Category Archives: Spend Analysis

Use Your Data Analysis System to Analyze Your Green Data and Save Money

As I noted in my recent post on Why You Need Visibility, if you put an energy meter inside a home and show people total usage in real time, a miraculous thing will happen: they will use about 10% less energy. And, more importantly, you can use this behaviour to drive savings, revenue, and innovation in your business. How? Consider these five uses courtesy of Andrew Winston and the Harvard Business Review which give you a green advantage (Five Ways To Use Green Data).

  • Usage Reductions
    If you provide operations with information on resource use, they will be inspired to find ways to cut back.
  • Internal Competition
    Share footprint data across departments, organize a competition, and see the troops rally! Some factory heads would rather miss financial targets than green goals because its just too embarrassing to be at the bottom of the list. (And since every dollar saved goes straight to the bottom line, you might just find yourself more profitable in the current stagflation.)
  • Customer Inquiry Satisfaction
    A great green story can sway customers to your product, and if you are a CPG manufacturer, get you more prime shelf space at Walmart.
  • Initiative Prioritization
    A focus on the value-chain impacts of your operations can help you to quickly zone in on those initiatives that will deliver the biggest results.
  • New Market Opportunities
    When P&G did a study on detergent, they discovered the vast majority of energy use was a result of consumers needing to heat the water to use the detergent. Thus, they invented Tide ColdWater, which generated 2B in revenue in its first year. You could find similar opportunities.

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Spend Rappin’ (2nd Repost)

It’s Boxing Day! And you know what that means … at Sourcing Innovation, it’s Spend Rappin’ time!

  To the Tune of “Christmas Rappin'” by Kurtis Blow

Don’t you get me all that JIVE about code you used before I’s alive,
Cause this ain’t 1965 – ain’t even 1999!
Now I’m the guy named Lamoureux and Spend is one thing that I know.
So every year, just about this time, I celebrate it with a rhyme!

Gonna save it, gonna shave it, gonna make it good,
Gonna take it all down through your neighborhood.
Gonna wring it, gonna sling it till it’s understood.
My rap’s about to happen, like the knee you was slappin;
Or the toe you been tappin’ on a hunk of wood.
‘Bout a two fisted dude, with a friendly attitude
and a sack full of savings for the people on the block.
He’s an old grey beard, maybe looks kind of weird,
and if you ever seen him he could give you quite a shock.

Now people let me tell ya about last year
when the dude came slicing spend through here.
Well the wit was out, the gloves on the ground,
folks stayed to watch him cut it down.
The beat was thumping on the block,
and they were glued to just one spot,
as the master cubed at a solid pace,

got a taste of the waste thrown in your face.

And this old spend slayer laid down a heavy layer
of his slicing dicing rhythm to a tree-mapped beat.
And the guy with the database started to participate,
and I could sure appreciate the spend roll up neat.

We were all in the mood so we had a little brood,
not a sound did abound, as he plowed through the mound,
then I thought I heard a gasp as he sliced through the past,
and laid our mav’rick spend bare, as I flopped into a chair.
So I went to the attic where I thought about the static
that our last spending tool was programmed to always give.
And I threw up my arms at the industry yarns,
Just a trick, a nick, and I’d let the suckers in.

He was quick, he was sharp and always on the mark,
he had a lot of success on his chinny, chin, chin.
He avowed, he was proud of the savings he allowed
from the tip of the ‘burg he found the savings within.
He’s cool for a fool throwin’ out every rule
every hour of the day when the cold winds blow.
Though the beard was-a cleared, I still have never cheered
like I did in the storm when I was in the know.

I said you’re right, my spend’s a fright,
Can you stop for a drop before you have to go?
He said “Sure, Bill, if the wine is chilled
and I’ll stake a steak down at the Monaco”.
So we went out back and discussed the stack
of invoices that had all been over-paid
and every dollar spent off of the contract
and then we laid it all bare till we made the grade.

And before he went this fine old gent,
finding gifts went to sift through his spend reports.
From the top to the bottom he reached in and got ’em,
spend trends for me, and variances from torts.

And the higher-ups got presents too,
Banned suppliers and a stale contract.
A bloated pie ’bout as clear as the sky,
the best that money couldn’t buy.
Cause money could never ever buy the feelin,
the one that comes when there’s no concealin’
of your spend by a tool that’s new
and that’s what Strovink‘s does for you.

The dude ya read’s back at the keys,
up late till all’s where it should be.
But if he were right here tonight,
he’d say Truthful Spending and to all a good night!

 

For my new readers, this cheerful verse is the result of a sly comment by Eric over on e-Sourcing Forum back in 2007 on How Not to Get a Job.

P.S. Keep a sharp eye out for Eric’s next spend analysis series, which will debut here on Sourcing Innovation in January (2010). Although he’s been rather quiet since his series on Spend Analysis Meme Busting (I and II) last spring (2008), I’m happy to say that the recent flurry of activity in the space, particularly from the analyst community, has convinced him to take time away from coding and share his sorely needed wit and wisdom with us once again. (Those of you who have been around for a while might remember his groundbreaking and visionary series over on e-Sourcing Forum and here on Sourcing Innovation in 2006 and 2007, indexed below.)

e-Sourcing Forum

  • “Web 2.0″ Spend Analysis – Introduction
  • Data, Data Everywhere
  • How Clean is Clean?
  • “Change” Does NOT Equal “Refresh”

Sourcing Innovation

Christmas Rappin’

   by Curtis Blow mp3 on YouTube

(Since it’s difficult to find complete and well-formatted lyrics on the web.)

Don’t you get me all that JIVE about things you wrote before I’s alive,
Cause this ain’t 1823 – ain’t even 1970!
Now I’m the guy named Kurtis Blow and Christmas is one thing I know,
So every year, just about this time, I celebrate it with a rhyme!

Gonna shake it, gonna bake it, gonna make it good,
Gonna rock shock rock you through your neighborhood.
Gonna ring it, gonna sing it till it’s understood.
My rap’s about to happen, like the knee you was slappin;
Or the toe you been tappin’ on a hunk of wood.
‘Bout a red suited dude, with a friendly attitude
and a sleigh full of goodies for the people on the block.
Got a long white beard, maybe looks kind of weird,
and if you ever seen him he could give you quite a shock.

Now people let me tell ya about last year
when the dude came flying over here.
Well the hawk was out, the snow’s on the ground,
folks stayed in to party down.
The beat was thumping on the block,
and I was dancing in my sock,
and the drummer played at a solid pace,

and a taste of the base was in my face.

And the guitar player laid down a heavy layer
of the funky junky rhythm of the disco Beat.
And the guy with the 88 started to participate,
and I could sure appreciate it sound so sweet.

We were all in the mood so we had a little food,
and a joke, and a smoke, and a little bit of wine,
when I thought I heard a hoof on the top of the roof.
Could it be or was it me, I was feeling super fine.
So I went to the attic where I thought I heard the static
on a chance that the prance was somebody breaking in.
But the noise on the top was a reindeer clop,
Just a trick St. Nick, and I let the sucker in.

He was roly, he was poly and not the holy moly,
you got a lot of whiskers on your chinny, chin, chin.
He allowed, he was proud of the hairy little crowd
on the point of the door where the skin should’ve been.
Get’s cool for a fool throwin’ out every yule
for a day on the sleigh where the cold winds blow.
So the beard maybe cleared, but I never have a-cheered
’cause it’s warm in the storm when it’s ten below.

I said you’re right it’s cold tonight,
Can you stop for a drop before you go?
He said “Why not if the music’s hot
and I’ll chance a dance beneath the mistletoe”.
So he went downstairs and forgot his cares
and he rocked the spot and danced like a pro.
And every young girl tried to rock his world,
but he boogie oogie oogied till he had to go.

And before he went this fine old gent,
finding gifts went to sift through his big red bags.
In the top for the bottom he reached in and got ’em,
toys for the boys, and for the girls flat rag.

And the grown-ups got some presents too.
A new TV and a stere-u.
A new Seville ’bout as blue as the sky,
the best that money couldn’t buy.
Cause money could never ever buy the feelin,
the one that comes from not concealin’
the way you feel about your friends
and this is how the story ends.

The dude ya read’s back at the pole,
up north where everything is cold.
But if he were right here tonight,
he’d say Merry Christmas and to all a good night!

The Role of Optimization in Strategic Sourcing – Optimization Results, Spend Applicability and Business Cases

This series discusses the recent report from CAPS Research on “the role of optimization in strategic sourcing”. The primary goal is to highlight, clarify, and, in some cases, correct parts of the report that are important, confusing, or incorrect to insure that you have the best introduction to strategic sourcing decision optimization that one can have.

This chapter overviewed some of the results obtained by numerous companies as a result of optimization and provided a number of cases studies, including a few that included non-cost elements. A few of the examples are worthy of note. They include:

  • the company who used optimization for cost avoidance in an inflationary market and achieved an ROI of 28%
  • the company that saved 120 Million on a 3 Billion spend, a savings of 4%
  • the company that saved 600 Million

The latter two cases are significant as they demonstrate that returns of up to 100 ROI (in extreme case) are possible since a number of providers now offer unlimited usage licenses for (well) under 1 Million a year. Now, professional services could run up the costs by a factor of 10, but it should still be clear that the ROI claims of 20X to 40X that some providers have stated they have achieved (on certain events for certain clients) are possible.

The cases that were described in detail are very illuminating and the following are worth noting:

  • A National Freight Sourcing Event
    A company decided to rebid 2,200 freight lanes, in an event which was opened up to 65 bidders. The company, which expected a 3% to 6% price increase if they stayed with incumbent suppliers, realized a 5% price decrease, a cost avoidance of 8% to 11%.
  • A Film Packaging Event
    The company required over 2,000 different film packaging items across 70 “families” in an event that was opened up to 45 suppliers. The company was able to involve more suppliers while breaking the price down into 25 cost coefficients per material family, demonstrating the power optimization can bring.
  • Product Containers
    Containers for product across 100 locations were needed. A savings of 8 Million was realized.
  • Ocean Freight
    The company utilized 600 ocean shipping lanes and 3 container sizes per lane. Before the event began, the suppliers projected 10% to 15% cost increases. In the end, price increases were only 1%, a 9% to 14% cost avoidance.

Next Part VII: Optimization and Reverse Auctions

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Want That New Analytics System? Join Forces With The CIO!

A recent article in Supply & Demand Chain Executive on “What’s on Your CIO’s Mind” noted that leveraging analytics to gain a competitive advantage and improve business decision-making is now the top priority for CIOs, according to a new study of more than 2,500 CIOs by IBM.

This is good news for sourcing and procurement professionals if you need a modern spend analysis system, because real spend analysis, which should start every sourcing process and end every procurement process, is just a subset of real data analysis. That means your chances of getting the system you need doubles if you join force with your CIO who could also use a good data analysis system to sift through the vast amounts of data she has to deal with.

Now, you may argue that the needs of the CPO, who needs insight into spend data, and the CIO, who needs insight into energy and application utilization (for example), are very different, but they’re really not. For starters, both have to categorize the data on the relevant dimensions (department and category for spend data, data centre and server for energy utilization, and department and application for utilization), both have to create summary reports (total spend, total energy utilization, and total number of users by application), and both have to create comparisons (year-over-year, department by department, etc.). A real data analysis system will do that and be powerful enough to serve the analytics needs of the CPO and the CIO.

And once you join forces on analysis, you can also join forces on risk management and compliance, which are also big needs for CIO as well. That’s going to be really hard for the C-Suite to ignore when two departments are proclaiming the need for these much-needed applications. Don’t believe me? Try it!

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Have You Figured Out Where Your Cash Went Yet?

About a year ago, Bob Matthews of Paladin Associates penned a great post over on e-Sourcing Forum.

It’s the Fourth Quarter … Do You Know Where Your Cash Went?.

It’s a good question … and one that is as poignant as ever. Do you?

If you don’t, now would be a really good time to find out. There are a number of sourcing service providers with expertise in spend analysis that can quickly get you on the right track and, if you don’t already have one, help you get a spend analysis solution that will allow you to answer this question whenever you need to ask it.

Here are just a few of the service providers you can call (who are on the list because I’ve talked to them recently and/or verified recent wins for their customers):

Claro Group

iq West

Lexington Analytics

Mitchell Madison Group

MPower Group

Opera

Paladin Associates

Power Advocate

Source One

Treya Partners