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Evaluating Spend Solution Providers
- 1. Power Advocate, Inc. Confidential 11 Evaluating Your Spend Solution Options
- 2. Power Advocate, Inc. Confidential 22 Today’s top energy executives recognize the huge value in effective spend analysis… Millions in Cost Savings Operational Efficiencies Optimized SRM
- 3. Power Advocate, Inc. Confidential 33 …but often overlook the most important criteria when considering vendors ! ! !
- 4. Power Advocate, Inc. Confidential 44 Many variables seem important; others actually are important Total Spend Analyzed Speed of Data Cleansing Number of Features Number of Rules Energy Spend Analyzed Usability for Energy Professionals Energy-Specific Rules Quality of Data Cleansing vs vs vs vs Most Important! Integration w/ Transactional Platforms Integration w/ Strategic Platformsvs
- 5. Power Advocate, Inc. Confidential 55 And when executives prioritize the wrong variables, they end up with solutions that pose meaningful risks Millions in Lost Savings Bad Data Inaccurate Reporting Total Spend Analyzed Speed of Data Cleansing Number of Features Number of Rules Integration w/ Transactional Platforms
- 6. Power Advocate, Inc. Confidential 66 “Experience in analyzing spend in your industry” What to Look For in a Spend Analysis Solution “To succeed at spend intelligence, it would help if you were to hook up…a solution provider that has familiarity with your industry” Steps to Success for All Enterprises So what do the industry experts recommend?
- 7. Power Advocate, Inc. Confidential 77 Is it really that risky to choose a cross-industry provider? Well, let’s take a look…
- 8. Power Advocate, Inc. Confidential 88 Here are some of the biggest customers that one cross-industry provider has…
- 9. Power Advocate, Inc. Confidential 99 The things these companies buy…
- 10. Power Advocate, Inc. Confidential 1010 …are VERY different from the things these companies buy
- 11. Power Advocate, Inc. Confidential 1111 Different suppliers Different products Different services Different data And…
- 12. Power Advocate, Inc. Confidential 1212 Complexity of Spend Data High Plus, data from some industries is more complex Commodities Engineered products Specialized vendors Vendors providing many products & services Centralized purchasing Distributed purchasing Basic services Highly-Technical Services Products purchased Services purchased Suppliers Organization Data ComplexityLow High
- 13. Power Advocate, Inc. Confidential 1313 Complexity of Spend Data HighData Complexity High Data ComplexityLow High Turns out, energy company data is especially complex
- 14. Power Advocate, Inc. Confidential 1414 And we’re not talking about a small difference Vs.
- 15. Power Advocate, Inc. Confidential 1515 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1 Accurately classifying cryptic, energy-specific items like this requires highly specialized rules and schemas…
- 16. Power Advocate, Inc. Confidential 1616 …which cross-industry vendors cannot profitably develop Energy Consumer Goods Automobiles Airlines Beverages Fast Food = Cross-Industry Vendors’ Profitability Threshold Complexity of Spend Data High Data ComplexityData ComplexityLow High
- 17. Power Advocate, Inc. Confidential 1717 After all, items like this need to be decoded piece-by-piece, and even then – hundreds of permutations are possible Material Group Shape Steel Wire Rod Tubing Piping Casing Alloy Ingot Manufacturer Hyundai Automobile Hyundai Railway Hyundai Steel Hyundai Ship Hyundai Plant Hyundai Electric Outside Diameter 6 inches 8 inches 10 inches 12 inches 14 inches 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
- 18. Power Advocate, Inc. Confidential 1818 Now imagine this 1 transaction… …multiplied by millions 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
- 19. Power Advocate, Inc. Confidential 1919 So what happens when energy firms actually buy cross-industry spend solutions?
- 20. Power Advocate, Inc. Confidential 2020 They’re left with shocking (real-life) examples like this: HVAC Mechanical Construction Service Cross-Industry Vendor Classification: Correct Classification: Cooling Tower Maintenance ✓ Line Item: Cooling Tower Maintenance Price: $38,300,000 Supplier: Bunneys Inc.
- 21. Power Advocate, Inc. Confidential 2121 Cross-Industry Vendor Classification: Correct Classification: Development Environment Software Real Estate ✓ …and many, many (real-life) examples like this: Line Item: Improvement Allowance Price: $3,200,000 Supplier: Red Hat Software
- 22. Power Advocate, Inc. Confidential 2222 Chemicals Not Chemicals 9% 91% $51.5M CHEMICALS, GENERAL Cross-Industry Vendor Classification: Correct Classification: …which combine to form (real-life) categories like this: Production Chemicals $2,641,910 Painting and Coatings $1,487,143 Nitrogen Services $443,150 Pumps $10,088,197 Motors $9,037,047 Electric Submersible Pumping (ESP) Lift Services $3,704,851 Variable Frequency Drives $3,165,546 Pump Seals $3,034,483 Drill Bits $2,691,688 Valves $2,641,910 Separators $1,487,143 Wire and Cable $1,390,791 Casing and Tubing Services $882,221 Coil Tubing services $822,310 Motor Maintenance $708,009
- 23. Power Advocate, Inc. Confidential 2323 The analysts for these energy firms spend days fulfilling simple requests… …and have no choice but to circulate incomplete reports
- 24. Power Advocate, Inc. Confidential 2424 Meanwhile, unactionable categories like this one… Engineering Spend Misclassified Elsewhere +$32.6 M $58.9 M Spend Classified as “Engineering” Portion that Wasn’t Actually Engineering -$11M …cost them millions in lost savings every year
- 25. Power Advocate, Inc. Confidential 2525 Ok, so can I do it myself? Well, let’s take a look…
- 26. Power Advocate, Inc. Confidential 2626 Let’s look at 1 transaction. 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1 Curious how an analyst might decode and classify this? It’s a bit complicated…
- 27. Power Advocate, Inc. Confidential 2727 Manufacturer Hyundai Automobile Hyundai Railway Hyundai Steel Hyundai Ship Hyundai Plant Hyundai Electric … He would likely recognize “HYUNDAI” as a Hyundai Corp manufacturing facility, but that still leaves hundreds of plausible classifications ? 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
- 28. Power Advocate, Inc. Confidential 2828 Material Group Shape Steel Wire Rod Tubing Piping Casing Alloy Ingot Manufacturer Hyundai Automobile Hyundai Railway Hyundai Steel Hyundai Ship Hyundai Plant Hyundai Electric … … So, he would need to know that the code “ERW” denotes casing, tubing, and piping; this narrows material groups, but still leaves 3 possible variations ? ✓ 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
- 29. Power Advocate, Inc. Confidential 2929 Material Group Shape Steel Wire Rod Tubing Piping Casing Alloy Ingot Manufacturer Hyundai Automobile Hyundai Railway Hyundai Steel Hyundai Ship Hyundai Plant Hyundai Electric … … Outside Diameter Third, he would need to know that 10” indicates an outside diameter, and that this measurement rules out piping and casing ✓ 6 inches 8 inches 10 inches 12 inches 14 inches Tubing ✓ ✓ ✓ 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
- 30. Power Advocate, Inc. Confidential 3030 This single transaction could have been classified in more than 200 different ways… See how difficult accurate energy spend classification is?
- 31. Power Advocate, Inc. Confidential 3131 Now imagine that 1 transaction… …multiplied by millions (50% of which is unclassified, blank, and/or inaccurate) It’s a decoding job not fit for a human 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
- 32. Power Advocate, Inc. Confidential 3232 Out of curiosity… Let’s see what it would take a human (your analyst) to cleanse this data to a 98%+ level of accuracy?
- 33. Power Advocate, Inc. Confidential 3333 Scrubber, 24" x 4', Horizontal, 300 # MAWPScrubber, 24" x 4', Horizontal, 300 # MAWP An analyst would need to cleanse 312 transactions per hour (or 1 transaction every 12 seconds) for a full year to cleanse just 1 year of data! 1 average year of data = 1.3 million transactions Assume (conservatively), ~ 50% of transactions – 650,000 lines – require cleansing and classification With no vacation, there are 2,080 hours in a work year Which means… Here’s the math:
- 34. Power Advocate, Inc. Confidential 3434 That’s right – he would need to decode one of these: every 12 seconds, with no breaks, for a full year (and that would just get you one year of cleansed data that is a year out-of-date) 10'' .375 X42 ERW HYUNDAI W/FBE 14-16 MILS.
- 35. Power Advocate, Inc. Confidential 3535 Data scientists spend 80% of their time mired in “data janitor work.” This is a problem across the board for attempted in-house solutions...
- 36. Power Advocate, Inc. Confidential 3636 There’s another cost that hurts your bottom line The average, entry-level data analyst makes $60,000/yr. Let’s assume you have a modest team of 5 analysts, who spend 80% of their time cleansing spend data rather than analyzing it Which means… Let’s look at your best-case scenario: You spend (at least) $240,000 every year for analysis you never receive
- 37. Power Advocate, Inc. Confidential 3737 But why listen to us?
- 38. Power Advocate, Inc. Confidential 3838 Well, because when it comes to energy spend… $2+ Trillion Energy Spend Cleansed $320 Billion Energy Spend Cleansed “Largest” Cross-Industry Vendor in the World …we’re the big kids on the block
- 39. Power Advocate, Inc. Confidential 3939 And, our industry focus allows us to do things that others simply can’t…
- 40. Power Advocate, Inc. Confidential 4040 (an investment that isn’t cost-effective for cross-industry vendors) …like perfecting a rules engine that exclusively parses and classifies Power, Oil, and Gas data 50+ engineers, analysts, developers Millions of energy-specific rules
- 41. Power Advocate, Inc. Confidential 4141 Remember that line item example from earlier? Material Group Shape Steel Wire Rod Tubing Piping Casing Alloy Ingot Manufacturer Hyundai Automobile Hyundai Railway Hyundai Steel Hyundai Ship Hyundai Plant Hyundai Electric Outside Diameter 6 inches 8 inches 10 inches 12 inches 14 inches 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
- 42. Power Advocate, Inc. Confidential 4242 Our rules deconstructed and classified it in seconds… Material Group Shape Steel Wire Rod Tubing Piping Casing Alloy Ingot Manufacturer Hyundai Automobile Hyundai Railway Hyundai Steel Hyundai Ship Hyundai Plant Hyundai Electric … … Outside Diameter ✓ 6 inches 8 inches 10 inches 12 inches 14 inches Tubing ✓ ✓ ✓ 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1
- 43. Power Advocate, Inc. Confidential 4343 …when a cross industry vendor would have misclassified it as this: 10” .375 X42 ERW DRL HYUNDAI W/FBE 14-1 Mainline Pipe x
- 44. Power Advocate, Inc. Confidential 4444 (cross-industry vendors often claim the whole process can be automated, but to achieve 98+% accuracy, human expertise is required) Raw Spend Data Rules Engine Expert Analyst Cleansed Data And just to be sure, our energy experts verify all classifications
- 45. Power Advocate, Inc. Confidential 4545 So what does all this mean for YOU?
- 46. Power Advocate, Inc. Confidential 4646 It means you can expect things from us… …that you could never get from a cross-industry vendor…
- 47. Power Advocate, Inc. Confidential 4747 …like no more time wasted on “data janitor work”… …and no more anxiety over inaccurate reporting Clean Data Analyze ✓
- 48. Power Advocate, Inc. Confidential 4848 Plus, you’ll finally be able to manage all of your spend… “For every dollar of spend under management, Aberdeen has historically quantified 5% to 20% cost savings” …and save millions of dollars for your organization
- 49. Power Advocate, Inc. Confidential 4949 Ready to see what Best-in-Class Data can do for you? Complete All of your enterprise data… Accurate …classified to a 98+% degree of accuracy… Repeatable …kept up-to-date with regular refreshes Granular …organized in useable, natural buying groups… Contact us and We’ll show you!