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Spend Analytics – There’s a Better Way

By January 12, 2023Blog

The changing supplier-buyer dynamics in this VUCA world warrant a solution that helps buyers make timely and well-informed procurement decisions.

Let’s walk through a hypothetical scenario …

Meet Steve Thomson. Steve heads the procurement function for the North American region of Acme Corporation. The CPO (Chief Procurement Officer) told Steve that buyers need help with certain non-compliant suppliers who are delaying deliveries, delivering damaged goods, varying unit prices, delivering incorrect quantities, and defaulting on multiple agreed-upon SLAs – all of which is leading to low buyer satisfaction.

Suppliers Jeopardizing the Bottom Line?

Acme has large orders that must be fulfilled on very tight timelines. Any delays in the delivery of raw materials from these suppliers will drastically impact Acme’s production schedules and lead to customer dissatisfaction, ultimately having a negative impact on their bottom line.

The team has not updated the ‘qualified supplier’ roster in the last seven years, so finding a quick replacement is not in the cards. Also, Steve cannot just act against suppliers based on buyer complaints alone. He would first have to analyze the overall spend pattern of all the plants in North America and identify the critical products and suppliers who provide the raw materials; otherwise, it would disrupt the entire process flow.

Acme uses a variety of different systems to capture and raise Purchase Orders, Supplier and Material Master Data, Production Schedules, and Material Requirements Plans. Steve will have to look at all of these disparate systems to find correlations between material and supplier spending details and derive insights from them.

A Slow and Tedious Manual Process

Steve starts his analysis by pulling data from all the relevant transactional and data storage systems to check the distribution of spend across the organization. He slices and dices this data to identify historical spend patterns. He must perform the material portfolio analysis manually to understand any supplier dependencies, then perform categorical spend analysis to understand the contribution of materials and suppliers toward total spending.

This helps him identify materials and suppliers of relevance, contributions of each material and supplier, and top contributors, enabling him to look for opportunities for volume bundling. Now he has the critical details on relevant materials for production in any particular plant. But he still needs to investigate further to find the non-compliant suppliers.

Steve creates a supplier stability index that can be reused in the future to rank suppliers based on critical parameters like quality, cost, time and other standard SLAs. This supplier matrix will help Steve understand whether suppliers providing critical materials are at risk.

Finally, after a month of analysis and sifting through multiple systems, Steve comes up with a supplier stability index and a list of suppliers ranked on their relevance and the risk they bring into his procurement process. This exercise helped Steve understand the complexities of spend detail analysis. Steve takes his analysis and corrective actions to the CPO for approval.

There Must Be a Better Way

While Steve’s analysis and corrective actions are awaiting the CPO’s approval, he realizes the need for an application that could pull in data from multiple data sources, perform a Pareto Analysis on supplier spend data, run a statistical analysis on the lowest unit price offered by suppliers as well as a geographical analysis.

An application like this could have provided better insights quickly and would have reduced the time to implement the corrective measures. This would have enabled Steve to rapidly plug the spend leakages and ensure that the qualified supplier roster is up-to-date with relevant suppliers who deliver quality products in the correct quantity at the right location.

If only Steve knew about Bristlecone’s Spend 360 solution, which delivers end-to-end visibility into critical spend parameters within the procurement function, helps strategize supplier consolidation and enables identification of savings opportunities.

If you can relate to Steve, let us assist you in your spend transformation journey.

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