Microforum spend analytics


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  • Validation & Enrichment leads to savings. In this example, two separate instances of the same supplier <Smurfit-Stone Container> were normalized. Without validation, the spend for this supplier would have been fractured and leverage would have been lost. Often times, when a supplier is known by different trade and legal names, duplicate entries are created in the supplier master file. Duplicates also arise when different addresses are used such as remit-to vs. the physical address. Validation resolves these issues by matching against alternative names such as legal, trade style and DBA (Doing Business As) and alternative mailing addresses.Enrichment maximizes leverage by identifying parent companies.In this example, we started with five suppliers. With validation we reduced the supply base to four, enrichment further normalized the supply base to only two suppliers <RockTenn Company> and <Verizon Communications>. The data can also be enriched to include financial risk, diversity, government certifications, and more, to improve decision making. 
  • Item classification is often incomplete and misses leverageAccount classification focuses on why something was purchased, not what was purchasedIndustry or Supplier classification is over-simplified, assuming a supplier sells only one thing, alternative leverage goes unnoticed
  • Multivariate classification leads to savings.Supplier classification is simple, but overlooks alternative leverage. Suppliers often sell more than one thing. This oversimplification causes alternative leverage, such as freight & shipping, to remain unseen and unleveraged. In this example, packaging is overstated – we are missing freight and the associated graphics design services to create the displays. Furthermore, classifying by supplier industry can miss the finer details such as packaging vs. displays.Item classification is often incomplete. Item descriptions tend to cover direct spend and may not be populated for indirect services or expenses. In this example, the indirect services such as telecom and graphics design are not assigned and result in missed opportunities.Another approach is to classify by account. But General Ledger account structures tend to be shallow. They usually track "why" something was purchased instead of "what" was purchased. In this example, <Accounts Payable trade> is too vague a description to classify what was purchased, <Promotions> tells us "why“ we purchased graphic design services but not the fact that we actually bought graphic design services. Lastly, cell phones are obscured because they are considered to be a general office supply – once again stating why not what.SAP’s multivariate approach to classification yields greater accuracy and granularity. Here, we have full visibility to spend because multiple variables are taken into consideration. If we simply rely on item, we would miss leverage because not all transactions have item descriptions. If we rely on account we risk classifying WHY something was purchased – not what was purchased. And if we based our classification on the supplier we would oversimplify the spend, missing alternative leverage. This example shows the interaction of just a few variables... imagine the impact of adding other variables including: Buying Location, Organization, Cost Center, Source System, Line of Business, WBS Element, Department, and so on.
  • Colgate Palmolive Co. 15.6B global consumer products company Founded in 1806 35,000 Colgate people worldwide Products sold in 200+ countries and territories The Company focuses on strong global brands in its corebusinesses Oral Care Personal Care Pet Nutrition Home Care
  • Colgate Palmolive project scopeDataSpend (Account Payables)Purchase OrdersTravel & EntertainmentExternal Factors (CommodityPrices)Three years of dataGeographyGlobal ImplementationSeven SAP ERP’s / One SAP SRMProcurement OrganizationDirectIndirectLogistics
  • Johnson & Johnson Company BackgroundHeadquartered in New Brunswick, NJGlobal Leader inHealth CareSpecializing in Pharmaceuticals, Medical Devices & Diagnostics and Consumer ProductsMore than 250Operating CompaniesIn 60 CountriesSelling Products in More Than 175 Countries114,000 Employees Worldwide
  • J&J Consumer - Implementation ScopeLocationsLatin AmericaEurope, Middle East, AfricaAsia PacificNorth AmericaSource DataTransaction DataContracts, Purchase Orders, InvoicesVolumes consistent with a large Consumer Products company.Key Master Data Material, Buyers, Buying Orgs, Categories, Suppliers, Plants, Geography, Management Organization (plus many more attributes)Source system data is not standardizedMaster data values not standardizedTransaction data configurations varySpend Scope:Direct Material Spend (Raw Materials & Finished Goods)TechnicalInstallation of SPM V2 on our existing J&J SAP BW 7 SP 18 system.Integration with 12 source systems File transfers to/from external cleansing 3rd party.Source System TechnologyBPCS SAP 46C with SPM V2 extractorsSAP 46C SPM V1 extractorsSAP 47CSAP ECC5SAP ECC6Global & Regional End Users: 100+
  • SAP BusinessObjects BI Platform Universe support allows Spend data to be accessed with BI solutions for advanced graphical analyses.View Spend data on mobile devices using SAP BusinessObjects Explorer iPad client for advanced analytics anywhere at any timeExtra SAP BusinessObjects BI Platform and Explorer licensing required
  • Microforum spend analytics

    1. 1. SAP ANALYTICSmicroforum 3/21
    2. 2. Global Trends Increasing Costs & Reaction to Risk Limited Spend Visibility  75% of CFOs under pressure to increase savings and  34% of enterprises still do not have an automated means to decrease risk (Aberdeen Group, 2010) collect and aggregate spend data from various sources (G/L, AP, ERP, etc.) to achieve timely, accurate and complete  Less than 40% of finance professionals are currently information (Aberdeen Group, 2010) enriching their spend data with risk information, making savings erosion an even more critical problem (Aberdeen  Inadequate or „too late‟ spend insights Group, 2010) Shifting CPO Focus Growing Need for Reliable Data  70% of CPOs expressed a need to focus on Competitive  56% of ISM members rate data reliability as the number one Insight, Risk, Compliance, and Supplier Management vs. challenge in strategic sourcing (Institute of Supply Transaction Management (CPO Research) Management, 2009)  86% of purchasing and finance professionals rate Spend  62% of all enterprises are still using manual means to Analysis as a high value function (Aberdeen Group, 2010) classify and cleanse spend data (Aberdeen Group, 2010)  Procurement is taking on a strategic role to deliver value  US Department of Defense reports that 40% of excess costs and bottom line savings were the result of unreliable data  Customers want an integrated, repeatable process to ensure reliable analyses© 2011 SAP AG. All rights reserved. 2
    3. 3. Collaborate Effectively With Stakeholders On Cost Savings &Supply Continuity InitiativesVisibility to enterprise wide spending and supply base enables sourcing strategies that deliver measurable results to key stakeholderssuch as Finance and Supply Chain organizations. Procurement Finance Supply Chain CIO Accelerate Cost Supply Savings, Reduce Supplier Cost Savings IT Cost Savings Continuity Risk Analyze Supply Identify 1 Budgets Supply Data Standardization Base Savings Plan and Enrichment Identify Sourcing Negotiate Savings Budget vs Track Supplier Initiatives Supplier Trigger Sourcing Actions Savings Targets Actual Performance Risks Monitor 2 Establish Contract Contracts Actionable Alerts Utilization Supplier Identify Cost To Measure Risk One Solution , Multiple Alternate Mitigate Risk Actual Savings Analysis Suppliers Deployment Options1. Identify and Act on Savings2. Identify and Act on Supplier Risk © 2011 SAP AG. All rights reserved. 3
    4. 4. Analytics for Everyone, Everywhere, AnytimeOPERATIONS l HR l FINANCE I IT I SALES l MARKETING MANUFACTURING l RETAIL l HEALTHCARE l BANKING l UTILITIES l TELCO I PUBLIC SECTOR What What is What will happened? happening now? happen? How and why What is the risk if it How do you prevent / ensure did it happen? does/doesn‟t happen? it happens again? Tom Davenport International Institute for Analytics© 2011 SAP AG. All rights reserved. 4
    5. 5. Analytics for Procurement Analytic Applications Analytics for Procurement Decision Support for Supplier Data Supplier Spend the Procurement Perfor- Reliability Risk Analytics Function mance© 2011 SAP AG. All rights reserved. 5
    6. 6. SAP Procurement PortfolioIntegrated Solutions that Support the Process Spend Sourcing Contract Operational Invoice Analytics Management Procurement Management Supplier Management SAP Supplier Lifecycle Mgmt SAP Spend SAP SAP SRM, SAP ERP SAP Invoice Mgmt Performance SAP Sourcing Contract Lifecycle & SAP Cart Approval by OpenText Management MgmtSAP Data Enrichment & Supplier Connectivity via SUS and SAP Sourcing OnDemand Classification Crossgate / Hubwoo* New!© 2011 SAP AG. All rights reserved. 6
    7. 7. Information is key for procurement performance To meet strategic business ….and this requires goals, procurement needs to…  Drive improvement in sourcing  Enterprise wide visibility to spend and strategies buying patterns  Effectively manage savings  Complete, accurate, trustworthy data opportunities  Powerful information at the hands  Develop healthy supplier of the business user relationships  Improve compliance “ If I can take the data from my spend analysis tool and understand where it comes from and tie it to performance, then I can easily address the opportunities to drive savings and reduce spend.” CPO, Large North American Insurance Company© 2011 SAP AG. All rights reserved. 7
    8. 8. Data Enrichment and Classification OnDemandSolution OverviewA cloud-based, network application that combines spend data with global contentand services to improve data reliability for strategic sourcing and spend analytics. Data Collection Enrichment Classification Revision How can I aggregate all My supplier identities are How do I know what I’m How can I add my own my spend data in one obscured due to poor really buying? knowledge into the place and be sure it’s data quality and lack of process? accurate? content!  Manage accuracy and  Increase leverage opportunities  Increase visibility to both direct  Incorporate subject matter completeness of company-wide with normalized suppliers and indirect spend expertise with the Revision tool spend data from multiple sources  Apply changes to the current  Improve decision-making with  Improve understanding of spend  Gather data from SAP and non- enriched content activity with a consistent structure cycle and future cycles for SAP sources for goods and services continuous improvement© 2011 SAP AG. All rights reserved. 8
    9. 9. The SAP Global Business Compendium Additional Location Location (Address, Linkage (Parent Information (Mail, Fax etc) ZIP, Country etc) Company etc) Contact Info (CEO, Officers, Phon Financial & Risk e numbers, email Indicators addresses etc) (Filings, suits, liens, b Diversity (women ankruptcy etc) owned, SDB, minoriti es etc) Line-of-Business (Standard Industrial Cortera Risk (via Classification Code incl. Endorsed Business function) Business Info Solution: risk (employees, sales, TI segment, payment N, non-US Tax Sanctions (OFAC) score, trend etc)© 2011 SAP AG. All rights reserved. number etc) 9
    10. 10. Validation and EnrichmentImproves leverage and decision-making Supplier Validated Legal Ownership Industry Spend Grafix GraphCorr LLC (Grafix) RockTenn Company Packaging $75,000 Parc Industrial, St. Marie QC 433 2nd Ave, Sainte-Marie QC G6E 3C6 CA Smurfit Smurfit-Stone Container Corp RockTenn Company Packaging $150,000 PO Box 93095, Chicago, 60673 150 N Michigan Ave, Chicago, IL 60673 US Stone Container Smurfit-Stone Container Corp RockTenn Company Packaging $200,000 150 N Michigan, IL 60673 150 N Michigan Ave, Chicago, IL 60673 US Verizon Verizon Business Verizon Communications Telecom $250,000 295 Maple Ave, Basking Ridge NJ 1 Verizon Way, Basking Ridge NJ 07920 US Verizon WRLS#12RK Cellco Partnership (Verizon Wireless) Verizon Communications Telecom $50,000 NJ 7920 USA 1 Verizon Way, Basking Ridge NJ 07920 US Traditional SAP Grafix $75,000 Verizon Comm. Verizon WRLS $300,000 $50,000 Verizon $250,000 Employees: 194,400 RockTenn Sales (mil): $106,565 Smurfit $425,000 $150,000 Risk, etc. Employees: 10,400 Sales (mil): $3,000 Stone Container Risk, etc. $200,000 Accelerate Savings© 2011 SAP AG. All rights reserved. 10
    11. 11. The SAP Transaction Knowledge BaseIndustry Wide Coverage $350+ billion in spend 20,000+ lines of businesses 20+ key variables 50+ industries 20+ years of history© 2011 SAP AG. All rights reserved. 11
    12. 12. Methods of Spend ClassificationItem Description „Cataloging’ Industry „Vendor Coding‟ (SIC, NAICS, UNSPSC)  Not all items have valid descriptions  Not organized for sourcing – resource based  Assumes repetitive similarity in description  Too generalized for in-depth sourcing  Forces micro vs. strategic focus  Assumes a supplier sells one thingAccounting SAP Method  Limited depth  Focuses on what was purchased by analyzing  Frequently misapplied due to budgets multiple variables on the transaction  Indicates why not what was purchased  Improves leverage with a more complete and accurate understanding of spend  Supports strategic sourcing© 2011 SAP AG. All rights reserved. 12
    13. 13. Spend ClassificationImproves accuracy and understanding Supplier Industry Item Account Business Unit Spend Grafix Packaging Not assigned Promotions Graphics $130,000 RockTenn Packaging Displays Accounts payable trade Advertising $475,000 RockTenn Packaging Displays Freight-inbound Advertising $38,000 Verizon Telecom Not assigned Utilities Facilities $285,000 Verizon Telecom Blackberry Office supplies Sales $72,000 Traditional SAP Supplier Packaging Telecom Approach $643,000 $357,000 Freight $38,000 Item Cell Phones Displays Unknown Multi- Displays Telecom PTP Graphic Design Approach $72,000 $513,000 $415,000 variate $475,000 $285,000 $130,000 Approach Cell Phones Advertising $72,000 $130,000 Account Unknown Office Sup. Utilities $285,000 Approach $475,000 $72,000 Freight $38,000 Accelerate Savings© 2011 SAP AG. All rights reserved. 13
    14. 14. How does Revision help? Process support vs. Excel spreadsheets 1  During the revision phase, classifications can be changed or refined as needed  The revision tool itself can be used to review and apply changes on-the-spot  Out of box reports are also available to 2 facilitate review  Example 1. During classification review, the data steward notices that some transactions having account “freight provision” should be in the freight category 2. Using the revision tool, the data steward x filters on “freight provision” and selects the transactions to reclassify x 3. Updated results are applied for x continuous improvement 3© 2011 SAP AG. All rights reserved. 14
    15. 15. Solution Summary: SAP BusinessObjects Spend PerformanceManagement Maximize Savings – Minimize Supplier RiskGain full spend visibility  Automated data capture from SAP and non-SAP  Data accuracy for faster insightsIncrease spend under management  Set up performance targets  Collaborate effectively to act on insights Data Enrichment & ClassificationRapidly identify savings opportunities  Find and act on savings potential ERP  Pro-actively monitor contract compliance GL BIReduce supplier risk P-Cards T&E  Pin-point supplier risks and supply concentration * Note: The Data Enrichment & Classification is a separately priced solution.  Find and act on qualified alternate suppliers© 2011 SAP AG. All rights reserved. 15
    16. 16. Integrated Data Management Enables Accurate Spend Visibility Spend and Supplier Risk Analysis Over 130 pre-built spend analysis models Out of the box support for supplier risk analysis Set and Track Performance Targets with Spend Advisor Comprehensive set of Analytics functionality Briefing Book supports stakeholder collaborationGovernment/ Public data Phase 1: Supplier Data Phase 2: Spend Data Standardization & Enrichment Classification Spend Data Validation, 3rd Party Enrichment and ClassificationCredit Rating Global coverage3rd Party Risk 1.6T transactions in knowledge base Rating 200+ external data sources 3rd Party Supplier Financial/Risk dataLegal Rating Global Business Transactional Compendium Knowledge Diversity/Government watch lists Base Newsfeeds Data Integration SAP extractors (ECC, SRM) Data Integrator ETL license for non-SAP systems SAP SRM P-Card/ Non-SAP ERP T&E Spend data Support to bring in 3rd party data feeds © 2011 SAP AG. All rights reserved. 16
    17. 17. Critical Supplier Information Enables Proactive Insights Into ImpactOf Supplier Risk  Spend volume with suppliers at risk  Analyze category and item exposure to risk  Quantify spend volume and buying locations at risk© 2011 SAP AG. All rights reserved. 17
    18. 18. Critical Supplier Information Enables Proactive Insights Into ImpactOf Supplier Risk  Jump directly from SPM to Cortera website for up to date Supplier report© 2011 SAP AG. All rights reserved. 18
    19. 19. Cortera Risk Data in DEC Appended during DEC processing Attributes available within SPM for dashboards and supplier views include  Risk Segment  Payment Score Risk  Payment Rating Trend  Reported Payment Relationships  Percent Past Due  Days Beyond Terms (DBT)  Industry DBT Benchmark  Risk Flags  Bankruptcy Count  Operations News Count  Liens Count Pull detailed Cortera Supplier Report on demand© 2011 SAP AG. All rights reserved. 19
    20. 20. Global Personal Products Company ChallengesCustom BW Reporting application developed in Areas of Opportunity2004 Increase utilization Based on Accounts Payable information only  Easy of Use Rule based logic for spend classification  Self Service CapabilitiesImplemented SRM/EBP solution for indirect  Better classification of spendprocurement between 2007 and 2010 Provide context informationClassification of Indirect Spend has being a  Commodity priceschallenge  Contract and Purchase Order data Users not always classify spend properly (EBP)  T&E Rule engine data maintenance is resource consuming (BW) Better analytical capabilitiesIT spending to many resources maintaining and  From Corporate summary to document level informationenhancing existing application  Tool to empower users to find and report on the data they needProcurement dependency on a few “Power Users” togenerate information for the organization© 2011 SAP AG. All rights reserved. 20
    21. 21. Global Personal Products Company ResultsBest Practices Key LearningsData is the key component SPM solution well designed to address spend Have a good understanding of the complexity of your analytics business needs Transactional & Master Data User adoption requires good data quality and Data validation is key and it can take a lot of effort and time modern/intuitive user interface Define Spend Hierarchies that facilitate sourcing initiatives  Spend is classified properlyInvolve your basis/technical group early in the  Vendors are classified properly per the role they haveimplementation To keep up with external innovation you need to pick Make sure that the Java stack is properly configured/tuned for the expected workload in production. a solution from a vendor that reinvest in enhancing Ensure a process is in place to deploy Adobe Flash. existing toolsDefine an appropriate data refresh frequency© 2011 SAP AG. All rights reserved. 21
    22. 22. Global Consumer Packaged Goods Company Challenges – competing on Analytics© 2011 SAP AG. All rights reserved. 22
    23. 23. Global Consumer Packaged Goods Company ResultsBusiness Case Leverage Opportunities A Global Business Intelligence (BI) solution that will provide end-to-end procurement Spend Analytics that supports our Global RFx and Category Management strategy. Improved visibility to item level detail segmented by commodity from each region leading to greater procurement savings. An enabler to achieve our already committed world-class savings targets. We concluded that it would be mandatory to have tools such as Spend Analytics to support this already committed savings goal. Incrementally, we assumed a conservative 0.1% savings on total direct spend. Further savings from cycle time reduction – Additional sourcing events can be held each year – More time available for strategy and supplier bid analysis© 2011 SAP AG. All rights reserved. 23
    24. 24. SAP BusinessObjects BI Platform - Universe IntegrationAdvanced Graphical Analyses and iPad Integration SAP BusinessObjects SAP Spend Performance BusinessObjects Management BI Platform SAP Flex UI BusinessObjects SAP SAP Explorer BusinessObjects BusinessObjects Analysis Web Intelligence SAP NetWeaver BW iPad Client (SAP BusinessObjects Explorer ) SDN Article on SPM/BO Universe Integration SDN Blog on SPM Mobile Scenarios© 2011 SAP AG. All rights reserved. 24
    25. 25. Spend Analysis on iPad, Explorer View© 2011 SAP AG. All rights reserved. 25
    26. 26. Resources SAP Analytics Online  Register for Virtual Event: http://virtualevents.sap.com/business-analytics  Visit our web page: http://www.sap.com/solutions/sapbusinessobjects/large/industries/procurement/index.epx to discover the latest Analytic Applications innovations from SAP  Visit SAP Analytics Blog: http://blogs.sap.com/analytics to share your views on daily blog posts  Become a Fan on Facebook: www.facebook.com/SAPanalytics/  Follow on Twitter: www.twitter.com/businessobjects SAP Community Network (SDN)  SAP Analytics page: www.sdn.sap.com/irj/boc  Best practices: www.sdn.sap.com/irj/boc/bi-best-practices  Architecture: www.sdn.sap.com/irj/boc/bi-solution-architecture© 2011 SAP AG. All rights reserved. 26
    27. 27. SAP Operational Performance Management Elite TrainingApr 16 – 20 in Prague, Czech RepublicBE THE FIRST TO HAVE LIVE SPM 3.0, SCPM 2.0 and DEC 1.0 EXPERIENCEThis Elite enablement workshop will cover a large variety of topics including: New Features for What-If-Analyses and Advanced Analytics in SAP BusinessObjects Spend Performance Management 3.0 (SPM) First time ever experience and deep dive into SAP BusinessObjects Data Enrichment and Classification OnDemand (DEC) Understand SPM and DEC integration options as well as a vertical integration scenario New Features for What-If-Analyses and Risk Management Integration in SAP BusinessObjects Supply Chain Performance Managemement 2.0 Deep dive technical sessions and performance tuning for all three solutions (UI and Backend) Performance Tuning (BW 7.3, OPM solutions, Java and ABAP extensions) OPM and SAP HANA session REGISTER https://www.sap.com/campaign/2012_04_EVENT_OPM_TRAINING_Apr16_20/i http://www.sdn.sap.com/irj/scn/weblogs http://twitter.com/#!/search?q=%23OP ndex.epx?kNtBzmUK9zU ?blog=/pub/wlg/28164 MElite© 2011 SAP AG. All rights reserved. 27
    28. 28. Thank You!Contact information:Henner SchliebsAnalytics Solution Marketinghenner.schliebs@sap.com
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