43% • of spend brought under management to break even.

15. 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.

16. Where does the data come from? Purchasing Card Spend (Some transaction detail but < < 20% of spend) Contract Record (Software system, Excel, or Manual) Accounts Payable Spend (100% of spend, but not necessarily 100% of the detail) eProcurement Transactions (Usually orders, not spend and < 20% of spend comes through eProcurement)

17. What are some common hurdles? Duplicates Hardware Classifications AT&T Dell • ATT Mobility • AT& T • ATT Reston • ATTM • ATT Wirless • A T & T • AT and T • AT & T Wireless • ATTM Store #2323 • Computer hardware • Classroom Supplies • Software Licenses • Other Supplies • Misc. Contracted Services • Capital Project equipment <$10k

18. 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.

19. Accounts Payable Spend Contract Record 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? Purchasing Card Spend eProcurement Transactions

20. 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?

21. 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.

22. Recap of the takeaways • A spend analysis project starts with data that you trust and tools you can use • 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. • 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. • 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.

23. Why consider Spikes Cavell? • 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.

24. 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.

25. 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.

26. 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.

27. Recap of the takeaways • A spend analysis project starts with data that you trust and tools you can use • 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. • 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. • 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. • 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.

28. For more information or to request a copy of the business case in Word format, contact Spikes Cavell by: Phone: (571) 313 – 5257 Toll Free: (800) 990 – 0228 Online: Request a call back E-mail: info@spikescavell.com