microforum spend analytics
TRANSCRIPT
SAP ANALYTICSmicroforum 3/21
© 2011 SAP AG. All rights reserved. 2
Increasing Costs & Reaction to Risk
75% of CFOs under pressure to increase savings and decrease risk (Aberdeen Group, 2010)
Less than 40% of finance professionals are currently enriching their spend data with risk information, making savings erosion an even more critical problem (Aberdeen Group, 2010)
Global Trends
Shifting CPO Focus
70% of CPOs expressed a need to focus on Competitive Insight, Risk, Compliance, and Supplier Management vs. Transaction Management (CPO Research)
86% of purchasing and finance professionals rate Spend Analysis as a high value function (Aberdeen Group, 2010)
Procurement is taking on a strategic role to deliver value and bottom line savings
Limited Spend Visibility
34% of enterprises still do not have an automated means to collect and aggregate spend data from various sources (G/L, AP, ERP, etc.) to achieve timely, accurate and complete information (Aberdeen Group, 2010)
Inadequate or ‘too late’ spend insights
Growing Need for Reliable Data
56% of ISM members rate data reliability as the number one challenge in strategic sourcing (Institute of Supply Management, 2009)
62% of all enterprises are still using manual means to classify and cleanse spend data (Aberdeen Group, 2010)
US Department of Defense reports that 40% of excess costs were the result of unreliable data
Customers want an integrated, repeatable process to ensure reliable analyses
© 2011 SAP AG. All rights reserved. 3
Identify Supplier
Risks
Supplier Risk
Analysis
Collaborate Effectively With Stakeholders On Cost Savings & Supply Continuity InitiativesVisibility to enterprise wide spending and supply base enables sourcing strategies that deliver measurable results to key stakeholders such as Finance and Supply Chain organizations.
Analyze Supply Base
Identify Savings
Supply Plan
Establish Contracts
Track Supplier Performance
Data Standardization and Enrichment
Trigger Sourcing Actions
Actionable Alerts
One Solution , Multiple Deployment Options
Cost SavingsAccelerate Cost Savings,
Reduce Supplier RiskIT Cost Savings
Procurement Supply ChainSupply
Continuity
CIOFinance
Sourcing Initiatives
Negotiate Savings
Savings Targets
Monitor Contract Utilization
Budget vs Actual
Identify Alternate Suppliers
Measure Actual Savings
Cost To Mitigate Risk
1
2
1. Identify and Act on Savings
2. Identify and Act on Supplier Risk
Budgets
© 2011 SAP AG. All rights reserved. 4
Analytics for Everyone, Everywhere, AnytimeO
PE
RA
TIO
NS
l H
R l
FIN
AN
CE
I
IT I
SA
LES
l M
AR
KE
TIN
G
MANUFACTURING l RETAIL l HEALTHCARE l BANKING l UTILITIES l TELCO I PUBLIC SECTOR
How and whydid it happen?
What is the risk if it does/doesn’t happen?
How do you prevent / ensure it happens again?
Whathappened?
What is happening now?
What willhappen?
Tom Davenport International Institute for Analytics
© 2011 SAP AG. All rights reserved. 5
Analytics for Procurement
Decision Support for the Procurement
Function
Data Reliability
Supplier Perfor-mance
Analytics for ProcurementAnalytic Applications
Supplier Risk
Spend Analytics
© 2011 SAP AG. All rights reserved. 6
SAP SourcingSAP
Contract Lifecycle Mgmt
SAP SRM, SAP ERP & SAP Cart Approval
SAP Invoice Mgmt by OpenText
Supplier Connectivity via SUS and Crossgate / Hubwoo*
SAP Spend Performance Management
SAP Data Enrichment & Classification
SAP Procurement PortfolioIntegrated Solutions that Support the Process
Spend Analytics
Supplier Management
Sourcing Contract Management
Operational Procurement
Invoice Management
SAP Supplier Lifecycle Mgmt
New!
SAP Sourcing OnDemand
© 2011 SAP AG. All rights reserved. 7
Information is key for procurement performance
If I can take the data from my spend analysis tool and understand where it comes from and tie it to performance, then I can easily address the opportunities to drive savings and reduce spend.”
CPO, Large North American Insurance Company
“
….and this requires
Enterprise wide visibility to spend and buying patterns
Complete, accurate, trustworthy data
Powerful information at the hands of the business user
To meet strategic business goals, procurement needs to…
Drive improvement in sourcing strategies
Effectively manage savings opportunities
Develop healthy supplier relationships
Improve compliance
© 2011 SAP AG. All rights reserved. 8
Data Enrichment and Classification OnDemandSolution 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.
How can I aggregate all my spend data in one place and be sure it’s
accurate?
Manage accuracy and completeness of company-wide spend data from multiple sources
Gather data from SAP and non-SAP sources
Data Collection
My supplier identities are obscured due to poor
data quality and lack of content!
Increase leverage opportunities with normalized suppliers
Improve decision-making with enriched content
Enrichment
How do I know what I’m really buying?
Increase visibility to both direct and indirect spend
Improve understanding of spend activity with a consistent structure for goods and services
Classification
How can I add my own knowledge into the
process?
Incorporate subject matter expertise with the Revision tool
Apply changes to the current cycle and future cycles for continuous improvement
Revision
© 2011 SAP AG. All rights reserved. 9
The SAP Global Business Compendium
Location (Address, ZIP, Country etc)
Linkage (Parent Company etc)
Line-of-Business (Standard Industrial Classification Code incl. function)
Diversity (women owned, SDB, minorities etc)
Sanctions (OFAC)
Business Info (employees, sales, TIN, non-US Tax number etc)
Financial & Risk Indicators (Filings, suits, liens, bankruptcy etc)
Cortera Risk (via Endorsed Business Solution: risk segment, payment score, trend etc)
Contact Info (CEO, Officers, Phone numbers, email addresses etc)
Additional Location Information (Mail, Fax etc)
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Validation and EnrichmentImproves leverage and decision-making
Supplier Validated Legal Ownership Industry Spend
GrafixParc Industrial, St. Marie QC
GraphCorr LLC (Grafix)433 2nd Ave, Sainte-Marie QC G6E 3C6 CA
RockTenn Company Packaging $75,000
SmurfitPO Box 93095, Chicago, 60673
Smurfit-Stone Container Corp150 N Michigan Ave, Chicago, IL 60673 US
RockTenn Company Packaging $150,000
Stone Container150 N Michigan, IL 60673
Smurfit-Stone Container Corp150 N Michigan Ave, Chicago, IL 60673 US
RockTenn Company Packaging $200,000
Verizon295 Maple Ave, Basking Ridge NJ
Verizon Business1 Verizon Way, Basking Ridge NJ 07920 US
Verizon Communications Telecom $250,000
Verizon WRLS#12RKNJ 7920 USA
Cellco Partnership (Verizon Wireless)1 Verizon Way, Basking Ridge NJ 07920 US
Verizon Communications Telecom $50,000
Traditional SAP
Accelerate Savings
RockTenn $425,000
Verizon Comm.
$300,000
Employees: 10,400
Sales (mil): $3,000
Risk, etc.
Employees: 194,400
Sales (mil): $106,565
Risk, etc.
Grafix $75,000
Verizon WRLS
$50,000
Smurfit $150,000
Stone Con-tainer
$200,000
Verizon $250,000
© 2011 SAP AG. All rights reserved. 11
The SAP Transaction Knowledge BaseIndustry Wide Coverage
20,000+ lines of businesses
20+ years of history
50+ industries
$350+ billion in spend
20+ key variables
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Methods of Spend Classification
Item Description ‘Cataloging’
Not all items have valid descriptions Assumes repetitive similarity in description Forces micro vs. strategic focus
Accounting
Limited depth Frequently misapplied due to budgets Indicates why not what was purchased
Industry ‘Vendor Coding’(SIC, NAICS, UNSPSC)
Not organized for sourcing – resource based Too generalized for in-depth sourcing Assumes a supplier sells one thing
SAP Method
Focuses on what was purchased by analyzing multiple variables on the transaction
Improves leverage with a more complete and accurate understanding of spend
Supports strategic sourcing
© 2011 SAP AG. All rights reserved. 13
AccountApproach
ItemApproach
SupplierApproach
Advertising130000
Freight38000
Unknown $475,000
Unknown $415,000
Office Sup. 72000 Utilities $285,000
Cell Phones $72,000
Displays $513,000
Packaging643000
Telecom357000
Spend ClassificationImproves 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
Accelerate Savings
Multi-variate
Approach
Displays $475,000
Telecom PTP $285,000
Graphic Design $130,000
Cell Phones $72,000
Freight $38,000
© 2011 SAP AG. All rights reserved. 14
How does Revision help? Process support vs. Excel spreadsheets
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 facilitate review
Example1. 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 filters on “freight provision” and selects the transactions to reclassify
3. Updated results are applied for continuous improvement
x
x
x
2
1
3
© 2011 SAP AG. All rights reserved. 15
Solution Summary: SAP BusinessObjects Spend Performance Management
GL
P-Cards T&E
BI
ERP
Data Enrichment & Classification
* Note: The Data Enrichment & Classification is a separately priced solution.
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
Rapidly identify savings opportunities Find and act on savings potential Pro-actively monitor contract compliance
Reduce supplier risk Pin-point supplier risks and supply concentration Find and act on qualified alternate suppliers
Maximize Savings – Minimize Supplier Risk
© 2011 SAP AG. All rights reserved. 16
3rd Party Risk Rating
3rd PartyCredit Rating
3rd Party Legal Rating
Government/ Public data
Newsfeeds
Integrated Data Management Enables Accurate Spend Visibility
Global Business Compendium
TransactionalKnowledge Base
Phase 1: Supplier Data Standardization & Enrichment
Phase 2: Spend Data Classification
SAP SRM Non-SAPSpend data
ERPP-Card/T&E
Data IntegrationData Integration
Spend Data Validation, Enrichment and ClassificationSpend Data Validation, Enrichment and Classification
Spend and Supplier Risk AnalysisSpend and Supplier Risk Analysis
SAP extractors (ECC, SRM)Data Integrator ETL license for non-SAP systemsSupport to bring in 3rd party data feeds
SAP extractors (ECC, SRM)Data Integrator ETL license for non-SAP systemsSupport to bring in 3rd party data feeds
Global coverage
1.6T transactions in knowledge base
200+ external data sources
Supplier Financial/Risk data
Diversity/Government watch lists
Global coverage
1.6T transactions in knowledge base
200+ external data sources
Supplier Financial/Risk data
Diversity/Government watch lists
Over 130 pre-built spend analysis modelsOut of the box support for supplier risk analysisSet and Track Performance Targets with
Spend Advisor Comprehensive set of Analytics functionalityBriefing Book supports stakeholder collaboration
Over 130 pre-built spend analysis modelsOut of the box support for supplier risk analysisSet and Track Performance Targets with
Spend Advisor Comprehensive set of Analytics functionalityBriefing Book supports stakeholder collaboration
© 2011 SAP AG. All rights reserved. 17
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
© 2011 SAP AG. All rights reserved. 18
Critical Supplier Information Enables Proactive Insights Into Impact Of Supplier Risk
Jump directly from SPM to Cortera website for up to date Supplier report
© 2011 SAP AG. All rights reserved. 19
Cortera Risk Data in DEC
Appended during DEC processing
Attributes available within SPM for dashboards and supplier views include
Risk SegmentPayment Score RiskPayment Rating TrendReported Payment RelationshipsPercent Past DueDays Beyond Terms (DBT)Industry DBT BenchmarkRisk FlagsBankruptcy CountOperations News CountLiens Count
Pull detailed Cortera Supplier Report on demand
© 2011 SAP AG. All rights reserved. 20
Global Personal Products CompanyChallenges
Custom BW Reporting application developed in 2004 Based on Accounts Payable information only Rule based logic for spend classification
Implemented SRM/EBP solution for indirect procurement between 2007 and 2010
Classification of Indirect Spend has being a challenge Users not always classify spend properly (EBP) Rule engine data maintenance is resource consuming (BW)
IT spending to many resources maintaining and enhancing existing application
Procurement dependency on a few “Power Users” to generate information for the organization
Areas of Opportunity
Increase utilization Easy of Use Self Service Capabilities Better classification of spend
Provide context information Commodity prices Contract and Purchase Order data T & E
Better analytical capabilities From Corporate summary to document level information Tool to empower users to find and report on the data they
need
© 2011 SAP AG. All rights reserved. 21
Global Personal Products CompanyResults
Best Practices
Data is the key component Have a good understanding of the complexity of your
Transactional & Master Data Data validation is key and it can take a lot of effort and time Define Spend Hierarchies that facilitate sourcing initiatives
Involve your basis/technical group early in the implementation Make sure that the Java stack is properly configured/tuned for
the expected workload in production. Ensure a process is in place to deploy Adobe Flash.
Define an appropriate data refresh frequency
Key Learnings
SPM solution well designed to address spend analytics business needs
User adoption requires good data quality and modern/intuitive user interface Spend is classified properly Vendors are classified properly per the role they have
To keep up with external innovation you need to pick a solution from a vendor that reinvest in enhancing existing tools
© 2011 SAP AG. All rights reserved. 22
Global Consumer Packaged Goods CompanyChallenges – competing on Analytics
© 2011 SAP AG. All rights reserved. 23
Global Consumer Packaged Goods CompanyResults
Business Case 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
Leverage Opportunities
© 2011 SAP AG. All rights reserved. 24
SAP BusinessObjects BI Platform - Universe IntegrationAdvanced Graphical Analyses and iPad Integration
SAP BusinessObjects Spend Performance
Management
Flex UI
SAP NetWeaver BW
SAP BusinessObjects
Analysis
SAP BusinessObjects Web Intelligence
SAP BusinessObjects
BI Platform
SAP BusinessObjects
Explorer
iPad Client (SAP BusinessObjects
Explorer )
SDN Article on SPM/BO Universe Integration
SDN Blog on SPM Mobile Scenarios
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Spend Analysis on iPad, Explorer View
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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
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SAP Operational Performance Management Elite TrainingApr 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 as well as a vertical integration scenario New Features for What-If-Analyses and Risk Management Integration in SAP BusinessObjects Supply Chain
Performance Managemement 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
REGISTERhttp://twitter.com/#!/search?q=%23OPMElite
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