Michelle Lax and Michael Barker

Vulcan Materials Company’sSpend Analytics Journey

About Vulcan Materials

• Vulcan Materials Company is the nation’s largest producer of construction aggregates—primarily crushed stone, sand and gravel—and a major producer of aggregates-based construction materials including asphalt and ready-mixed concrete. Our coast-to-coast footprint and strategic distribution network align with and serve the nation’s growth centers. We are headquartered in Birmingham, Alabama.

Vulcan Materials Organization

• We are organized into 7 Divisions and 1 Corporate Office.

• Approximately 400 aggregate, asphalt and ready mix plants report up through the 7 Divisions across the country.

Vulcan Materials Organization

Contents

• Why Spend Analytics?• Why Now?• Why Spend Radar?• Our Implementation• Specialty Applications• Early Victories• Questions

Why Spend Analytics?

• Classification of Spend Currently Inaccurate– Enable our Analysts to Analyze – Prior to Spend

Radar, our analysts spent the majority of their time cleansing, reconciling, validating and consolidating data

• Internal Challenges with Reporting – Many Requisitioners, Buyers and Approvers

resulted in Inconsistent Data– Level 3 PCard Data wasn’t feasible– Multiple Vendor records in Oracle

Why Spend Analytics? Continued

• Consolidation of our Spend– Multiple Sources Consolidated to One View

• PCard• T&E Cards• Legacy Systems• Oracle ERP – Purchase Orders and Invoices

• Capability of Answering Supplier Questions Quickly– Total spend by supplier– Total spend by category– Total spend by geography– Supplier potential if an agreement were made

Why Now?

• Difficult Economy– Cost Cutting was a major driver– Intel needed to renegotiate contracts– Need to identify additional spend categories to

manage

• Multiple Organizational Structure Changes– Divisions > Regions– Regions > Divisions– VP – General Manager Changes

Why Now? Continued

• Optimal Time for Selling to Management– Engagement with consultant

• Demonstrated value of data and graphical information

• Easier for management to digest• More forward looking actionable intelligence

rather than historical information – Management saw the value - wanted more

of this style of information and presentation

Why Now? Continued

• Departmental Vision Aligned with the Need for Spend Analytics– Departmental Efficiency– Knowledge of our own data gives us an

advantage in negotiations– Credibility in the field– Wanted 80 / 20 Data Analysis vs Data

Cleansing– Wanted Vendor Normalization capability

Why Spend Radar?• Researched Major Suppliers in the Industry

– Noted differences in the “classification model” of each vendor

• Multiple proofs of concept / demos• Black Box methodology• Review by Humans on the Front End• Less Auditing required on the Back End

• Excellent Service Track Record– References– Our confidence in their capabilities– Professionalism– Flexibility

Our Implementation

• Taxonomy Development– Custom Taxonomy

• No overlap in categories• Purchases are classified as what they are, not

which department they serve or account they go into

• Our preference was for maximum granularity

– Taxonomy Levels (Example)

Our Implementation ContinuedLevel 1 Level 2 Level 1 Level 2 Level 1 Level 2

Administrative Products

Benefits

Non-sourceable

Building

Equipment

AttachmentsEmployee Relations Charitable Electrical EquipmentEmployee Relocation Reimbursements Community Relations Equipment Rental

Facilities Products Debt Repayment Fixed EquipmentInsurance Discounts / Refunds FleetSales Promotions Dividends GeneratorSupplier Awards Escrow Accounts HydraulicsTraining Materials Fees IT Equipment

Services

Administrative Services Fines and Penalties Lab EquipmentBenefits Services Garnishment Lubricating SystemCompensation Services Intercompany Spend Marine EquipmentContract Labor Land Purchase Mobile EquipmentProduct Delivery Services Licensing & Permits Office Equipment

Production / Support Services Memberships / Dues / Subscriptions Parts

Services - Other Pension PneumaticsShipping Services Political Contributions Power Transmission

Consumables

Blasting Rents & Royalties Rail EquipmentChemicals Restocking Fee Rock BreakerDrill Accessories Settlement Scale

Energy & Utilities Severance / Non-Compete Support Equipment

Filters Sponsorships Surveying EquipmentFluids Tax TankGases Union DuesMRO

MaterialsBuilding Materials

Office Supplies Raw MaterialsSHE SteelTiresWear Products

Our Implementation ContinuedCategory Level 1 Category Level 2 Category Level 3 Category Level 4

Consumables Wear Products

Cheek Plates Cheek Plate - Upper (Non-Manganese)Cheek Plate - Lower (Non-Manganese)

Chute Liners

Chute Liners - OtherRubber Chute LinersCeramic Chute LinersSteel/AR

FeedersLinersGrizzly BarsWobbler Bars

Ground Engaging ToolsGround Engaging Tools - OtherBlades / Cutting EdgesTeeth / Adaptors

HSI BlowbarsHSI - Other

Manganese

Manganese - OtherCone CrushersGyratory CrushersJaw CrushersCheek Plates

Rubber Liners -

Screen Media

Wire Cloth-Rubber ClothUrethane Cloth

Steel - Wear Resistant Steel Wear PlateSteel Wear Parts - Other

VSIAnvilsShoesVSI - Other

Wear Products - Other -

Our Implementation Continued

• Consulted with a Network of Vulcan Subject Matter Experts in the Field– Determine what is important to be classified– Determine what can be classified– Determine what changes we can make to aid

in classification in the future

Our Implementation Continued

• Working with SciQuest– Effective Project Management - Deliverables

and timeline were clearly defined and delivered upon

– Good Product Knowledge - Initial Classification was highly accurate

– Resource Availability• The SciQuest team was available to answer our

questions whenever we needed them• Specialized reporting requests were

implemented as needed

Our Implementation Continued

• Data Preparation– Level 3 Procurement Card Data Enrichment

• Bank provides a file• Many vendors provide poor data• Match good data to the corresponding purchase

– Summarization of Standardized Purchases - Haulers

– Integration of Additional Data Fields• Expense Reports

– Expense Justification– Employee Name as Supplier

Our Implementation Continued

• Consolidated Our Data Uploads to 3 Files– Haulers– PCard– Other Transactions

• Classification– Initial Classification to 95% - 5 weeks– Additional Classification to 98% (as of

January 2015) by Vulcan personnel

Our Implementation Continued

Main Dashboard: Spend by Classification, Spend by Supplier, Spend by Region, Spend by Month

Our Implementation Continued

If the user clicks on a category, a filter is applied. This “drill-down” functionality is fast and powerful, and it applies the filter to all charts and data in the tool. Here, we clicked “Equipment”. Now notice the Spend by Classification chart. Parts, Mobile Equipment, Fixed Equipment, etc are all level 2 categories of Equipment. Now only the top suppliers of our “Equipment” category are now listed at the top right.

Our Implementation Continued

We can continue to drill deeper into the spend categories. In this case, we clicked “Parts”. Notice the data has now drilled down to the different categories of Parts (e.g. Loader Parts, Crusher Parts, etc). And, now we see that our top suppliers for the “Parts” category are listed at the top right. Note: all charts and tables have drill down functionality.

Specialty Applications

• Compliance Reporting– Market Share Reports – for contract compliance

and rebate documentation• Custom Market Share Report Dashboard• Classification Greater Than 95%• More detailed and accurate reports (Level 3

Enrichment)

• Custom Lookup Tables– Reporting Parent– Manufacturer Parent– PT/MRO Primary

Specialty Applications Continued

• Assume Responsibility for Data Manager– Create Our Own Classification Rules - Allows

us to get classification % as high as we need• Effort vs Results

• Cross Functional Uses Outside of Procurement– Financial Analysis– Tax– Audit– Operations

Specialty Applications Continued

Market Share Report – Tires - Setup

Specialty Applications Continued

Market Share Report – Tires - Result

Specialty Applications Continued

• Managing Organizational Change– Multiple Organizational Changes in Past

Months / Years– Lookup Tables

• Data Contains Organizational coding for point in time of transaction

• Use lookup tables to map spend to current organizational structure

Specialty Applications Continued

• Custom Quick Filters

– Exclude Divested– Exclude Non-Sourcable– Exclude Cap-Ex Spend– Exclude Sold Assets to External Company

Early Victories

• Capturing misclassified data - Electric Motors Spend

• Travel & Entertainment Spend Detail – Hotel or Restaurant Chain

• Discovering major suppliers that were obscured– Consolidated Electrical Distributors– Big Box Retailers (Home Depot, Lowes, etc)

• Enhances Identification of New Sourcing Opportunities – – Vocational Truck Upfitters– Outside Services

Questions?