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Analyzing Spend – You Can't Fight What You Can't See

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Supply chains across enterprises are infested with supplier risks, savings leakage issues, and sourcing inefficiencies that often go undetected due to the lack of good visibility into spending data. …

Supply chains across enterprises are infested with supplier risks, savings leakage issues, and sourcing inefficiencies that often go undetected due to the lack of good visibility into spending data. By blending spend data with the right market intelligence, organizations stand to extract the best value from their sourcing initiatives. Learn how to optimize your sourcing efforts when you attend this session.

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  • Overview slide by Keertan
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  • Eric and Greg both spoke to the importance of identifying corporate linkage, diversity status and total spend when working with their suppliers. These are just some of the categories that we’d recommend companies explore to get a clear, overall snapshot of supplier health. Companies must also take into consideration overall financial health, socio-political stability of the supplier’s location, and the health of tier-2 suppliers. Establishing a central repository of all supplier data gives companies the ability to see the entire supply chain at a glance. From my days managing supply chains for HP, I know that compiling all that information can be challenging – and worse, can lead to incorrect information being used to make decisions. As a best practice, it is always beneficial to employ some sort of third-party review of the data – that not only validates the quality of the data, but can uncover opportunities as well. At D&B we use the DUNS-Right system – every supplier/organization has a unique identifying number which allows us to identify parent and children companies, branches, violations, etc.
  • Fourth: “How can I get advance warning of a supplier disruption or change in the status quo?”Advance warning of supplier trouble can mean the difference between avoiding a disruption and coming out on top or scrambling to pick up the pieces. Your options for resolution are so much broader when you have the luxury of time.
  • Notes: Other examples of quadrants are Strategic Importance & Supply Risk/Complexity, Profit Impact & Supply Risk/Criticality, Impact & Spend, Complexity of adding capacity & Supplier willingness to add capacity
  • Notes: Other examples of quadrants are Strategic Importance & Supply Risk/Complexity, Profit Impact & Supply Risk/Criticality, Impact & Spend, Complexity of adding capacity & Supplier willingness to add capacity
  • Transcript

    • 1. Analyzing Spend: You Can’t Fight WhatYou Can’t See© 2013 Ariba, Inc. All rights reserved.Speakers:Irene Ong – Marina Bay Sands Corp.Moderator:Sundar Kamakshisundaram – Ariba, anSAP Company
    • 2. #AribaLIVEAgenda• Introduction• Spend Analytics Overview• Customer Panel PresentationSpend Analysis Implementation at Las VegasSands• Q & A© 2013 Ariba, Inc. All rights reserved.2
    • 3. #AribaLIVEAnalyzing Spend: You Can’t FightWhat You Can’t See312 Trillion dollars is total spendthrough global 2000 companieslast yearEnterprises are losing over USD 260Billion per year due to theinability to organize and analyzespend data1To date, only 40% of the companieshave good visibility on theirspending260% of the firms that analyze spendstill rely on paper andspreadsheets3You Can’t Fight What You Can’t See1: Aberdeen Research: Best Practices in Spend Analysis : Cure for a Corporate Epidemic, 2004;2: SAP / Procurement Leaders Survey 20113: Spend Analysis : Working too Hard for the Money , 2007
    • 4. #AribaLIVEWhy Do Enterprises Care AboutSpend Analysis?© 2013 Ariba, Inc. All rights reserved.4Sourcing SavingsSupplier RisksCost of ProcurementComplianceSupply Chain Diversity and SustainabilityWorking Capital LeverageDiscount Leakages86% of theenterprises seehigh value inSpend Analysis 11: SAP / Procurement Leaders Survey 2011
    • 5. #AribaLIVE© 2013 Ariba, Inc. All rights reserved.5Contract ComplianceRates*Strategic SourcingSavings*62%6.7%11.7%46%Before Spend Analysis After Spend Analysis44% 59%Spend UnderManagement *34% incrementalincrease in contractcompliance rates75% increase in strategicsourcing savings34% increase in spendunder management*Aberdeen Group : Spend Analysis – Working Too Hard for the Money – 2007For a Good Reason
    • 6. #AribaLIVE© 2013 Ariba, Inc. All rights reserved.6Savings of USD 1 billion over a course of two yearsSpend data consolidated from 270+ source systemsSupplier count reduction by 20%USD 300,000 in cash savings within six months by managingpayment termsSpecific category procurement costs reduced by 66%Spend Analysis Benefits for aLeading Ariba Customer…..
    • 7. #AribaLIVE© 2013 Ariba, Inc. All rights reserved.7Disparate Data SourcesInconsistent Data QualityLimited Access to Market and Supplier InformationManual Effort Intensive ProcessesLack of Adequate Skills and ToolsAnd the Challenges too
    • 8. #AribaLIVESpending Clarity Starts with Askingthe Right Questions• How can I get more detailedinformation on suppliers?• How much am I spending withsuppliers at a corporate family level?• How diverse is my supply base?And how can I locate morediverse suppliers?• Where are the greatest risks in mysupply chain?© 2013 Ariba, Inc. All rights reserved.8
    • 9. #AribaLIVEStay Ahead of the CurveKnow How Your Suppliers May Behave Tomorrow© 2013 Ariba, Inc. All rights reserved.9The Advantage• Get a sense of potential supplyinterruption before it can impact the:• Bottom line: through stock outs• Top line: through idling themanufacturing line• Brand: through damage to quality andproduct availabilityThe Results• Source from financially stable suppliers• Get advance notice to reduce risk andprotect supply chain continuity• Deliver consistent, objective treatmentof suppliers
    • 10. Analyzing Spend: You Can’t Fight WhatYou Can’t See© 2013 Ariba, Inc. All rights reserved.Irene Ong – Marina Bay Sands Corp.Manager, Business Strategy & Process
    • 11. #AribaLIVELas Vegas Sands CorporationLas Vegas Sands Corporation (NYSE: LVS)• Leading global developer and operator of destination integrated resorts (IRs)• Properties include Las Vegas, Macao, Singapore and Bethlehem, PennsylvaniaGross Floor Area of IRs is 60,000,000 sq. ft.Total Hotel Rooms is 19,800 roomsTotal Retail Mall Space is 4,500,000 sq. ft.Total MICE (Meeting, incentives, conferences and exhibitions)Space is 5,200,000 sq. ft.Total Gaming Space is 1,660,000 sq. ft.• Net Revenue for the past 5 years from LVSC’s 2012 10-K© 2013 Ariba, Inc. All rights reserved.11Who We AreYear 2008 2009 2010 2011 2012Net Revenue $4.38B $4.56B $6.85B $9.41B $11.13B
    • 12. #AribaLIVESpend Strategy at LVSCThree-step process to develop a sourcing strategy:1. Identify Spends by Category / Sub – CategoriesDetermine which spends are Procurement Influenced vs. Non-Procurement Influence2. Align Sub-Categories into a Segmentation QuadrantImportant factors are the Y - Axis and X - Axis3. Develop Sub-Categories Strategies to SourceKey elements that must be understood and will drive a sourcing strategy© 2013 Ariba, Inc. All rights reserved.12
    • 13. #AribaLIVEIdentifying Spends by Categoriesat LVSCProcurement Influenced (2012- 40%) Non-Procurement Influenced(2012-60%)Food & BeverageOperating SuppliesMarketing / Advertising / PrintFacilities & ServicesOutside ServicesGamingSurveillanceTechnology & ITDevelopment & ConstructionFF&EFerryUtilitiesEmployee BenefitsRetailTotal8.5%5%4.5%4%7.2%6%.5%8%33.5%4%4.8%8.8%4.7%.5%100%EntertainmentLegalLeasesInsuranceFinancial ServicesAviationCommissionsTaxesThird-Party Charges© 2013 Ariba, Inc. All rights reserved.13* Areas in blue did not have Procurement & Supply Chain involvement prior to 2009
    • 14. #AribaLIVE2012 LVSC Procurement-InfluencedSpend AnalysisMarketing, Advertising & Print(MAP) 4.5% Beverage 4.5%Facility & Facility Services4%FF&E 4%Food 4%Gaming 6%Operating Supplies 5%Outside Services 7.2%Pre-Development & Design &Construction 33.5%Surveillance 0.5%Employee Benefits 4.7%Ferry 4.8%Technology 8%Utilities8.8%Marketing, Advertising & Print (MAP)BeverageFacility & Facility ServicesFF&EFoodGamingOperating SuppliesOutside ServicesRetailPre-Development & Design &ConstructionSurveillanceEmployee BenefitsFerryTechnologyRetail 0.5%© 2013 Ariba, Inc. All rights reserved.142012 Procurement Influenced Spend: 40% of total spend
    • 15. #AribaLIVE2012 LVSC Non-Procurement-Influenced Spend AnalysisTaxes 78%Entertainment 2.5%Legal 2.0%Intercompany Charges9.0% Other 3.0%Insurance 1.0%Financing 2.0%Aviation 1.0%Commissions 0.5%Other 1.0%TaxesEntertainmentLegalIntercompanyChargesThird-PartyChargesInsuranceFinancingAviationCommissionsOther© 2013 Ariba, Inc. All rights reserved.152012 Non-Procurement Influenced Spend: 60% of total spend
    • 16. #AribaLIVEAligning Sub – Categories intoa Segmentation Quadrant© 2013 Ariba, Inc. All rights reserved.16CustomerImpactHighLowLow HighCategory SegmentationSwitching CostsStrategicTactical CriticalAlliance
    • 17. #AribaLIVEDevelop a Category Sourcing StrategyLVSC Category Strategy Template© 2013 Ariba, Inc. All rights reserved.17Category: Duration:Scope:Competitor BenchmarkingWho / What / SupplierAnnual Spend -CurrencyAnnualized Savings -Currency2012 A 2013 F TotalUSAsiaTotal2012 A 2013 F TotalUSAsiaTotalCategoryPicturesSegmentationStrategic AllianceTactical CriticalCategory AnalysisCost Structure, Benchmarking, SupplierComparison, Index Data, EtcGlobal SpecificationValue Chain InformationTechnology and MarketChangesKey Cost DriversCategory Description /ScopeSupplier Scoring(5 Highest , 1 Lowest)Cost (xx%) Quality (xx%) TotalSupplier ASupplier BSupplier COthersCategory Strategy /Sourcing RecommendationCurrent Situation:Strategy:
    • 18. #AribaLIVELVSC Category Strategy TemplateExcel based – 11” by 17”© 2013 Ariba, Inc. All rights reserved.18
    • 19. #AribaLIVEThe Exciting World of SlippersCategory sourcing strategy – Part 1© 2013 Ariba, Inc. All rights reserved.19
    • 20. #AribaLIVEThe Exciting World of SlippersCategory sourcing strategy – Part 2© 2013 Ariba, Inc. All rights reserved.20Category Analysis
    • 21. #AribaLIVEThe Exciting World of SlippersCategory sourcing strategy – Part 3© 2013 Ariba, Inc. All rights reserved.21
    • 22. #AribaLIVEContact info:Sundar Kamakshisundaram: sundar@ariba.com© 2013 Ariba, Inc. All rights reserved.22Q&A
    • 23. #AribaLIVEPlease Complete Session Survey© 2013 Ariba, Inc. All rights reserved.23Find Sessionin ScheduleClickChoose oneRateSessionThank you for joining usClick Survey andSelect BreakoutSession Survey