21 oct 2010 northumbria event north_cips_20101021
DESCRIPTION
spend analysisTRANSCRIPT
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Oct 2010 Duncan Olive CIPS Spend Analysis
Spend Analysis
CIPS Northumbria Branch
21st October 2010
Duncan OliveCommercial Efficiency Manager, NHS Business Services Authority
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Oct 2010 Duncan Olive CIPS Spend Analysis
Spend Analysis What is it?
the process of collecting, cleansing, enriching, classifying and analysing expenditure data with the purpose of reducing procurement costs, improving efficiency and monitoring compliance
DataCollection
DataEnrichment
DataCleansing
DataClassification
DataAnalysis
Who procured it?What was procured?
When and how often did we procure it?With whom did we procured it?
How did we procure it?How much did we pay for it?
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Oct 2010 Duncan Olive CIPS Spend Analysis
Spend Analysis Why?
Cashable Savings Process Efficiencies Maximise Leverage Spend under Management Supplier Rationalisation Compliance/Reduce Maverick Spend Strategic Sourcing Programme
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Oct 2010 Duncan Olive CIPS Spend Analysis
Visibility is King
Cost Centre
ServiceArea
Service
Organ-sation
WhoDimension
Class L..
Class L2
Class L1
Classi-fication
What
Suppliers
Where
PostCode
Local
Sub-Region
Region
National
FootPrint
Where
Month
Qtr
Year
Period
When
Volume
Spend
Values
Metrics
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Oct 2010 Duncan Olive CIPS Spend Analysis
A Strategic Base Line
Who procured it?Organisation Structure-Chart of Accounts
What was procured?Nominal Ledger Hierarchy/ Procurement Taxonomy
When and how often did we procure it?PO/Invoice Transactions
With whom did we procure it from?Creditors File
How did we procure it?Contracts Register
How much did we pay for it?Transactions
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Oct 2010 Duncan Olive CIPS Spend Analysis
there are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know. Donald Rumsfeld, 2002
Starting Point
Sophisticated Financial Management SystemsNominal Taxonomy Orientated to Managing FundsChart of Accounts out of date (Business Restructures)Limited Reporting and Analysis ToolsEvolving Contract RegistersDisparate Data Sources, partial data setsBusiness Intelligence (Suppliers, Procurement Taxonomies)Accounting Practices and BehavioursData Quality
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Oct 2010 Duncan Olive CIPS Spend Analysis
Investment JustificationSelling Spend Analysis
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Oct 2010 Duncan Olive CIPS Spend Analysis
Business Case Outcome Focused
Service
Service
Service
Service
Service
Finance
3rd Party Spend
Organisation
HRWhy IT
Finance
Outcome
WhatIncrease % of Procurement Spend under Management current %?
Market Competitiveness/Value for Money current %?Supplier Rationalisation, Compliance
Realise Cost Savings, Reduce Supply Risks, Manage Markets
VFM Functions: Cost & Efficiency, Quality, Performance, Customer Satisfaction
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Oct 2010 Duncan Olive CIPS Spend Analysis
Business Case Scope
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Oct 2010 Duncan Olive CIPS Spend Analysis
Strategic
Risk
Value
Bottleneck
Leverage
Benefit Realisation
Be realistic Targeted approach Quick wins, Tactical, Strategic goals Supply Cost Savings, Process Efficiencies, Compliance,
Supplier Risk Management, Take account of culture of the Organisation
Spend Analysis Investment Realisation
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Oct 2010 Duncan Olive CIPS Spend Analysis
Investing to Succeed
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Oct 2010 Duncan Olive CIPS Spend Analysis
Introducing Change
Governance Culture, Behaviours and Practices New Technology Supply Model Procedures Organisation
Quick Wins, Medium Term Goals Challenge, Options Appraisal, Implementation, Measurement
Communication, Transparency, Ownership, Participation
>Change Management
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Oct 2010 Duncan Olive CIPS Spend Analysis
Review 1
Review 2
Review 3
Review
Contracting Fast tracks
Contracting Programme
Delivery
Improvement
FinancialPractice
ProcurementPractice
Training
Data
Extraction
Cashable SavingsVFM Contracts
Improved Supplier Perf.Reduced Supply Risks
Reduced Compliance Risks
Standardised processesStandardised systems
Improved Capacity MgmtImproved Capability
Improved ProductivityReduced RisksIntelligence
Policy&Procedure
Data
Cleansing
Data
Classification
Data
Analysis
Target Programm
e
Strategic Approach
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Oct 2010 Duncan Olive CIPS Spend Analysis
Stakeholder Engagement
Leadership Sponsorship Project Management Business Practitioners Business Need, Data Collection Finance Budgets/Savings Realisation Commercial Market Options, Procurement Approach
IT/Applications Specialist Data Extraction HR Workforce Legal
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Oct 2010 Duncan Olive CIPS Spend Analysis
Organisational SupportProject Board
Review 1
Review 2
Review 3
Review
Procurement Action Group
Technical
Finance
Legal/HR
Commercial
Procurement Action Group
Procurement Action Group
Procurement Action Group
Policy & Practice
3rd PartyCurrent
ProcurementModel
FutureProcurement
Model
Project Management
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Oct 2010 Duncan Olive CIPS Spend Analysis
Project Methodology
Project Board
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Oct 2010 Duncan Olive CIPS Spend Analysis
Establish PAG
Data Collection
Data Analysis
Current ModelOptions Appraisal
Future ModelOptions Appraisal
BenchmarkingMarket Testing
PAG DiscoveryWorkshop
PAG Consultation
Board Approval
PAG Consultation
Board Approval
Board Update
Board Update
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Oct 2010 Duncan Olive CIPS Spend Analysis
Data Collection
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Oct 2010 Duncan Olive CIPS Spend Analysis
TransactionsInvoice Lines
PO Lines
WhereCreditors
WhoCost Centre
COAHierarchywhat
Nominal Hierarchy
whatProcurementTaxonomy
HowContractRegister Supplier
MarketIntel
Core Data & MetricsPostal Data
Net Invoice Line Value
VAT Invoice Line Value
Transaction Line Count
Invoice Document Count
PO Document Count
Supplier Count
Contract Count
Minimum Full Years Spend
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Oct 2010 Duncan Olive CIPS Spend Analysis
One Model does not fit all.Category specific data sources
TravelProf.
Services Postal
OfficeSupplies
ICTTransactionsInvoice Lines
PO Lines
UtilitiesVehicleUsage
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Oct 2010 Duncan Olive CIPS Spend Analysis
Data Cleansing/NormalisationData Mapping/Classification
Data Enrichment
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Oct 2010 Duncan Olive CIPS Spend Analysis
Data quality is poor Initially Intensive Remove pay related spend
Iterative process Express tolerances for accuracy
Invest in accuracy sufficient to achieve the required ROI
Improve use of keys within core application systems Company ID, VAT Reg No. DUNS, Charity No. Product IDs, Contract IDs General Application Data Housekeeping
Increase transaction full lifecycle throughput - procure to pay error reduction
Data Cleansing/Normalisation
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Oct 2010 Duncan Olive CIPS Spend Analysis
Classification Taxonomy CPV, NSV, SIC, UNSPSC, PROCLASS, E-CLASS, PSPES
Ledger Taxonomy vs Supplier vs Spend Classification Sector Classification (influencable/Non Influencable Spend)
Public Bodies, Employee Payments Sector Visibility
Sole Traders, Charities, Voluntary Orgs, SME use of Factoring Orgs. Classify Top Down until meaningful Rule Based/Fuzzy Logic Mapping Buy in Supplier Classification Data Challenging Categories
Temp Staff / Interim Staff Legal Consultants
Eye Balling /Professional Interpretation
Align Nominal Ledger and Procurement Taxonomy !
Data Mapping/Classification
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Oct 2010 Duncan Olive CIPS Spend Analysis
Enrichment
Organisation Structures Geographic Contracts Category Specific Data
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Oct 2010 Duncan Olive CIPS Spend Analysis
Spend Analysis Toolkit
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Oct 2010 Duncan Olive CIPS Spend Analysis
Spend Analysis Tool Characteristics
Define, Integrate Multiple Data Structure Schemas, Populate Model, Error HandlingRapid DevelopmentRepeatable
Data Modelling
GraphicalAdhoc, Production ReportsMulti DimensionalSlice and Dice between dimensionsDrill Down/Drill Up
Data AnalysisSpend Analysis
Classification, EnrichmentData MappingManagement
Validation, Normalisation, CorrectionData CleansingData
Accept Data in multiple FormatsStore Large Volumes of Data
Data Collection
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Oct 2010 Duncan Olive CIPS Spend Analysis
Delivery Options
Outsource Spend Analysis Service
In-House Technology (Scalability)
RDBMS Oracle, SQL Server, Access Business Intelligence Tools MS Access Excel
Have you the Skills IT Skills Data Analyst Commercial (Market)
Buy in Data Supplier Cleansing, Normalisation, Classification
Obtain data from your supply base (category specific data)
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Oct 2010 Duncan Olive CIPS Spend Analysis
Example IBM Cognos
Market Leading Business Intelligence Software ProviderScalable Desktop (7.0) to Enterprise (8.0)Easy to use - Limited specialist ICT skill needed Hugh number crunching capabilityRapid development and deploymentText, Graphical, Spatial presentationModel data from disparate systemsMulti-dimensional analysis
Who, Where, What, When, HowAdopted by OGC/BS
Time
Organ-isation
Spend
Suppliers
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Oct 2010 Duncan Olive CIPS Spend Analysis
Measuring Impact
Needs to be a repeatable process
Incorporated into Business as Usual processes
Evolve into Business Intelligence
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Oct 2010 Duncan Olive CIPS Spend Analysis
Application to Support Wider Outcomes
Sustainability Economic Development Carbon Targets
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Oct 2010 Duncan Olive CIPS Spend Analysis
Why Do Spend Analysis Projects Fail?
Lack of Leadership Lack of Sponsorship Unrealistic Expectations/Unclear goals Data quality Wrong Tools Lack of Skills/Resource Support Change management not addressed
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Oct 2010 Duncan Olive CIPS Spend Analysis
the setting of realistic efficiency targets the ability to capture savingsa workflow for realising savings potentiala new comprehensive contracts programmea business case for additional resources on an invest to save basa view of local business and the potential contracting impactan opportunity for improved budget managementthe basis for a considered approach to E-Procurementan opportunity for improved supplier database managementreporting of meaningful data for collaborative contracting possibilitiesa model that can be refreshed in future years
Feedback Received?
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Oct 2010 Duncan Olive CIPS Spend Analysis
Does it work
Spend visibility 40 plus organisations Industry Case Studies Influenced technology adoption Carried out Strategic and Tactical Reviews during 2008-
09 realising efficiencies in excess of 1m 2009-10 across 12m in 5 categories
Developed Strategic Category Approach
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Oct 2010 Duncan Olive CIPS Spend Analysis
Some Points in Summary Spend Analysis is invaluable to improvements within both Demand and
Supply Management Spend Analysis can be a significant investment
Time, Skills, Technology, Human and Financial resources Scale investment based upon the return
Be sure of your business objectives and outcomes before initiating Spend Analysis is an enabler not the Outcome
Incorporate into a Change Programme Spend Analysis is not a one off project
it needs to be incorporated into Business as Usual to evolve into Business Intelligence
Introduce greater alignment between Nominal Ledger and Procurement Taxonomy
Classification will never be 100%, it needs interpretation and tolerances are necessary
Improve collection and management of Supplier Intel within core system
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Oct 2010 Duncan Olive CIPS Spend Analysis
Questions