What Your Spend Data Is Telling You and Why It’s Worth Listening

Spend Analysis: What Your Spend Data Is
Telling You and Why It’s Worth Listening
Speakers:
 Kurt Albertson, Principal, Procurement Advisory, The Hackett Group
 Jacob Ingvalson, Director, Strategic Sourcing and Procurement, Aflac
 Simon Hauser, Ph.D., Manager, Spend Analysis, SAP Ariba (SAP)
Moderator:
Sundar Kamak, Vice President, Product and Innovations, SAP Ariba (SAP)
PUBLIC

2PUBLIC© 2017 SAP SE or an SAP affiliate company. All rights reserved. ǀ
Public
Overview and introductions
Panel Presentations
 Kurt Albertson, Principal, Procurement Advisory, The Hackett Group
 Jacob Ingvalson, Director, Strategic Sourcing and Procurement, Aflac
 Simon Hauser, Manager, Spend Analysis, SAP Ariba (SAP)
Open Q&A
Agenda

Public
Data aggregation
Dashboards and reporting
Traditional business intelligence is just the tip of the iceberg…
Commodity
classifications
Supplier data enrichment
Market insights
and benchmarks

Public
“Knowing is not enough,
we must apply.
Willing is not enough,
we must do.”
Bruce Lee

Public
Panelists
Simon Hauser, Ph.D.
Manager, Spend Analysis
SAP Ariba (SAP)
Kurt Albertson
Principal, Procurement Advisory
The Hackett Group
Jacob Ingvalson
Director, Strategic Sourcing and
Procurement
Aflac

Statement of Confidentiality and Usage Restrictions
This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which
would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents
contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group.
Copyright © 2017 The Hackett Group, World-Class Defined. All rights reserved.

9© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
What are the top ten most important priorities for procurement in 2017?
Critical High
39%
23%
26%
13%
11%
5%
19%
21%
16%
12%
48%
61%
55%
64%
58%
62%
45%
42%
45%
48%
Elevate the role of procurement to a trusted advisor
Improve procurement’s business agility
Reduce and avoid purchase costs
Expand purchasing’s scope / influence
Deepen influence on complex indirect spend categories
Increase internal stakeholder satisfaction
Obtain more value from purchase-to-pay (P2P)
Support enterprise digital transformation objectives
Reduce supply risk to avoid regulatory non-compliance
Reduce supply risk to ensure supply continuity

In 2017 spend influence continues to be important both from a “quantity” but
also from a “quality” perspective
Savings for stage when
procurement is involved (Quality)
4,57%
2,85%
1,92%
0,61%
0,60%
0,56%
Design / Specification
(Demand Mgmt.)
Supplier Identification Negotiation & Contracting
Cost Reduction Cost Avoidance
3.45%
2.48%
5.18%
Source: The Hackett Group, 2016
85%
77%
68%
100%
95% 93%
Direct Materials Indirect Materials Indirect Services
Procurement Spend
Influence (Quantity)
Peer Group World Class
24% believe greatest
opportunity is here
26% believe greatest
opportunity is here
36% believe opportunity
is across both

Spend analysis is a critical enabler of achieving trusted advisor status and
delivering on value objectives
Value Drivers Planned Benefits Actually Benefits
Reduced the amount of time required to complete spend analysis by: 49% 33%
Increased the percentage of total spend being analyzed and reported on by: 49% 34%
Increased the accuracy of spend reporting by: 55% 38%
Identified and reduced non-compliant spend by: 46% 18%
Identified cost savings opportunities leading to additional strategic sourcing
savings of (on average):
37% 15%
Identified opportunities and was able to consolidate the supply base by: 29% 8%
Source: Spend Analysis Poll, The Hackett Group, February 2015

“Spend data is widely available globally” was the most important success
factor in successfully managing spend at a global level
7,25% 5,86% 4,00% 3,48%
Global category
strategy
BU / region / large
country
Local / small country Tactical sourcing
Estimated average savings
Source: Global Category Management Study, The Hackett Group, 2016
40% 25% 10% 10%
Global category
strategy
BU / region / large
country
Local / small country Tactical sourcing
Percent of spend

Greater granularity from a classification perspective is helpful but should
be viewed by category
35%
35%
41%
47%
47%
53%
53%
53%
59%
59%
Indirect, Sales & Marketing Support
Indirect, Business & Administrative Services
Indirect, General Equipment & Supplies
Direct, Purchased Finished Goods (Resale)
Direct Services
Capital Equipment/Facilities Operations
Indirect, Travel & Entertainment
Indirect, HR Services
Direct, Raw Materials/Packaging/Other
Indirect, IT & Telecommunications
Categories that are classified at a more granular level
Indirect IT & Telecom and Direct Raw Materials are often being measured at a more granular level
than other categories

Business case for moving from master family to sub-category
classifications
3%
13%
3%
24%
17%
7%
23%
20%
14%
% reduction in non-compliant / maverick spend % increase in cost savings from strategic sourcing % consolidation in the supply base
Master Family (Ex. Professional Services) Sub-Category (Ex. Exhibit Construction) More granular than sub-category (Ex. Item)

Managed, Influenced & Unmanaged
Reporting in Ariba…

AGENDA
Agenda slides
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use light blue for the other sections
• About Aflac
• Hackett Metrics
• Reporting Journey…
• Questions
16

About Aflac
17
• Aflac is a Fortune 500 company, providing financial protection to more than 50 million people
worldwide. When a policyholder or insured gets sick or hurt, Aflac pays cash benefits fairly,
promptly and directly to the insured.
• For more than six decades, Aflac voluntary insurance policies have given policyholders the
opportunity to focus on recovery, not financial stress.
• Aflac is committed to finding a cure for childhood cancer and has contributed more than
$113MM to the research and treatment of childhood cancer.
Founded by principal founder John Amos, and brothers Paul and Bill Amos
Operate in the US (1955) and Japan (1974)
$22.6 Billion in Revenue (2016)

Hackett Metrics
18
Managed:
• Spend that was actually sourced by SS&P consistent with Aflac’s Procurement Policy.
Influenced:
• Spend in which SS&P had some influence. This may include spend that was not sourced by
SS&P but where SS&P was involved late. For example, participated in contract and price
negotiations? Reduced risk? Reduced or avoided cost?
Unmanaged:
• Spend that does not fit either of the two other categories.

Reporting Journey…
19
Impact:
• Manual
• Monthly or Quarterly, After the Fact
• Multiple Sources (MS Office & SAP Ariba
solutions)
• Time Consuming/Prone to Error
Process:
1. Monthly or Quarterly, Managers review spend in an
Excel file spend and tag it as "Managed" or
"Influenced" or "Unmanaged" or "Unaddressable".
2. These indicators are then loaded into SAP Ariba
Spend Visibility.
Process:
1. As created, mark each SAP Ariba contract
workspace with the Spend Indicator.
2. As created, mark each SAP Ariba purchase
requisition with the Spend Indicator.
3. Push the Spend Indicator into SAP.
4. Push the Spend Indicator into SAP Ariba Spend
Visibility
Impact:
• Automated
• Real Time
• Single Source of Truth
• Efficient
Current Future

March 23, 2017
Simon Hauser, Ph.D., SAP Ariba (SAP)
Spend Analysis: Run at Your Best and
Make Adoption Work

Public
User Adoption – What We Have Learned
Best Practices Evolution
Services Update
Open Q&A
Agenda

User Adoption What We Have Learned

Public
“Where is the data coming from?”
“Can I trust the data?”
“Why should I use this tool?”
“How do I identify opportunities and areas
for improvement?”
“How do I build the reports I need?”
“What is the data telling me?”
Deploying spend analysis raises
questions

Public
 Ability to articulate business case for SAP
Ariba Spend Analysis
 Single point of contact for end users
 Advanced user of SAP Ariba Spend
Analysis – train end users
 Coordination with SAP Ariba solution
deployment lead and internal
stakeholders on
– Custom reports and dashboard content
– Announcements, recent successes
– Communication of enrichment availability
Make adoption work
Let superusers lead the way

Public
 Trust in data and classification are essential
for user adoption!
 Regularly review commodity classifications
with predefined timeline
 Create refinement report to focus enrichment
review on newly loaded data
 Consolidate approach via online ECR
(enrichment change request) feature or bulk
upload
 Implement source system data
improvements to further enhance enrichment
outcomes
Make adoption work
Data improvement

Public
 A custom taxonomy allows you to
translate the classification taxonomy for
SAP Ariba solutions to suit your end users
 Structure custom taxonomy based on
products/services to execute on initiatives
such as strategic sourcing, maverick
spend management, and rebate programs
 Build taxonomy at a deeper level to
support direct spend vs. indirect
 Minimize M:1 relationships, work toward a
1:1 mapping with the classification
taxonomy to preserve granularity
Make adoption work
Custom taxonomy

Public
 Keep dashboards and reports focused on
key user groups
 Get easy access to predefined content
 Leverage announcement/news section for
project successes, milestones, timeline
 Integrate compound reports to give 360-
degree view of suppliers and commodities
 House relevant documents on dashboard
(cheat sheets, presentations, and more)
Make adoption work – dashboards and reports

Public
SAP Ariba Best Practices Center
 Managed project available to all SAP Ariba Spend Analysis
customers to increase solution adoption and ROI after go-live
 Best practices center offerings include:
 Custom taxonomy support
 Jump start
 User guide
 Operational reporting (group dashboards, advanced reporting, Microsoft Excel
templates)
 Significant growth in customers taking advantage of this service
over the last few years

Public
SAP Ariba Spend Analysis – best practices center projects by year
*As of Q1 2017
*

Public
Services update
 Growing global team of deployment leads supporting multiple languages and time zones
 New solutions: SAP Ariba Supplier Risk and master data cleansing service for SAP Ariba
solutions
 Continue to invest in strategic and consultative skill development for the team
 Ongoing innovation around new service offerings based on what customers are telling us.
Some possible innovations include:
 Data extraction services
 On-site workshops to accelerate deployment
 Additional consulting offerings (adoption focus/goal tracking)
 Data improvement in analysis
Other current focus areas include
 Partnership with 3rd party provider to help with savings realization – currently running pilot program
 Replacement of category experience data in SAP Ariba solutions

Public
Summary
• Enable superusers to support your end users
• Gain trustworthy data thanks to ongoing refinement
• Implement a custom taxonomy structured to support sourcing and effective spend
management
• Enjoy easy access and group-relevant dashboard content
• Take advantage of the best practices center
• Look for new service offerings and additional content forthcoming in H2 2017

Thank you.
Kurt Albertson
Principal, Procurement Advisory,
The Hackett Group
kalbertson@thehackettgroup.com
Jacob Ingvalson
Director,
Strategic Sourcing and
Procurement, Aflac
jingvalson@aflac.com
Simon Hauser, Ph.D.
Manager, Spend Analysis
simon.hauser@sap.com
Sundar Kamak
Vice President, Product
and Innovations, SAP Ariba
(SAP)
Sundar.kamak@sap.com
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