Category Archives: Spend Analysis

TAMR – Trying to Tame the Data Deluge!

TAMR may be a relatively new entrant in the stand-alone best-of-breed spend analysis space, having been incorporated back in 2013, but — and this is largely due to the pedigree and experience of its founders and senior team — it’s AI-backed probabilistic machine learning engine is on par with any player out there and it’s spend analytics success at some of the Fortune 500 players that have adopted it is on par with companies that have been doing spend analysis for over a decade.

And while, at first glance, TAMR appears to play in a large spend analytics space, when you zero in, you find that the vast majority of players offering spend analytics are (sourcing) suite providers and ERPs, with few companies focussed only on spend analysis or broader analytics. In fact, upon review of 25 major players, only Analytics 8 Spend View, Rosslyn Analytics, Sieveo, Spend 360, and SpendHQ remain in the stand-alone best-of-breed spend analytics space. Moreover, when you look at larger analytics focussed enterprises with spend analysis offerings, only Opera Solutions and PRGX stand out as most of the suite providers are still offering last generation or acquired solutions.

And even though there are only a few standalone providers and a few suite providers that stand out, TAMR, whose customers are primarily large Fortune 500 / Global 3000 customers, is in a class almost its own. Many of the standalone providers left are focussed on the mid-market and many of the leading analytics companies, like PRGX that focusses on audit recovery, specialize in other areas of analysis. At the end of the day, only Opera addresses the full range of analytics that TAMR does.

TAMR is relatively unique because, with TAMR, you can start with spend analysis and then deploy the same platform throughout the enterprise and marry marketing and social media impact analytics with spend to analyze results and outcomes per dollar of spend on a campaign basis, collect NPD and innovation challenge data and measure the outcomes from that spend on a fine-grained level, and compare investment opportunities against spend reduction opportunities and see which has the better outcome for the enterprise long term.

Like Opera, TAMR is built around advanced probabilistic machine learning algorithms that can work on any kind of data and can identify probably related and duplicate data in any domain. When human experts label a small subset of data elements, related data elements, and duplicate data elements, the algorithms can quickly adapt to the data sets and classification can occur quickly and accurately.

With regards to spend analysis, TAMR has built out a complete interface to their platform in Tableau that allows an analyst to see what has been classified, drill down, and see confidences in addition to standard supplier groupings, spend by category, spend by supplier, etc. The demo drill-down reporting suite is already more extensive than the standard offering from most of the pure-play spend analysis players and the alternate view into mappings and confidences will be more familiar to Tableau users than TAMR‘s built-in UI.

For a deeper dive into the strengths and weaknesses of this new analytics platform, check out the deep dive by the doctor, the prophet, and the maverick over on Spend Matters Pro (Part I).

SpendHQ: Revving Up Visibility Into Your Supply Base

When we last dug into SpendHQ back in 2014 (Part I, Part II, Part III, and Part IV), we noted how this solution has grown from a simple spend reporting tool into a fully featured spend visibility tool that tracks all of your spend over time — by category, department, and user; a category management tool that lets you dive into category spend and filter down to the items of interest, see managed vs unmanaged spend, and track compliance; and, as of the next release later this quarter, track contract meta data and do basic contract lifecycle management.

We also noted that while it was not the most powerful (ad-hoc) spend analysis solution on the market, it was a really great solution for a mid-market company without a (useable) spend analysis or visibility solution that needed to get one up and running quickly, accurately, and usefully (as the solution has more power and capabilities than the average company needs to get great results). Within 4-6 weeks, a company with no spend analysis capability can be up and running 100% and be making useful, informed decisions.

Since then, they have been hard at work improving the contract module; adding a new compliance module in the visibility engine that allows the user to instantly see, for the selected categories, the addressable spend, the managed spend, the compliance rate, and the impact rate; and a brand new vendor detail module that sits on top of their brand new supplier database that contains information on about 20 Million entities that was formed from the fusing of their database of over 7.5 M entities that they built up over 12 years of operation and InsideView’s database of over 15 Million entities. The database has basic vendor information (address, ownership, status, industry, revenue, etc.), insights (on products, services, strengths, etc.), family tree (which contains ownership, subsidiary and sibling information), and financial data. A user can also see all associated contracts in the contract module and click into the details of each one as required.

One of the gems of the platform is the new and improved Category Management module with greatly enhanced savings management capability. On a category basis, this module summarizes spend, managed spend, core list compliance, and pricing accuracy — where each unit purchased is compared against the contract price. This allows an organization to identify maverick spend and overspend during the contract (on every refresh) and address issues as they arise. Within a category, they can drill into each item and see total spend and drill into spend by location and/or buyer, allowing them to zero in on maverick spend and spend that is priced off-contract. The pricing accuracy can drill down from a category to an item if need be and track inaccuracies, undercharges, overcharges, and overall error rate (as well as overall loss).

In addition, the particular interface customization and support for MRO, T&E, shipping and small parcel spend categories, often overlooked “tail spend”, is far superior to an average product and lets a buyer not only figure out what is maverick or going to on-contract suppliers (but being billed at off-contract rates), but how the spend breaks down across base charges, fuel charges, surcharges, and so on. This allows you to drill into the cost drivers of categories and products, and attack the real cost drivers in a strategic engagement. The specific capabilities built for shipments in particular are quite good. The shipment analytics breaks costs down into accessorials, zones, and fuel surcharges so that an organization can see precisely how the spend is breaking down, where the bulk of the charges are, and where any overspend are.

SpendHQ was built for the sourcing organization that wants a best of breed spend analysis and visibility tool and support maintaining and interpreting it, with the option to engage the right expert at the right time in the right categories to maximize savings. Its more of a “savings as a service” offering than the majority of other spend analysis players, and the best results come from augmenting it with ISG’s sourcing expertise that can help identify the right category to source to maximize savings at any given time. It’s a vendor that should definitely be kept on your radar.

For a deeper dive into SpendHQ, keep an eye out for the upcoming in-depth Spend Matters Pro review [membership required] by the doctor and the prophet that will appear later this summer.

Analytics8 SpendView: An Affordable New Mid-Market Spend Analysis Solution

While the analytics marketplace, like the e-Sourcing marketplace, might be well established with most Procurement organizations able to name half a dozen likely providers off the top of their heads and most analyst firms able to name two dozen, the fact remains that less than half of Procurement organizations use real analytics and only the leaders go beyond basic spend reporting to index tracking, what-if savings estimates, or predictive trending.

There are numerous reasons for this lack of adoption, but a big reason was that early analytics solutions often came with a hefty six figure price tag. And that was just for the initial project. Then there were quarterly data warehouse refresh fees, report update fees, maintenance fees, and consulting fees to help interpret the patterns and identify the biggest opportunities. Many early adopters ending up paying seven figures annually, often for a limited return. Why? Because by the time the warehouse was refreshed, the reports run, the analytics done, and the spend opportunities identified, the business demand changed, the market dynamics changed, the prices changed, and the analysis was of limited relevance.

However, as newer solutions, like Spend Radar and BIQ came on the scene, spend analytics became much more affordable, and useable, as analysts could refresh data on monthly, weekly, and daily basis and obtain the solution in the five figure range. Plus, they had a fair amount of control over what data was loaded, what cubes were built, and what reports were available — with the ability to generate their own cubes and reports, sometimes on the fly with solutions like BIQ. Analytics stated to take off. And so did the e-Sourcing suite providers that gobbled them up. As a result, there are now few analytics solutions that are affordable by the mid-market and fewer still targetted there.

This is where Analytics8 SpendView comes in, built on over a decade of big data analytics experience and over 15 years of spend analytics experience by the solution designers, SpendView is a new analytics offering designed to bring modern easy-to-use spend analysis capability to any organization with over 10M in annual spend at a price tag it can afford, but good enough to satisfy even large multi-nationals with unique needs. What kind of price tag? A price tag that starts in the low five figures for a perpetual license (with low annual maintenance fees). (This is a price tag that can allow an average mid-market organization to obtain at least a 10X ROI every year.)

The new Analytics8 SpendView suite is a set of 4 integrated modules that allows an analyst to family and normalize suppliers, identify preferred and manage suppliers, categorize spend, and create and drill into spend reports. The vendor normalization module allows the analyst reviews all supplier records and maps all duplicates to one master record. It’s got a very simple interface, search, filter, select, and associate with a single click. The supplier assignment allows the analyst can select all unmanaged or un-preferred vendors, choose whether or not to manage or prefer them, assign suppliers to parents, and quickly see what percentage of spend is with preferred and/or managed suppliers. The categorization module allows the analyst to categorize transactions to categories by defining rules. The interface, currently supplier or description driven (but which should also be department and / or GL-code driven), allows a user to drill into uncategorized transactions, filter for similarity, and define rules that map groups of transactions to categorized spend. The rule is added in numeric order, but can be re-ordered as needed. And the reporting module ontains a set of canned widget-based drill down reports that allow an analyst to drill down into spend data, by supplier, department, category, geography, or other attribute and extract a report on the data, and only the data, they want to see it — which could be invoice data, payment data, or purchase order data. It’s built on QlikView and has the full capabilities thereof.

It’s power and usefulness to the average organization is more-or-less on par with its more established primary competitors — which SI sees as Rosslyn Analytics, Sievo, Spend 360, and SpendHQ (especially since BIQ and Spend Radar, named above, were among the acquisitions of the previous generation of best-of-breed stand alone analytics providers) — and it is a quick entry into spend analytics for any enterprise already using QlikView for other analytics needs.

SI recommends you check out the deep dive on Analytics8 SpendView by the doctor and the prophet over on Spend Matters Pro [membership required] that goes deep into strengths and weaknesses, corporate SWOT analysis, and the market landscape. (Part I, Part II and Part III now available) You won’t be disappointed.

Why Does Tail Spend Take Your Head for a Spin?

In our last post on why you shouldn’t let tail spend take you for a tail spin, we noted that tail spend could be keeping an additional 3% of revenue from hitting the bottom line (and, depending on your industry, and its margins, reducing your profit potential by up to 50%) and severely impacting your organization’s profit potential (and operating budget, which Procurement rarely has enough of).

We told you the answer to that was Sourcing Innovation’s new white paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required), sponsored by Claritum, because, unlike most papers, it tells you not only what tail spend is, and why not addressing it is costing your organization more than you know, but how to do something about it.

And it’s not just the typical solutions that the paper throws at you, which include:

  • tacking it on to managed spend,
  • using a GPO,
  • e-Catalogs, and
  • optimization-backed sourcing platforms

because:

  • strategic suppliers want to supply high-volume or high-value products, not low-volume or low-value products, and certainly not as a condition for supplying strategic categories
  • GPO pricing is only as strong as their constituents and if the majority of the constituents don’t want the products or services that constitute your organization’s tail spend, their prices won’t be much better
  • tail spend is too unpredictable to be managed through a single catalog, especially since only a portion of tail spend should generally be made as catalog spot-buys
  • as optimization-backed sourcing platforms have the power to source much of tail spend, but don’t provide the guidance, and the strategy is often the most important thing

That’s why the paper provides not a single strategy, but a process for selecting the right strategy for each type of tail spend, as well as guidance on how to choose a platform to support it.

So download Sourcing Innovation’s new white paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required), sponsored by Claritum, and get your tail spend management on the right track.

Don’t Let Tail Spend Take You For a Tail-Spin!

Download Sourcing Innovation’s new white paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required) today (sponsored by Claritum) and find out how tail spend could be keeping an additional 3% of revenue from hitting the bottom line (and, depending on your industry, and its margins, reducing your profit potential by up to 50%).

The first thing that the paper does is define just what tail-spend is. It’s more than just the “tactical” (or “nuisance”) spend in the lower-left quadrant of the famous 2*2 Krajlic matrix, which describes the traditional strategy of “purchasing management” to manage non-critical abundant supply that can be sourced locally in a de-centralized manner for maximum efficiency. And it’s less than any transaction less than $200,000 which is how Accenture describes tail spend.

Tail spend is essentially that spend that shouldn’t be put through a rigorous sourcing project, because the ROI that would be obtained is not enough to warrant the effort. If the ROI is not at least 3x, the spend just needs to be appropriately managed. Maybe that’s a low bid auction. Maybe it’s the cheapest product or service in a vetted catalog. Maybe it’s the preferred item from a catalog (or even strategic) supplier to increase total spend and negotiate additional volume based discounts.

It’s not leaving it up to whomever to do whatever whenever with whomever they like. When tail spend is not managed, the following can happen:

  • rebates and discounts can be lost
    when contracted volumes are not met
  • process costs can increase
    as tail spend invoices, often submitted through fax and e-mail, continue to increaseas tail spend will inevitably expand over time (and it will increase with no accompanying or referenced purchase order)
  • liability risk increases
    when service vendors without appropriate insurance are contracted
  • reputational risk increases
    when junior buyers buy from a supplier with a poor CSR record
  • supply risk increase
    when junior buyers buy from unstable suppliers
  • non-compliance risk increases
    when mandated MWVDBE vendors or fair-trade vendors are bypassed
  • (personnel) fraud risk increases
    as buyers can put charges on p-Cards with little or no documentation (and submit the same receipt 3 times over 6 months)

In other words, tail spend needs to be managed, but it can’t be managed until you understand what it is and how it should be dealt with. This is where Sourcing Innovation’s new paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required) today (sponsored by Claritum) comes in. It will help you understand what tail spend is, why it is important, how you can manage it, and the value that can be extracted from good tail spend management.