Spending Analysis & Purchasing Portfolio Model





What are spend analysis and purchasing portfolio model? How to apply them to the supply chain management.


Spend Analysis History

1980s: automotive companies such as Ford and GM started the systematic effort to streamline and rationalize their supply base.


1990s:
Consultants targeting indirect spend commodities
=> FreeMarkets made a reverse strategy for direct materials
=> Ariba & Emptoris offering modules such as RFx, reverse auctions, bid optimization, supplier performance and spend analysis

2001: “Automated spend analysis” application vendors – Zeborg, Verticalnet, Softface

2002: Aentropy, Zycus with slightly different offerings

(Pandit, K. & Marmanis, H. 2018)

Spend Analysis vs Data Warehousing


Data Warehousing involves pulling periodic transactional data from ERP and other business systems into a dedicated database and running analytical reports on that database.
  • ERP systems aren’t designed for the specific needs of a procurement team and tend to have more Finance, HR and/or Manufacturing related views with a low level of flexibility to meet fast-changing business needs

Spend analytic solutions focus using data that is cleansed and categorized specifically for procurement purposes. (Brett Cornell 2017)   

Characteristics of an ideal spend analysis application

I. Data definition and loading (DDL)
2. Data cleansing, structure, and enrichment (DE)
3. Spend data analytics (SA)
4. Knowledgebase management (KB)

(Pandit, K. & Marmanis, H. 2018) (Book: Spend Analysis: The Window Into Strategic Sourcing)


Spend Analysis Types

Tail Spend Analysis

Vendor Spend Analysis

Category Spend Analysis




Item Spend Analysis


Payment Term Spend Analysis

Contract Spend Analysis





Purchasing Portfolio Model


Lean and Agile purchasing portfolio model 


Case study: Marks and Spencer




What types of tools there are for data (purchasing) management? What are the advantages and problems associated with each tool’s usage?

Spend Analysis Tools

Spend Analysis in Excel

Pros:
Inexpensive, easy-to-create data collection tools and charts
No need to extract data from external systems

Cons:
Small-scale data
Require more data cleaning work than actual data analysis
            e.g, data inconsistencies and data formatting issues
Lack timeliness and speed of data updates and refreshes

Microsoft Power BI


Pros:
Provide important metrics in real time, and usually in different kinds of devices
Unify all of the organization’s data with portals and applications

Tableau

Pros:
Emphasize on visualization possibilities for spend data
Provide information based on relevant questions (e.g, Who are the most profitable customers? What do they buy?)

CASE STUDY: Kellogg’s Spend Forecasting

The Kellogg Company is the world’s leading producer of confectionary products such as cereal and crackers in more than 180 countries across 6 continents.

Challenges of Kellogg from Sievo
  • Spend forecasting in excel requires manual work and prone to manual error
  • Inherent knowledge and historical data were not captured without online solution
  • ERP configuration and organizational structure made it challenging to align to a common forecast process
Solutions
  • Process standardization across regions
  • Data integration from different sources
  • Switch from number crunching to value added analysis
  • Offer direct materials PPV calculation (Budget, Actuals and Forecasting)
  • Historical data warehouse for comparison purposes


Global BI Vendors



(Sievo 2018)

References

BPP Learning Media. 2012. CIM Post-grad Diploma: 1 Emerging Themes 2012. BPP Learning Media. London. 

 Brett Cornell 2017. Common Spend Analysis Questions Answered. Jagger. URL: https://Www.Jaggaer.Com/Common-Spend-Analysis-Questions-Answered. Viewed On 6 September 2018.

 Drake, P., Lee, D.M, & Hussain, M. 2013.The lean and agile purchasing portfolio model. Supply Chain Management: An International Journal. Vol. 18.  URL: https://doi.org/10.1108/13598541311293140. Viewed On 6 September 2018.

 Pandit, K. & Marmanis, H. 2018. Spend Analysis: The Window Into Strategic Sourcing. J.Ross Publishing. USA. 

Sievo Oy. Kelloggs Spend Fore casting Case Study. Sievo. URL: https://Cdn2.Hubspot.Net/Hubfs/3445609/Ebooks%20and%20pdfs/Kelloggs%20Spend%20Forecasting%20Case%20Study.Pdf. Viewed On 6 September 2018.

Sievo Oy. Spend Analysis 101: Comprehensive Guide To Procurement Spend Analytics. URL:
https://Sievo.Com/Resources/Spend-Analysis-101#How-To-Do-Spend-Analysis. Viewed On 6 September 2018.














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