Category Archives: Spend Analysis

A New Year is Upon Us – Do You Have Your SpendHQ Ready To Go? Part III

In the first two parts of this series, we introduced you to SpendHQ, one of the strongest, but yet most overlooked, players in the spend visibility and analysis space from a software and services solution viewpoint. As noted, the SpendHQ solution, which currently consists of a spend visibility and category management module that will soon be accompanied by a contract (metadata) management module, is a good starting point for a company which needs to get up and running with spend visibility quickly.

The category management product has five main components: dashboard, details, order analytics, pricing, and savings.

The dashboard summarizes the spend from spend visibility, the managed spend, the core list compliance, and the pricing accuracy as well as metrics related to company, supplier, item, buyer, location, and budget center, among other identifiers. If the user selects pricing tier, she will see the average order size, total orders, and wholesale spend for the relevant pricing tier. From the dashboard, the user can quickly drill into the top level categories. In addition to the total spend trend graph for the default time period, the user can also see the maverick spend by supplier, ordered by the suppliers who receive the most maverick spend. Or, the user can drill into the metrics.

The details section is designed to allow a user to quickly drill into a category and get the relevant subcategory and item, buyer, or location information related to that category. On the item screen, for example, the buyer can quickly see the total spend, the total unit, the most recent price, the price trend, MSRP (if known), and the date of last purchase.

The order analytics section is designed to allow a user to drill into the order patterns for a category or subcategory and see the average order size and how it changes over time. A user can drill into the components of an average order or into the detail of all orders in the time period.

The pricing section is designed to allow a user to analyze the price paid for an item, or set of items, over time, relative to the price that should be paid. The user can see the total overcharges and undercharges for the time period in question, the net result, and the overall pricing accuracy. This allows a buyer to not only figure out where overcharges are rampant, but where it makes sense to go after them. If the item, or category, also had a significant number of undercharges (because the retail price went down during the time period and the supplier charged retail instead of contract throughout the time period) and the net result is that the net amount lost was small, it might not be a good idea to go after the supplier on those items as they will insist the undercharges be recognized (and be applied against a category where they rampantly overcharged you).

The savings section shows the user how the organization fared on a category, subcategory, or item over time relative to a (set of) baseline price(s) for the category from the comparative time period (before the current prices were put in place).

The details component is broken down into overview, item detail, buyer detail, and location detail subcomponents, allowing a user to see, for the category or categories of interest, the relative spends and then dive in by item, buyer, or location. In the item detail, the buyer can drill down into full purchase history by buyer if she desires.

All-in-all, the SpendHQ solution gives the user great visibility into their category spend, and the drivers of that spend (be it a department, location, or rogue set of buyers) and helps the organization manage that spend.

A New Year is Upon Us – Do You Have Your SpendHQ Ready To Go? Part II

Yesterday we introduced you to SpendHQ, one of the strongest players in the spend visibility and analysis space from a software and services solution viewpoint. Unlike most spend analysis solutions that were designed and built by sourcing solution providers, SpendHQ was designed by sourcing and spend experts and implemented by a development team experienced in the implementation, and integration, of sourcing solutions.

In today’s post we are going to dive into the visibility module. The goal of the visibility module is to help the sourcing team, and the C-suite, get a handle on what the organization is spending over time (by quarter, month, or year — depending on the amount, and granularity, of the data available). The SpendHQ solution does this by pre-constructing a spend cube tailored to organizational needs and providing an interface that can drill into any level of detail, on the dimensions of relevance, and filter out any data items of interest, or non-interest, along any dimension. The solution then presents the data in a very easy to understand graphical display that is designed to be focussed on the most relevant items of interest, and only the most relevant items of interest. In the SpendHQ solution, no screen has more than three graphs. The designers, which have experience with a number of sourcing and spend products and associated dashboards, have found that any more than three graphs on a screen not only clutters the UI, but often distracts the decision makers from the most relevant data (which leads to more time spent analyzing the wrong data and less time focussed on what really matters from a savings perspective). This does not limit the usefulness of the product in any way as another key feature is that every screen tells you exactly where you are in a drill down as well as what filters have been applied. Furthermore, a user can always jump back up to any level or down to the bottom (using a pre-defined saved filter) and every piece of data is selectable and filterable dynamically. (So, even though the user only gets one cube, the user can extract any subset of that cube and view it along the dimensions of the user’s choice.) Plus, the current view, and all of the data behind it, can always be extracted to an Excel spreadsheet at any time (which makes it easy for the user to build reports, verify analysis, and load it into the supply management software of their choice for subsequent event execution and tracking).

The visibility product has six main components: home (the spend-trend dashboard), details, compare, compliance, reports, and tools.

The spend-trend home dashboard displays a spend trend graph for the default (but changeable) date range by month, broken down by category, the total spend, and the total number of vendors who contributed to that spend. From here, a user can drill into the relevant categories. Selecting a category brings up a screen with the spend for the category, broken into sub-categories.

The details section breaks the spending down by category and vendor, allowing the user to see trends by selected categories and subcategories, and, if desired, restrict that view to a select group of vendors.

The compliance section allows the user to quickly determine how much spend is being managed relative to the total organizational spend and how much of that managed spend is compliant. This allows the organization to not only determine the compliance rate, but the impact rate — which is the amount of compliant total addressable spend. This section is broken down into an overview section, a managed spend section, an unmanaged spend section, and a Rogue’s Gallery (TM) that summarizes the top unmanaged categories and the top non-compliant subcategories so that a spend manager can quickly zero-in on the biggest offenders with respect to compliance, and generate a list of the top locations, departments, and buyers.

The reports section allows the buyer to quickly access standard and pre-defined reports and the tools section allows the buyer to define their configuration options.

One of the unique features of the application is the Power Filter that allows a user to quickly select the spend range, dimensions of interest, and the relevant items as well as filter out the sub-dimensions and even line items of non-interest. With this tool, even the most novice of users can quickly slice and dice out just the data of interest to them. The user can save any and all filters of interest and (re) apply them at any time.

It’s not only a powerful spend visibility solution, but a very useable one. If your company is a mid-market company without a (useable) spend analysis or visibility solution that needs to get one up and running quickly, accurately, and usefully, take a very close look at SpendHQ. It’s a great starting point on your spend visibility and analysis journey.

A New Year is Upon Us – Do You Have Your SpendHQ Ready To Go? Part I

As SI outlines in its upcoming white paper on the Top Ten Transitions To Tackle in 2014 to Tame the Tolls, hyper-inflation is just around the corner, logistics capacity is on the rise (just like the cost of transportation), and working capital management is still lagging. If you put it all together, costs could rise out of control while millions of dollars sit tied up unnecessarily. The only way to avert this impending disaster is to take proactive action and get your spend, and spend management, under control.

In order to do this, you need good spend visibility — and, if you are not an expert in spend visibility or spend analysis, you need visibility that you can use and that is graphical, categorized, and relevant to your spend management needs. Furthermore, if you do not have technical skills (in house), you need services that can help you normalize, integrate, categorize, and cleanse your data. And if you don’t know where to start once you have the data categorized, normalized, and cubed for analysis, you need category expertise and consulting services.

If you are in one of these groups, up until recently there were essentially no solution options for you to choose from and even now, there aren’t that many. Furthermore, most of the solutions on the market that are available to you today, with only a handful of notable exceptions that you can count on your fingers (without your thumbs), fall into either the category of solution or service, but not both. However, for those of you that need an option that provides a full-service solution that includes data integration and category expert consulting, an often overlooked solution (that has been under continuous development for almost a decade) is about to make a big splash in the Spend Analysis and Visibility space.

That solution is SpendHQ. What started out as an internally developed tool to help Insight Sourcing Group (ISG) achieve the visibility they needed to help them drive savings for their clients, was transformed into a basic commercial software solution in 2007 for a select group of marquis clients to help those clients track spend and associated savings. Since then, ISG has spun off the product into an independent business unit which recently added new team members with commercial product development expertise from leading sourcing and spend analysis solution companies. This new business unit has been dedicated to improving and extending the tool for the last three years in quarterly product releases.

The 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. In addition, the services component has matured and the organization can quickly import, merge, classify, and cleanse all of the relevant data from whatever ERP, AP, or Procurement systems you happen to be using and refresh this data for you as often as every week, although SpendHQ recommends monthly refreshes (even though, for larger clients, quarterly refreshes often suffice). (Their largest client, with 50 Billion in revenue, chooses to only refresh their data quarterly as real-time isn’t all that relevant where spend analysis is concerned.) Plus, SpendHQ can also integrate supplier data feeds for verification and enrichment and currently integrates with a number of office supplies vendors out-of-the-box.

While not the most powerful (ad-hoc) spend analysis solution on the market, it’s a really great solution for a mid-market company without a (useable) spend analysis or visibility solution that needs 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. In the next two parts, we will dive into the visibility and analysis capabilities of SpendHQ as well as the category management capabilities.

You Need Analytics. You Need Intelligence. But Do You Need Visualization?

Probably not. Especially if all that visualization does is significantly jack up the cost of your analytics solution.

As a Procurement Pro, you need to know who is buying what, from which supplier, at what price, and in what quantity, and you need to present the relevant aggregate summaries to department managers and overall summaries to the CPO and the C-Suite — who will want to see the data graphically. Since even Excel has a plethora of charts and graphs at your disposal, it’s a safe bet that any decent spend analytics platform is going to have just about every standard graph and chart imaginable.

But just because you need charts and graphs, does this mean you also need interactive graphics that form the cornerstone of modern data visualization solutions? Kind of yes but mostly no. Interactive tree-maps, that are already built into leading spend analysis solutions, that allow a user to click on a quadrant that corresponds to a category and drill down into sub-category spend to understand why a certain category represents such a significant percentage of spend are quite useful, but 3-D rotating graphs, hyperbolic category hierarchies, network models, etc. are not that much use when it comes to understanding spend.

SI really likes the straight-forward answer to the question of does your company actually need data visualization given by Bill Shander over on the HBR Blog Network.

Given that data visualization can be expensive, especially if it involves large amounts of data and complex algorithms or deep interactive experiences, you need to decide if it’s worth the investment. If you’re selling straightforward solutions to simple problems, data visualization is probably not worth the money. Consumer packaged goods firms Coca Cola and Nestle don’t need interactive graphics to explain their products, just as Playboy and Playgirl don’t need to educate the opposite sex much about their centerfolds.

If a vendor is trying to convince you of the value of their analytics solution, they shouldn’t need rotating cubes to demonstrate that they can do sophisticated analysis, just like you shouldn’t need 3-D graphs to point out that a certain department’s refusal to adopt the corporate contract is increasing costs 15% and costing the organization 1 Million a year.

Simply put, if the analytic solution at your disposal has some advanced data visualization capability that is useful, use it, but don’t spend a lot of money for fancy graphics that don’t convey any more information than you can package in an Excel bar chart!

iValua: Proving Their Mettle with Source to Settle, Part III

In Parts I and II, we noted that when we last covered iValua in 2010, they were one of the few providers tackling end-to-end sourcing and procurement in a single suite of integrated modules built on one common platform. We noted in Tackling End-to-End Sourcing and Procurement, Part I that this French company had capabilities that, at least to some degree, addressed each of the core phases of the basic sourcing-and-procurement cycle except decision optimization and tax reclamation. Since then, they have added advanced tax tracking capability, and a boatload of other features that include SIM/SPM, Risk Management, Project Management, Enhanced Analytics, and Extensive UI customization. Today, we will continue our coverage of the platform, which includes modules for Supplier Management, Sourcing, Contract Management, and Catalog Management that were covered in Parts I and II; Procurement, Invoice Management, Expense Management, and Reporting that will be covered today; and Administration that will be covered tomorrow in the series finale.

Procurement

Procurement, in the iValua suite, is the process of creating requisitions (and having them approved), managing the resulting orders, managing budgets, managing receipts, and managing services deliverables. Requisition management, order management, and budget management are standard fare for Procurement platforms and work as you would expect, but the ability to create and mange receipts and manage service deliverables is a more unique offering for a Procurement platform. This allows for m-way matching in the platform, which is key to ensuring that not only are negotiated savings realized, but that overpayments, and more importantly, fraudulent payments, are not made.

Invoice Management

Invoice Management revolves around invoice creation, management, and reconciliation to receipts. It all works as you would expect, and there is nothing fancy here. Just a well-designed platform designed to make the process as smooth as possible.

Expense Management

Expense Management is the process of requesting cash advances, managing requests, creating expense reports, reviewing expense reports, rejecting lines or entire reports, and approving lines or entire reports. The expense management process is fully defined, and consists of creation, validation, accountant validation, threshold checking, finance or external department approval, (final) accounting approval, and settlement. As with invoice management, the process, and the application, works as you would expect.

Reporting

Reporting is the process of creating analysis reports, browsing them, creating queries, managing them, and then, as a result of the analyses, creating strategic action plans. The analysis capability is quite good. Users can create their own cross-tabs and pivot tables in the browser by dragging-and-dropping dimensions into chosen row and column positions. The analysis can be on any type of data stored in the system — surveys, questionnaires, RFX bid events, e-auctions, budgets, invoices, etc. But the most unique capability is the ability to create strategic action plans, which can serve as the foundation for future sourcing events. Like improvement plans, they can be quite detailed and are generally setup to support savings initiatives.

Each strategic action plan / savings project has a breakdown that allows a user to quickly access the definition data, the team and associated tasks, the financial overview, and detailed analysis through a sequence of tabs. The definition data will indicate the current status, related sourcing projects, and notes added by the team. The financial overview will capture the budgeted savings when the project was approved, the planned savings at project initiation, the current savings forecast, and the amount of savings captured to date. The actual savings (and forecast) will come from the data gathered during Procurement and be calculated using a user-defined formula (which could be as simple as $1 per unit, based upon negotiated rates).

Come back tomorrow when we’ll cover Administration and wrap-up the series!