On Day 1 of SAP Ariba’s annual user conference, SAP Ariba Live 2016 in Las Vegas, the Ardent Partners analyst team sat in on a presentation entitled, Spend Analysis: What Your Data is Telling You and Why It’s Worth Listening. For more than an hour, several presenters from the pharmaceutical and energy/utilities industries shared very familiar pain points, processes, challenges, and successes relating to managing their spend data and extracting insight from it. As analysts, it was interesting – validating, even – to hear these stories and relate them to the aggregate data. What follows is a brief synopsis of one of the case studies presented during the hour from AbbVie Pharmaceutical.
Spend Data: Telling Organizations What They Want to Know
Arnold Bynum, Senior Manager of Business Process Systems for AbbVie, kicked off the case study by sharing a little bit about the company. As a pharmaceutical and bio-engineering company, it was originally part of Abbot, a medical device/technology company, but it spun off in 2013. Like most organizations these days, Abbvie swims in data and has executives eager to learn from it. But as Arnold told a packed conference room, “Your spend data tells you only what you want it to – what do you want to know?”
Procurement organizations that lack spend analytics capabilities learn nothing from their spend data. They also are not prepared for the inevitable questions from C-level customers. “When your CEO comes to you and asks, ‘What’s our total spend?’ I don’t know’ is not a good answer,” said Arnold. “Let me get back to you” might get you 24 hours.” The correct answer ought to be, “’Sir/Madame, here’s what your spend is,’ or ‘here’s a dashboard with a breakdown of what we’re spending by region and category.’”
Self-Service Analytics to the Rescue
Fortunately, sophisticated yet user-friendly spend analytics systems can provide line-of-business users and executives with a wealth of intelligence and understanding. With this in mind, Arnold and his team needed something that was simple, user friendly, and on one platform, yet was able to integrate their spend from sourcing and suppliers.
When AbbVie’s team began developing a roadmap for system building and implementation, they made it a point to communicate with all relevant stakeholders and include them in the process – that way they could capture their needs and perspectives and help minimize the risk of under-delivering. As a result, they developed a roadmap for implementing a robust, self-service spend analytics tool in parallel with a stakeholder communication plan and a training plan. They also rolled out their training program upfront so that when they went live, their staff were already trained and could hit the ground running.
According to Rachel McGuire, Senior Purchasing Assistant at AbbVie, the company eventually deployed a spend analytics solution by SAPAriba, which allowed them to enhance or enrich their spend data with “upstream” information (i.e., spend, category, and supplier), and “downstream” information (i.e., AP, AR, PO, and requisition). And, according to Arnold, they also made it a point to refresh their data more frequently than other organizations. Rather than a monthly or quarterly refresh, AbbVie shot for a 19-day data enrichment/enhancement cycle, and have not missed a cycle.
Success Breeds Success
As Rachel said, the more powerful and visible the tool became within the organization, the more requests from VPs, the CFO, and other executives came through wanting spend reporting, and in increasingly shorter timelines (within the day – hours, even). When they adopted their analytics tool, it provided them with a wealth of increased reporting and analytics capabilities, notably:
- Global visibility into spend – Users can understand at a high level which departments are spending what with whom, which helps them to identify opportunities to adjust spending or suppliers
- Category profile analysis – they can review the categories of spend to see where the opportunities are to make adjustments – either to increase or decrease spending on a given category
- Supplier analysis – identify those key suppliers they have the most spend with, based not only on supplier data, but also on internal spend data. It allows them to pitch their suppliers to source additional categories.
- Vendor rationalization – are they spending money with too many suppliers? Conversely, can they consolidate spend with a few strategic suppliers?
- Analyzing spend under management – what areas of spend do they have the most control over? Conversely, what areas are ripe for improvement?
Although the solution is self-service, AbbVie’s reporting team creates detailed monthly reports for the executive team that are more than a 100 pages long and breakdown by region, country, site, top suppliers, categories, departments, etc. They also created report templates for their users to consult on their own time and analyze their spend according to whichever header information they prefer. The reporting team can also create ad-hoc reports as needed.
Spend Analytics: Providing Visibility from Ground-Level to C-Level
Implementing a spend analytics solution increased AbbVie’s reporting cycles for multiple internal customers, and enriched their operations at multiple levels:
- Category managers now examine their spend outside of their categories – e.g., if categories are miss-classified then their spend is being inaccurately captured.
- Procurement staff now have more time to source due to the fact that supplier, spend, and category data is already consolidated, and they can take the time to make informed decisions.
- Leadership now get updated spend reports faster, leading to quicker visibility into direct and indirect spend, and ultimately changes that can be made sooner, like demand management.
For example, Arnold shared a story of how AbbVie leadership realized that one department was spending considerably more on bottled water than other departments. When they approached the department head about it, they were able to switch out bottled water for water coolers, and it cut down on the cost. Things like that help organizations understand where they are spending their money and help them spend it smarter.
Arnold concluded his part of the presentation by sharing his experiences when people question his team’s data. “They say, ‘I don’t believe that data’, or ‘can I trust the data?’’ His response is to challenge the critics and ask what data they are looking at to make them suspicious. Ultimately, he says, “You can’t afford not to trust the data.”
Final Thoughts
Spend analysis can be a transformative technology inside and outside of the procurement shop. It collects, categorizes, cleans, enriches, and analyzes spend data, turning it into spend intelligence and disseminating it to sourcing teams to help them make informed sourcing decisions. It can provide wide and deep visibility into the spend, sourcing, and supplier habits of the organization, and allows decision makers and practitioners, alike, to drill down into sub headings to further understand the numbers and alter buying and sourcing behaviors. At a high-level, it can speak volumes about the decisions, health, and performance of an organization. Organizations like AbbVie have their eyes and ears fixed to the data and are listening to what it has to say.
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