Analytics for procurement health care

SAP ANALYTICS
ASUG Webinar for Procurement Analytics in Health Sciences
4/10/2012
Henner Schliebs

Executive Summary

Your procurement and supply chain businesses are perhaps hounding you for continuous supplier and
spend intelligence – reports that will help drive supplier selection decisions, track performance of
suppliers and manage spend to be within budget. However, your supplier data requires de-
duplication, normalization and enrichment – enrichment with various sources of information such as
credit and risk, debarred businesses, minority owned, and corporate ownership information to help
during critical supplier discussions and negotiations. IT no longer needs to drown from these requests
and spend weeks or even months responding to this request. With SAP‟s solutions, and partnerships
with 3rd party data providers, you can empower your procurement, finance and supply chain business
users.

© 2011 SAP AG. All rights reserved. 2

Learn about…

Analytic Applications for Procurement
The problems and solutions
Data Enrichment and Classification
Spend Performance Management
Customer Best Practices
What‟s Next


SAP Analytics
ANALYTIC APPLICATIONS FOR
PROCUREMENT

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

Analytics for Everyone, Everywhere, Anytime
OPERATIONS 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


Know, Decide and Act With Confidence

Embedded Applications Purpose-built Applications
Seamlessly integrates with
Contextually answers Aggregates Enterprise Data
Business Processes
process driven To Optimize Strategic
Applications to deliver
questions Business Functions
actionable insight


Analytics for Procurement

Analytic Applications Analytics for Procurement

Decision Support for Supplier
Data Supplier Spend
the Procurement Perfor-
Reliability Risk Analytics
Function mance


SAP Procurement Portfolio
Integrated Solutions that Support the Process

Spend Sourcing Contract Operational Invoice
Analytics Management Procurement Management

In Ramp Up!

Supplier Management SAP Supplier
Lifecycle Mgmt

SAP Spend SAP Sourcing / SAP SAP
SAP SRM, SAP ERP SAP Invoice Mgmt
Performance Sourcing Contract Lifecycle
& SAP Cart Approval by OpenText
Management OnDemand Mgmt
SAP Data Enrichment & Supplier Connectivity via SUS and
Classification Crossgate / Hubwoo*
New!


Transforming the Way Procurement Users Gain Insight
Self Service
Change
Problem
Manage
Manageme Visually analyze the
Reporting
ment
nt

spend breakdown for
a specific item
Self Service Data
Reliability
See what portion of
item spend comes
from freight charges
versus material costs

external Data
Integration


Data Reliability
DATA ENRICHMENT AND CLASSIFICATION
ONDEMAND

© SAP

Data Enrichment and Classification OnDemand
Solution Overview
A cloud-based, network application that combines spend data with global content
and 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


What Do Data Collection Do?

Definition
• The purpose of Data Collection is to ensure a complete and accurate aggregation of spend data from multiple sources on
a periodic basis.
• During the Data Collection phase, master and transaction files are received from multiple sources and reviewed for
accuracy, technical validity and content integrity. Sources are then approved for further processing or rejected.

Challenge SAP Benefit
 Lack of standard process for collecting data from disperse  Standard ETL tool to support external data collection
systems  Integration into SAP Spend Performance Management to
 Lack of integration into external data sources collect raw information
 Monitor progress towards meeting timelines

Result: Organizations are unable to collect their data in a Result: Organizations can increase accuracy, timeliness and
timely and automated fashion. automation decreasing risk of bad data and TCO


What Do Supplier Data Standardization and Enrichment Do?

Definition
• Supplier standardization validates suppliers and removes duplicates. It creates linkages between supplier corporate
parents and their children
• Supplier enrichment enhances supplier data with information about a supplier‟s diversity status (e.g. Minority-
owned, Women-owned, Veteran-owned), or credit/financial risk, etc.

 Lack of standard process for entering supplier names into  Standard view of all suppliers for goods and services
transaction systems  Leverage total purchases to drive cost savings and
 Lack of supplier parent/child relationships among suppliers rationalize suppliers
 Lack of supplier specific business and risk data  Monitor progress towards meeting Diversity Supplier
initiatives
 Identify suppliers who may be a risk to the supply chain
due to financial instability

Result: Organizations are unable to analyze their spend by Result: Organizations can increase leverage opportunities by
supplier, and cannot leverage total spend normalizing business entities and improve decision-making
with enriched content

The SAP Global Business Compendium

Additional Location Location
Linkage (Parent
Information (Mail, Fax etc) (Address, ZIP, Countr
Company etc)
Contact Info y etc)
(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)
number etc)

Validation and Enrichment
Improves 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

What Is Spend Data Classification?

Definition
• Spend Data Classification is the process of assigning procurement spend purchases to a standard structure such as
UNSPSC, the SAP taxonomy, or a custom structure

• Procurement, Supply Chain and Financial transaction • Standard Standard view of all goods and services
systems may not have a standard classification purchased across the enterprise
structure across the enterprise for assigning goods • Leverage total spend to drive cost savings, monitor
and services to a category compliance, and rationalize suppliers
• Users may incorrectly classify data at the point of
entry in the transaction system

Result: Since purchases are not classified to a Result: Organizations can now increase visibility to both
single, standard enterprise-wide structure, procurement direct and indirect spend with a consistent category
organizations cannot analyze their total category spend scheme.
across the enterprise

The SAP Transaction Knowledge Base
Industry Wide Coverage

$350+ billion in spend 20,000+ lines of businesses

20+ key variables

50+ industries

20+ years of history


Methods of Spend Classification

Item 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 thing

Accounting 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

Spend Classification
Improves 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

What Is Spend Data Revision?

Definition
• Revision is the process of reviewing the enrichment, validation and classification processes from a data steward
perspective to add expertise to the process for continuous improvement

• Automated processes cannot always guarantee the • Standard process for the data stewards support
individual customer data situation is handled correctly reliability efforts
• Due to individual factors there still might be not • Easy to use user interfaces to enable the customer to
classified data sets that need to be matched / act as the data steward
analyzed • System gets “smarter” each run by enhanced logic

Result: Automated rules of all degrees of sophistication Result: Organizations can now increase the value of the
cannot handle specifics of individual customer cases and automation by complementing the rules engine with unique
might not deliver the desired results. Customers need to be customer data knowledge.
able to easily review the data and modify the results of the
processed rules

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


What’s in it for You?

Lay the foundation for full
spend visibility in the SAP
Improve leverage and
BusinesObjects Spend
decision making with a
Performance Management
normalized and enriched
application by optimizing the
supply base
collection and verification of
data

Drive continuous Understand purchasing
improvement by adding activity with transactions that
business expertise to are classified to a consistent
enrichment and classification standard for goods and
processes services


Spend Analytics

SPEND PERFORMANCE MANAGEMENT

© SAP

Solution Summary: SAP BusinessObjects Spend Performance
Management

Maximize Savings – Minimize Supplier Risk
Gain full spend visibility
 Automated data capture from SAP and non-SAP
 Data accuracy for faster insights
Increase spend under management
 Set up performance targets
 Collaborate effectively to act on insights
Data Enrichment & Classification
Rapidly identify savings opportunities
 Find and act on savings potential ERP
 Pro-actively monitor contract compliance GL
BI

Reduce 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

Integrated Data Management enables Accurate Spend Visibility

The Solution Why SAP

SAP Integration
 Connectors to pull Spend, Financial, Operational
Procurement and Master data from SAP data sources
Best-In-Class ETL
 Included best-in-class ETL tool simplifies connectivity
to non-SAP structured and unstructured data sources
Leading EIM technologies
 Includes best-in-class methodology and technology for
 Automated data capture from SAP and non-SAP accurate, reliable data quality, supports data
enables Continuous Spend Analysis for Incremental validation, normalization and enrichment having
Savings Insights processed over 1.5 trillion records
 Data accuracy for faster insights External Data Feeds
– Supplier Normalization & Enrichment*  Includes support for external data feeds providing
– Spend Classification* immediate market insights.
* Provided as optional subscription service

Out Of The Box Analytics enables Actionable Insights


Comprehensive Analysis:
 Spend, Supply Base, Contract, Supplier Risk and
Procurement KPIs, including tracking to key
KPIs, budgets and financial performance metrics
Surface Savings and Supplier Risk Insights:
 Quantify impact with detailed drill down analysis to
effect confident decisions, instead of time consuming
data mining
 Automated Comprehensive spend and supply base
data model Integration with SAP Sourcing:
 Launch sourcing RFx, Auction or Project from insights
 Provides insights into savings and supplier risk directly, via out of the box integration
Dynamic Briefing Book:
 Powerful ad-hoc analytics for the power user
 Supports snapshots in time, with refresh and offline
 Enables collaboration and decision capture capabilities to support stakeholder collaboration and
decision capture

Actionable Metrics on Critical Success Factors Improves Spend
Performance


Performance Management:
 Evolve from Reporting and Analysis to Performance
Management, incorporate „Management by Exception‟
to focus valuable Procurement resources to top
initiatives

Configure KPIs:
 Set KPIs to meet your competitive advantage
goals, and align procurement goals with corporate
 Align procurement strategy to execution strategy and vision

 Gain full visibility into procurement “actuals” Know The Contributors to Lagging KPIs:
 Track key KPIs with full knowledge of key contributors to
 Better manage key procurement performance
variance, and root cause for sub-standard performance for
indicators immediate decision and action

 Identify root causes of sub-standard performance

Insights Into Savings Potential Helps Prioritize Sourcing Strategies


Spend Advisor:
 Be alerted to savings potential, instead of time and
effort mining for savings opportunities

From Insights to Detailed Analysis:
 Supports Power Users need to perform deep dive and
ad-hoc analysis on the savings insights, including
analyzing supplier risk profiles, supply concentration
and sole sourced supplier risks
 Identify savings potential
From Insight to Action:
 Analyze Quantity, Price And Supplier details
 Take immediate action on insights by transferring line
 Determine strategic sourcing opportunity item data into SAP Sourcing for continued next steps in
the strategic sourcing process
 Launch sourcing action from insights

Critical Supplier Information Enables Proactive Insights Into Impact
Of Supplier Risk

 Spend volume with suppliers at risk
 Analyze category and item exposure to risk
 Quantify spend volume and buying locations at risk

Critical Supplier Information Enables Proactive Insights Into Impact
Of Supplier Risk

 Jump directly from SPM to Cortera website for up to date
Supplier report


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


Global Personal Products Company
Challenges

Custom BW Reporting application developed in Areas of Opportunity
2004
Increase utilization
 Based on Accounts Payable information only
 Easy of Use
 Rule based logic for spend classification
 Self Service Capabilities
Implemented SRM/EBP solution for indirect  Better classification of spend
procurement between 2007 and 2010 Provide context information
Classification of Indirect Spend has being a  Commodity prices
challenge  Contract and Purchase Order data
 Users not always classify spend properly (EBP)  T&E
 Rule engine data maintenance is resource consuming (BW)
Better analytical capabilities
IT spending to many resources maintaining and  From Corporate summary to document level information
enhancing existing application  Tool to empower users to find and report on the data they
need
Procurement dependency on a few “Power Users” to
generate information for the organization


Global Personal Products Company
Results

Best Practices Key Learnings
Data 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 properly
Involve your basis/technical group early in the  Vendors are classified properly per the role they have
implementation
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 tools
Define an appropriate data refresh frequency


Global Consumer Packaged Goods Company
Challenges – competing on Analytics


Global Consumer Packaged Goods Company
Results

Business 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


SAP BusinessObjects BI Platform - Universe Integration
Advanced 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

Spend Analysis on iPad, Explorer View


Procurement Analytics

WHAT’S NEXT


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

Thank You!

Contact information:

Henner Schliebs
Analytics Solution Marketing
henner.schliebs@sap.com

SAP Operational Performance Management Elite Training
Apr 16 – 20 in Prague, Czech Republic

BE THE FIRST TO HAVE LIVE SPM 3.0, SCPM 2.0 and DEC 1.0 EXPERIENCE
This 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
 New Features for What-If-Analyses and Risk Management Integration in SAP BusinessObjects Supply Chain
Performance Management 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
http://bit.ly/opmelite http://bit.ly/opmelite-sdn http://bit.ly/opmelite-youtube http://bit.ly/HbX5w7


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