Spend (Supply Chain) Analytics Day I

Why do Companies have a Procurement Department ?

In conclusion, our major contract expires tomorrow, we have no idea what we want, and no knowledge of the market. It is time to pass this to the procurement team.

Let’s buy some Cauliflower

Why you end up paying more?

A farmer is paid this amount to buy a kg of cauliflower

`2.50Cauliflower is sold double

the rate at APMC after adding transport charges

`5.00Cost in retail markets

`20.00

Spend Analytics…

An average company can save 11% with a modern spend analysis system.

~Aberdeen Group

Spend Analytics: The Whole Spectrum

1. Spend analysis

5. Contract management

2. Supplier assessment

3. Supplier identification

4. Sourcing

6. Procurement

7. Order fulfillment

8. Invoicing, reconciliation and payment

Spend Analytics…

Top 6 Reasonsfor Spend Analytics

1 Know exactly how much does your company spend with the supplier before negotiating a contract.

2 Negotiate with the final legal entity not the subsidiary.

I C R A

Credit Rating Management Consulting

Software & Analytics BPO

ICRA Techno Analytics Ltd

100% wholly owned

Gro

up

Com

pani

es

ICRA Sapphire Inc.

BPA Technologies Inc

Final Legal Entity …

Adatis(Italy)90% Owned

Adatis(Canada)60% Owned

Adatis(US)90% Owned

Adatis(Germany)45% Owned

Adatis(UK)

Adatis(France)50% Owned

Adatis(Switzerland)50% Owned

Adatis(Canada)40% Owned

Final Legal Entity …

How to obtain the Final Legal Entity …

Bureau Van Dyk Dun and Bradstreet

DUNS NumberHow Clean is your

data?

3 Concentrate your effort on the large suppliers

4 Categorize your spend to know where to go

Categorize the data …

What will be the category? UNSPSC: United Nations Standard Products and Services

Code• Segment or Market Sector• Family or Market Sub Sector• Class or Commodity Group• Commodity

How to categorization ? (Create Rules?) ? ? ?

5 Who buys What from Whom and When and Where

Who

Buy What?

Result of Filtering by Cost Center

Result of Filtering by

Supplier

Result of Filtering by Supplier &

Cost Center

Result of Filtering by Supplier,

Cost Center & commodity

From Whom?

Supplier

Cos

t Cen

ter

Commodity

6 Stop Maverick Spend

Maverick:

Someone who is independent and not a follower

Collect a bill from one of the chain stores like: Metro Spencers Big Bazaar Etc

The bill should contain at least 10 line items. (else use multiple bills)

Identify the UNSPSC Code of the line items.

Submit a scanned copy of the bill(s) along with your analysis.

Assignment (10 marks) . . .

The excel file contains a list of suppliers for Bad Idea Company.

Cleanse the data (PDF provided). Use a distance algorithm (like Levenshtein) to

calculate the distance between the suppliers. Identify the suppliers that can be similar by selecting

suppliers whose distance are less than a threshold (use a threshold around 5).

Verify from Google that these are not independent entities.

Your project should contain the following: List of similar suppliers and their distances. R Code or Rapid Miner Process

Project (30 marks: 15 fixed + 15 relative) . . .