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Predictive Analytics: Better Commerce Insight

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Predictive analytics is a solution that comprises the collection and analysis of data through quantitative means to draw conclusions and insights, and ultimately predict future events. An increasing number of organizations are turning to predictive analytics to make better decisions and improve performance.

In this session we’ll explore predictive areas such as benchmarking, performance measurement, and commerce insight. We’ll look at practical ways to use these services and solutions to improve sourcing & procurement, sales & marketing, procure-to-pay, and order-to-cash processes.

Come to this session to find out how predictive analytics can be a game-changer and ultimately the best tool in your tool box.

Published in: Business, Technology
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Predictive Analytics: Better Commerce Insight

  1. 1. Predictive Analytics Better Commerce Insight James Tucker, Sr. Director, Network Strategy & Marketing jtucker@ariba.com | @jbtucker3 | +1 650 390 1702 Will Caseber, Director, Value Engineering wcaseber@ariba.com | +1 727 641 1124 #AribaLIVE © 2013 Ariba, Inc. All rights reserved.
  2. 2. PREDICTIVE MEASURES 2 © 2014 Ariba – an SAP company. All rights reserved.
  3. 3. What If... • • ... you could anticipate supply chain risk? • 3 ... you knew what direction spend category costs were headed before your competition? ... you knew how well your business processes perform relative to your industry and peers? © 2014 Ariba – an SAP company. All rights reserved.
  4. 4. "The best way to predict the future is to create it." - Abraham Lincoln 4 © 2014 Ariba – an SAP company. All rights reserved.
  5. 5. Agenda • • • • • 5 What Is Predictive Analytics? Use Cases for Predictive Analytics A Predictive Analytics Framework What You Can Do Today Next Steps © 2014 Ariba – an SAP company. All rights reserved.
  6. 6. Predictive Analytics Is... • • 6 Predictive analytics encompasses a variety of techniques from statistics, modeling, machine learning, and data mining that analyze current and historical facts to make predictions about future, or otherwise unknown, events. In business, predictive models exploit patterns found in historical and transactional data to identify risks and opportunities. Models capture relationships among many factors to allow assessment of risk or potential associated with a particular set of conditions, guiding decision making for candidate transactions. © 2014 Ariba – an SAP company. All rights reserved.
  7. 7. Use Case Scenarios 8am 1pm CSCO sees that an earthquake in Japan may impact supply. CPO learns of upward pressure on indirect material pricing. CFO learns that his organization is a laggard in AP processes. 7 © 2014 Ariba – an SAP company. All rights reserved. Sourcing team identifies new sources for impacted commodities in the region. She tasks procurement team to increase inventory on impacted items He tasks his team to assess payment terms, improve invoice approval cycles and reduce cost in AP.
  8. 8. The Road to Predictive Where to Begin – Where it Will Take You ―In the future, businesses will be expected to possess the talent, tools, processes, and capabilities to analyze past business performance and events to gain forward-looking insight to drive business decisions and actions.‖ PREDICTIVE BUSINESS ANALYTICS: FORWARD LOOKING CAPABILITIES TO IMPROVE BUSINESS PERFORMANCE, Laurence Maisel, Gary Cokins 8 © 2014 Ariba – an SAP company. All rights reserved.
  9. 9. A Balanced Approach ―At a time when companies offer similar products and use comparable technology, high-performance business processes are among the last remaining points of differentiation.‖ Competing on Analytics: The New Science of Winning, T. Davenport and J. Harris 9 © 2014 Ariba – an SAP company. All rights reserved.
  10. 10. Effective Process Performance Management Has Boosted Many Careers Scott Singer from CPO to EVP & Head of Global Business Svcs. Rio Tinto 10 Mark Roenigk from CPO to COO Rackspace © 2014 Ariba – an SAP company. All rights reserved. Mark Guinan From CPO to CFO Hill-Rom Tim Cook From CPO to CEO Apple
  11. 11. “We can’t improve what we don’t measure.” – Dr. Michael Hammer Critical Buy-Side Measures: Price Reduction Spend Compliance Process Efficiency • Annualized Savings % • Sourcing Savings % • % Spend under Management • % Spend Sourced Annually • Spend per Sourcing FTE • Events per Sourcing FTE • Tactical Sourcing Savings % • % Spend Managed Tactically • % Spend on Catalog • % Spend on PO • % Spend Invoice vs Contract • % PO-based Invoice Spend • % Invoice Spend via Network • PO per Purchasing FTE • % of Electronic PO • PR-PO Cycle Time • Confirmed PO %, ASN PO% • Invoices per AP FTE • % of Electronic Invoices • % of Touchless Invoices • Invoice-Pay Cycle Time 11 © 2014 Ariba – an SAP company. All rights reserved. Working Capital • % Spend on Discount • % Spend w Extended Terms • % Discounts Captured • Discounts per Billion spend • Average Discount Rate • Average Days to Pay
  12. 12. Getting Perspective - Benchmarking • • Predicting future performance is difficult without a strong understanding of where you are Understanding current performance requires perspective Outward-looking Inward-looking Are we: • Where we want to be? • Where we said we would be? 12 © 2014 Ariba – an SAP company. All rights reserved. Are we: • Normal for our industry? • Leading? Lagging?
  13. 13. Benchmarking Process Standardize Metrics Collect and Normalize Remove size/scale bias Define Segments Make comparison meaningful: peer groups, quartiles Compare Performance 13 Establish a basis for comparison Critically assess outcome © 2014 Ariba – an SAP company. All rights reserved.
  14. 14. Performance Measurement A process for collecting and reporting information and assessing results in light of target objectives Manage Executives Manage Staff ERP, Ariba, Surveys, 3rd Parties 14 © 2014 Ariba – an SAP company. All rights reserved.
  15. 15. Performance Scorecard 15 © 2014 Ariba – an SAP company. All rights reserved.
  16. 16. Value Summary • • ACME CORP’s 2012/2013 activity as compared to pre-Ariba activity has enabled a savings of $36.2M By enabling additional addressable spend and functionality, an additional $28.8M savings can be achieved Savings Impact Area Price Reduction Spend Compliance Cash Management Savings Opportunity Realized Savings • Better sourcing practices and competitive bid process • Per-unit cost savings $24.6 M $23.1 M • Ensuring purchases and invoices are based off of negotiated contract pricing & terms • Expanded usage of catalog content • Reduction of over payment errors $11.4 M $5.6 M $0.214 M $0.144 M $36.2 M $28.8M • Optimization of early payment discounts Total Annual Benefits Enterprise-level value opportunities created through greater alignment of P2P are estimated to be around 4.4% of addressable spend —The Hackett Group 16 Incremental Savings © 2014 Ariba – an SAP company. All rights reserved.
  17. 17. Customer Success Link to Case Study Ashley Miller Group Vice President Strategic Supply Management Al Barbee Director, GSK 30% cycle-time 60% cost savings Vendor Satisfaction (they know when they’ll be paid) 17 © 2014 Ariba – an SAP company. All rights reserved. 2000 Procurable Spend Under Management 80% 87% 1500 45% 1000 500 20% 0 2009 2010 2011 2012
  18. 18. ―Value comes only when the insights gained from analysis are put to action to drive improved decisions.‖ James Taylor Smart (Enough) Systems 18 © 2014 Ariba – an SAP company. All rights reserved.
  19. 19. The Strategic Weapon: Business Network Leading the Networked Economy Transformation “ Networked enterprises are 50% more likely to be a market leader. ”
  20. 20. DEMO 20 © 2014 Ariba – an SAP company. All rights reserved.
  21. 21. Q&A James Tucker Senior Director Network Strategy & Marketing jtucker@ariba.com | @jbtucker3 | +1 650 390 1702 21 Will Caseber Director Value Engineering wcaseber@ariba.com | +1 727 641 1124 © 2014 Ariba – an SAP company. All rights reserved.

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