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.

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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 howpredictive analytics can be a game-changer and ultimately the best tool in your tool box. ------------------------ 
  • The insights delivered by standard business intelligence and reporting are not readily actionable; they must be translated to action by way of human judgment. Metrics, reports, dashboards, and other retrospective analyses are important components of enterprise business intelligence, but their execution is ad hoc in that it is not clear a priori what kind of actions or decisions will be recommended, if any. Predictive analytics is specifically designed to generate conclusive action imperatives. Predictive analytics delivers a powerful aggregate win by driving millions of operational decisions, such as whether to pay an invoice to term or accept an early pay discount; to recruit a supplier; to nurture an at-risk customer. To identify fraudulent payments. Predictive models drive decisions. Whether to raise or lower commodity prices. One of the best known predictive applications which almost all of us have gone through is the credit card scoring. When you apply for a credit card, the retail bank gets your credit score from a credit bureau. The scoring model used by the credit bureau uses our credit history, loan applications, and other data to predict our risk level. This result enables the retail bankers to accept or deny the our application. Predictive Analytics has a wide range of impact and use cases in business and our personal lives. For this conference, we’re going to focus on B2B commerce-related processes.
  • explore predictive areas such as benchmarking, performance measurement, the commerce graph, and the commerce index. We’ll look at practical ways to use these technologies to improve sourcing & procurement, sales & marketing, procure-to-pay, and order-to-cash processes. This new technology has been proven effective for both enterprise and emerging businesses worldwide. Come to this session to find out if predictive analytics could be a game-changer and ultimately the best tool in your tool box.
  • Eric Siegel, Ph.D., Founder, Predictive Analytics World, Author, Predictive AnalyticsSir Francis Bacon, an 18th-century founder of the modern scientific method, famously argued that“Knowledge is power.”1 With all due respect to this great scientist, in the 21st century, “knowledge isprofit” for those firms that deploy big data predictive analytics solutions to reduce risks, make smartdecisions, and create differentiated, more personal customer experiences. The answers are in thedata — but only if companies look for them.
  • Predictive analytics uses algorithms to find patterns in data that might predict similar outcomesin the future. A common example of predictive analytics is to find a model that will predict whichcustomers are likely to churn. For example, telecommunications firms can use customer data suchas calls made, minutes used, number of texts sent, average bill amount, and hundreds of othervariables to find models that will predict which customers are likely to change mobile carriers. Ifa carrier can predict the reasons why customers are likely to churn, it can try to take preemptiveaction to avoid this undesirable outcome. But this isn’t a one-time operation; firms must reruntheir analysis on new data to make sure the models are still effective and to respond to changes incustomer desires and competitors. Many firms analyze data weekly or even continuously.
  • The Ariba Network is the world’s largest Business Network, allowing Buyers and Sellers to become more efficient across their Buying, Selling, and Cash Management ProcessesAs those of us whowork in procurement and finance are well aware, our departments can add tremendous value to the bottom line. In an average large enterprise, every dollar/euro saved in procurement equates to 5x that amount of revenue delivered when it comes to net income (source: Ardent Partners). Best in Class companies have over 85% of their spend under management (meaning spend that procurement manages directly or heavily influences), compared to only 54% amongst the others. Imagine the bottom line impact these Best in Class organizations are having on their companies.
  • Achieved 80%Procurement Processes Improved – greater understanding of methods of procurementDeeper Awareness & Campaigning of the Ariba tool being the Financial System of Record for Spend ManagementAP Processes Enhanced to Standardize all Suppliers on Ariba processes
  • 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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