Compliance Maximized | Savings Realized www.globaleprocure.com Global eProcure The Case For Spend Analysis August 2009

Secret of Spend Analysis for Dummies Spend Analysis refers to the systematic process of obtaining line item visibility for company purchasing spend data. It is not one project but a part of the whole procurement process Undertaking a spend analysis initiative will provide information on the breakdown of spend by geography, vendor, and business unit. Centralized records are available Has all the necessarily information in the ERP systems. Spending of an Individual in an organization never goes unnoticed

Spend Analysis refers to the systematic process of obtaining line item visibility for company purchasing spend data.

It is not one project but a part of the whole procurement process

Undertaking a spend analysis initiative will provide information on the breakdown of spend by geography, vendor, and business unit.

Centralized records are available

Has all the necessarily information in the ERP systems.

Spending of an Individual in an organization never goes unnoticed

What Information is required to conduct Spend Analysis? Spend data by each line item is required to carry out effective spend analysis. This line item data is available either through an internal accounts payable system or through vendor invoices. Vendors keep this data and provide the information as a service to the company. In other cases, the data may exist in ERP, MRP or other systems.

Spend data by each line item is required to carry out effective spend analysis.

This line item data is available either through an internal accounts payable system or through vendor invoices.

Vendors keep this data and provide the information as a service to the company.

In other cases, the data may exist in ERP, MRP or other systems.

Internally Typically accounts payable or general ledger data may not have the complete descriptions of items or parts purchased. Multiple ERP systems in place and extracting line item data ERP systems were designed for finance, accounting and other purposes, and not designed for spend classification purposes. when spend is classified, many times it is done inaccurately. Miscellaneous spend constitutes a large portion of a company’s total purchasing spend due to poor item descriptions. The lack of a standardized process to enter the items descriptions, part numbers and vendor names, makes the collection of spend data even more difficult . Difficulties faced to collect data !!!

Internally

Typically accounts payable or general ledger data may not have the complete descriptions of items or parts purchased.

Multiple ERP systems in place and extracting line item data

ERP systems were designed for finance, accounting and other purposes, and not designed for spend classification purposes.

when spend is classified, many times it is done inaccurately.

Miscellaneous spend constitutes a large portion of a company’s total purchasing spend due to poor item descriptions.

The lack of a standardized process to enter the items descriptions, part numbers and vendor names, makes the collection of spend data even more difficult .

Case Study.. A billion dollar company spending $300 K on motors may find they use 200 different types of motors, making it difficult to articulate the ROI from spend analysis. Spend Information is often entered at the department level rather than the category level In the case of multiple ERP systems, different taxonomies for naming and numbering commodities and suppliers are used during the data entry process

A billion dollar company spending $300 K on motors may find they use 200 different types of motors, making it difficult to articulate the ROI from spend analysis.

Spend Information is often entered at the department level rather than the category level

In the case of multiple ERP systems, different taxonomies for naming and numbering commodities and suppliers are used during the data entry process

The first step is getting “your house in order” which requires putting a spend analysis team in place, collecting spend from various ERP systems, vendors, invoices and other sources The second step in the process is making use of an in-house tool or specialized outside vendor to cleanse the vendor names and classify the spend based on a set of defined commodity codes. Once a spend analysis has been completed for a first set of annual data, a process must be put in place whereby commodities are classified using standard codes and vendors are given same name across the enterprise. This allows for an increasingly accurate spend refresh on a quarterly or even monthly basis. Some steps to achieve savings…

The first step is getting “your house in order” which requires putting a spend analysis team in place, collecting spend from various ERP systems, vendors, invoices and other sources

The second step in the process is making use of an in-house tool or specialized outside vendor to cleanse the vendor names and classify the spend based on a set of defined commodity codes.

Once a spend analysis has been completed for a first set of annual data, a process must be put in place whereby commodities are classified using standard codes and vendors are given same name across the enterprise.

This allows for an increasingly accurate spend refresh on a quarterly or even monthly basis.

If you go to your boss and tell him/her that you need $100,000 - $200,000 for a spend analysis initiative He/she will ask you where is the ROI You may believe you already have a good handle on your company’s spend and therefore, there is not any returns to be achieved through spend analysis. How can you convince your boss and others stakeholders in the organization of the ROI? Companies have successfully built the business case by combining spend analysis with a strategic eSourcing program where it is easier to demonstrate ROI. This would allow spend analysis to become an enabler rather than a separate project or process ROI?

If you go to your boss and tell him/her that you need $100,000 - $200,000 for a spend analysis initiative

He/she will ask you where is the ROI

You may believe you already have a good handle on your company’s spend and therefore, there is not any returns to be achieved through spend analysis.

How can you convince your boss and others stakeholders in the organization of the ROI?

Companies have successfully built the business case by combining spend analysis with a strategic

eSourcing program where it is easier to demonstrate ROI.

This would allow spend analysis to become an enabler rather than a separate project or process

Conclusion... If you can’t measure it, you can’t control it. If you don’t analyze your spend critically, you can’t maximize savings for your company. If you are making decisions based on the spend analysis of years past, you can be assured there are more savings to be found. Spend analysis is an on-going “process” rather than a one-time activity. Senior management should focus on getting the benefits of spend analysis on a periodic basis

If you can’t measure it, you can’t control it.

If you don’t analyze your spend critically, you can’t maximize savings for your company.

If you are making decisions based on the spend analysis of years past, you can be assured there are more savings to be found.

Spend analysis is an on-going “process” rather than a one-time activity.

Senior management should focus on getting the benefits of spend analysis on a periodic basis

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About Global eProcure Global eProcure is a leading procurement services company offering a unique blend of consulting, technology, and procurement outsourcing. Our goal is to help our clients meet or exceed their compliance and savings targets through tailored solutions that provide the right combination of innovative technology, industry expertise, and proven best practices. Focusing on realized savings that directly impact the bottom line is how we measure the value we have brought our customers. For the last 10 years Global eProcure has been working with clients to successfully deliver an average of 4 to 16% realized savings. Our blended business model with a right mix of resources has provided our clients with a sizeable ROI year after year. Global eProcure is certified Minority and Women-owned Business Enterprise (MWBE). Global eProcure is also an ISO 9001:2000 certified for software design and development and consulting services. Global eProcure is a privately held enterprise with global headquarters in Clark, NJ and offices throughout Europe and Asia. For more information, please visit www.globaleprocure.com

Global eProcure is a leading procurement services company offering a unique blend of consulting, technology, and procurement outsourcing. Our goal is to help our clients meet or exceed their compliance and savings targets through tailored solutions that provide the right combination of innovative technology, industry expertise, and proven best practices. Focusing on realized savings that directly impact the bottom line is how we measure the value we have brought our customers.

For the last 10 years Global eProcure has been working with clients to successfully deliver an average of 4 to 16% realized savings. Our blended business model with a right mix of resources has provided our clients with a sizeable ROI year after year. Global eProcure is certified Minority and Women-owned Business Enterprise (MWBE). Global eProcure is also an ISO 9001:2000 certified for software design and development and consulting services. Global eProcure is a privately held enterprise with global headquarters in Clark, NJ and offices throughout Europe and Asia. For more information, please visit www.globaleprocure.com