Spend Analytics: We Have Implemented A Spend Analytics .

Spend Analytics: we haveimplemented a spend analyticssolution and have greater datavisibility, what do we do now?”Presented by:Ted Johnson and Gayle Ta – UC San DiegoFrank Scirica – Huron Consulting Group

Spend Analytics Overview What is Spend Analytics?– The process of aggregating, classifying, and leveraging spenddata for the purpose of reducing costs, improvingoperational performance and ensuring compliance2

Spend Analytics Overview Why is Spend Analytics important?– Spend data insight is critical for identifying hard-dollarsavings opportunities and developing sourcing, budgetingand planning strategies– Drives purchasing compliance with negotiated contracts andidentifies missed opportunities– Supports data driven communications to campus leadership,stakeholders, team members and suppliers– Universities require adequate oversight to ensure consistentcompliance with Federal regulations, specifically as it relatesto grants management– Pressures to extend value of existing sourcing, procurementand ERP technology investments3

Spend Analytics FrameworkThe graphic below demonstrates a typical framework for gathering, cleansing, enriching and analyzingdata that can be leveraged for procurement projects and reporting.4

Spend AnalyticsProviding spend data to a solution provider for classification does not guarantee results. Knowing whatto do with this data is the key to a successful program.ExtractValidate /Cleanse Provide guidance on definition of spend and associated attributes Determine what data elements should be included in the solution Identifying originating sources for spend data Recommend end user testing and defect resolution strategy Provide testing guide and script templates Function as liaison between University and solution provider during test spend data feedsClassify Provide an audit process during UNSPSC categorization of spend Recommend sourcing groups (Huron classification schema)Enhance/ Enrich Guidance around potential varying data enhancement and enrichment opportunities based onsolution provider selectedAnalyze /Report Provide standard spend report types and recommend procurement activities related to thesolution Go-Live5

Spend Analytics – Spend ClassificationLeveraging analyzed category data, spend classification provides clarity of spend categories,subcategories and vendors as a starting point to identify sourcing related opportunities and broadercategory management.( 's in 000s)Est. Annl. SpendHuron Category Level IFOODSERVICEHuron Category Level IIFOODSERVICE PRODUCTSTotal 7,880 130 8,0103,485-3,485CATERING1,9801,4003,380 13,345 1,530 14,875LODGING 2,400 1,850 4,250( 's in 000s)AGENCY2,4501852,6352,305Est. Annl.SpendAIR TRAVEL6651,640GROUND 425 7,725 4,640 12,365Travel Category SubtotalADMINISTRATIVEP-CardFOODSERVICE MANAGEMENTFoodservice Category SubtotalTRAVELA/PSHIPPING & LOGISTICS 3,355 170 3,525DOCUMENT SERVICES2,7451152,860OFFICE RELATED PRODUCTS2,665552,7209102251,135 9,675 565 10,240GENERAL RETAILAdministrative Category SubtotalVendor Name% ofSpendPurchasingContractVendorOFFICE MAX 1,96572%YesPAPER MART2308%Yes954%STAPLESSubtotalOther (3 )Total 2,29084% 43016% 2,7202 100%6

Spend Analytics - Identifying OpportunitiesOnce the area for analysis has been identified, remainder of activity can focus on identification ofstrategic sourcing opportunities and overall category management.Office Supplies Subcategories 1,800 1,600 1,6493,500 1,574Est. Annl. Spend2,000 1,000 800 600 200 0 2,500 1,200 400 # of SKUs 741 6101,500 527 504 469 440 2871,000 264 180 167 158 117 102 69No. of Items PurchasedEst. Annl. Spend ( K) 1,4003,000500 38 1-As the number of unique items increases, the number of price points received increases within a given category or product typeProduct proliferation is particularly wide spread in ORP categories such as Filing & Record Storage, Technology, Converted Paper Products,Pens / Pencils & Corrections, and OtherProduct rationalization savings opportunities exist across many product categories7

Spend Analytics - Identifying OpportunitiesBy identifying areas of spend, you can further segment by manufacturer to further refine potential sourcingopportunities. In this example, toner spend analysis highlights opportunities rationalize supply, increase use ofthe MFD fleet and consider remanufactured products.Toner Spend by ManufacturerCombined purchases of HP, Staples Brand, and Dell tonerproducts account for almost XX% of University’s total tonerspend The high-dollar amount and numerous manufacturer brandsof toner suggests that the purchase and utilization of smallscale copiers and printers are likely prevalent on campusOpportunities: Transfer independent printer volume to existing MFD fleet toreduce total campus printing costs Rationalize supplier for greater discounts Consider remanufactured product HP, 1,614K , 60%Staples, 501K , 18%Other (32), 132K , 5%Brother, 69K , 3% Lexmark, 75K , 3%Dell, 230K , 8%Xerox, 88K , 3% A wide range of discount levels werereceived on Toner products by theUniversity; periodic price audits canbe instituted to ensure pricingcompliance with contracted generalcategory discountsToner Spend by Top ManufacturersContractedDiscountLevelOEM ProductDiscountReceivedWtd. Avg.DiscountReceivedContractedDiscount v. Wtd.Avg. DiscountReceived 1,61435%30% - 56%34%-1%Staples Brand 50160%30%30%-30%Dell 2305%N/AN/AN/AOther (35) 36430%0% - 79%45%15%Mfr. NameHPEst. Annl.Spend ( K) 2,7098

Spend Analytics - Identifying OpportunitiesBy analyzing manufacturer spend detail, you can further segment by product type to further refine potentialsourcing opportunities. In this example, HP toner spend is broken down by top product type to highlight thepotential savings benefits of remanufactured products.OEM v. Remanufactured TonerOEM Toner, 2,221K,82%Reman. Toner, 488K,18% The quality of remanufactured toner cartridges has improved dramatically since theywere introduced 20 years ago; high-quality remanufactured cartridges nowundergo a process that makes them equivalent in performance, print quality andpage yield to new models, requiring them to meet all OEM specificationsEnvironmental benefits of using remanufactured toner cartridges include keepingnon-biodegradable material out of landfills and conserving the equivalent of threequarts of oil per cartridgeIndustry Leader: MIT's Copy Technology Centers use remanufactured tonercartridges whenever possible, commenting that “the quality is great”Sample HP Toner Products with SpendEst. Annl.Exceeding 20KMfr. #Item DescriptionQtySpend Increased utilizationof reman toner cangenerate at leastXX% in savingsover OEM toner fortop HP SKUs.Avg. UnitReman.Price PaidToner Price 118.08 81.12PriceVariance31%ExtrapolationImpact 58,766CC364AHP LASERJET 64A BLACK TONER1,590 187,747CE505AHP CE505A BLACK TONER CARTRIDG1,298 88,511 68.19 41.7339% 34,345CE278AHP 78A TONER574 40,536 70.62 36.7048% 19,470CC533AHP CC533A MAGENTA TONER340 35,421 104.18 57.2445% 15,960CC531AHP CC531A CYAN TONER340 35,421 104.18 57.2445% 15,960CC532AHP CC532A YELLOW TONER308 32,087 104.18 57.2445% 14,458CC530AHP CC530A BLACK TONER296 31,577 106.68 58.0746% 14,389CC364XHP LASERJET 64X BLACK TONER1324,878 30,079 481,380 227.87 171.0325%38% 7,503 180,8509

Spend Analytics - Identifying OpportunitiesIn this example, copy paper spend is broken down by top product type to highlight the potential savings benefitsof consolidating spend to best-value products.Top White Copy Paper ProductsManufacturerProduct #Item DescriptionBest-Value per Ream: 3.19Est. Annl. Spend 100KManufacturer NameUOMQtyAvg.UnitPriceCase (10 Reams)Ext.PricePaid ( K)Avg.Price PerReam 31.92 610 3.19 34.91 154 3.49 32.60 115 3.26 44.81 47 4.48 36.63 40 3.66135848-WHSPLS 8.5X11 COPY CSDOMTARCase19,110112350/461757SPLS 8.5X11 30% REC COPY CSDOMTARCase4,4163R2047XEROX 8.5X11 COPY/PRINT CSXEROX CORPCase3,51687025-CTSPLS 8.5X11 100% REC COPY CSINTRNATL PAPERCase1,058221192STAPLES 8.5X11 3HOLE COPY CSDOMTARCase1,102513096-BLSPLS 8.5X11 MULTIUSE 20/96 CSDOMTARCase344 36.36 13 3.64135855-WHSTAPLES 8.5X11 COPY RMDOMTARReam79,116 3.19 252 3.193R2047XER COPY PRINT 8.5X11 COPY RMXEROX CORPReam18,232 3.28 60 3.28DPP851251PPR LETTER CUT SHEETS 8.5X11 5DOMTAR INC.Ream7,242 4.11 30 4.11112350/1542STAPLES 8.5X11 30% REC COPY RMDOMTARReam7,196 3.49 25 3.49221192SPLS 8.5X11 3-HOLE COPY REAMDOMTARReam6,646 3.66 24 3.66ReamTotal 1,371TotalReamQty191,10044,160Ext. PriceExtrapolationfor BestImpact ( K)Value 610 0 141 13 112 2 34 14 35 53,440 11 279,116 252 0 58 2 23 77,196 23 26,646 21 3413,892 1,321 5035,16010,58011,02018,2327,242By consolidating white copy paper purchasing on the SKU with the best-value ream price, the University willsave 50K per year.10

Spend Analytics – Compliance & Trend MonitoringSpend analysis as part of category management will facilitate the identification of purchasing trends,buying patterns as well as monitor utilization and spend consolidation of key strategic suppliers tosupport your category strategy.Spend Trend Shown at Category Level Understand year-over-yearcategory level spend trendsSpend Trend Shown at Category LevelStandard Vendor NameHuron CategoryLevel IHuron CategoryLevel IIYear 1Total Year 2Total Year 3Total TrendOFFICE MAXADMINISTRATIVEOFFICE RELATED PRODUCTS 864,250 1,536,745 1,954,362 SSI, INC.ADMINISTRATIVEOFFICE RELATED PRODUCTS 181,837 174,286 165,427 PAPER MART, INC.ADMINISTRATIVEOFFICE RELATED PRODUCTS 234,510 122,785 42,756 STAPLESADMINISTRATIVEOFFICE RELATED PRODUCTS 287,392 102,789 12,670 OFFICE DEPOTADMINISTRATIVEOFFICE RELATED PRODUCTS 227,754 99,650 5,200 CREST PAPER CORPADMINISTRATIVEOFFICE RELATED PRODUCTS 137,894 87,631 0 PAPER WORLDADMINISTRATIVEOFFICE RELATED PRODUCTS 0 0 88,540 1,933,637 2,123,886 2,268,955 Total Monitor strategic supplierspend growth as well as nonstrategic supplier spendreduction Identify new suppliersentrance11

Spend Analytics – Supplier ManagementIn this example, spend and transaction analysis by supplier highlights preferred supplier volume andopportunities to manage non-preferred spend.Top 20 Suppliers by SpendSupplierCLASSIC SOLUTIONSSTATE ELEC SUPPLYCRESCENT & SPRAGUE SUPDIRECT RESOURCE INCSTANLEY SECURITYLOWESAIRGASBUCKEYE POWER SALESGrainger, Inc.TRANE COJOHN DEERE COMPANYAQUA SCIENCE INCFASTENAL COHILLYARD INCB & H PHOTO-VIDEO.COMPRECISION IMPRINTGovConnectionKETCHUM & WALTON COPAMS INCRICHLAND AUTO PARTSTotalPreferred SuppliersEst. Annl. Spend % of Total( K)Spend 596,062.27 355,947.44 315,760.38 305,149.80 225,347.06 173,027.58 123,705.94 123,275.81 115,235.95 107,841.04 85,071.58 82,829.54 82,368.36 81,411.66 77,145.25 72,368.20 72,078.26 70,343.41 68,693.64 67,650.96 1%39%# of 872211391265413613939812,892% of 1% The Top 200 facility supplies products by volume account for XX% oftransactions and XX% of the spend Lowe’s has the highest volume of all non-preferred suppliers (secondoverall by transaction volume) Less than 1% of University’s suppliers are responsible forapproximately 40% of the spend and 45% of the transactions12

Spend Analytics UC San Diego– How do we get there?Multiple DisparateSystems-no dataDedicated Analytics Manual Manipulationand Cleansing of dataTeamRobust DataDashboardsClient-facingDataEnterprise AnalyticsSystem13

Spend Analytics at UC San Diego Department Focused Reports– Weekly Analytics– Quarterly Dashboard Customer Focused Reports– MySpend– Department Brochures

Spend Analytics UC San Diego - Weekly SmartAnalytics

Spend Analytics - DashboardPerformance Based Metrics

Spend Analytics - DashboardOperational Metrics

Department Wide DashboardSupplier Diversity and Local ImpactReceiving Operation MetricsCustomer SatisfactionMetrics

Spend Analytics – Dashboard Definitions

Spend Analytics - MySpendMySpend gives at-a-glance insight into yourdepartment’s spend and savings to help youunderstand and optimize your procurementactivities by identifying where savings isbeing realized

Spend Analytics - MySpend

MySpend – Department Spend Summary