Leading procurement professionals understands the tremendous business value that can be gained through effective spend analysis. The key elements of spend analysis have been used for years (visibility, data analysis, and data processing), and a host of technology applications (including some that can be trialed for free), are helpful in getting crucial intelligence out of the procurement lifecycle.
For an electronics manufacturer, it is common to store procurement data in the enterprise resource planning (ERP) system. But OEMs often rely on a number of other technology tools to help make the spend analysis process easier and more effective.
By automating the spend analysis process, a procurement department can quickly gain a host of details on its company's suppliers and it's spend activities. Beyond this all-important visibility into spend habits and supplier effectiveness, the process of leveraging technology to regularly analyze procurement details will yield business intelligence that could not be immediately gleaned by most manufacturers.
Prime Advantage works primarily with small and midsized industrial manufacturers, and our organization sees these companies (both our members and suppliers) use purchasing-related data that is culled from ERP, business intelligence, computer aided design (CAD) and Product Lifecycle Management (PLM) systems to assist in their abilities to find new areas of savings, improve compliance, and reduce cycle times.
Let's look at one real life example of how spend analysis can be leveraged to good benefit. Manitowoc Foodservice is a global manufacturer of foodservice equipment solutions and a long-time Prime Advantage member. Headquartered in New Port Richey, FL, it represents some the market's leading foodservice equipment brands in food and beverage, including Delfield, Frymaster, Cleveland, Manitowoc Ice, Kolpak, Garland, and Lincoln.
“Our spend analysis efforts at Manitowoc Foodservice have moved into a total cost structure, allowing us to monitor dozens of cost metrics,” said Tom Tetlow, global vice president of strategic sourcing, Manitowoc Foodservice.
Like many manufacturers that have grown through acquisitions, Manitowoc Foodservice has ended up with multiple ERP systems collecting its purchasing data. “There are multiple ERP data source systems (via the acquisitions), so there was a need to set up a process and structure to gather purchasing data from these various systems for data enrichment, analysis, and reporting,” said Tetlow. “Data is consolidated in a master warehouse in Cognos for reporting purposes, and our offices around the world can view the data and manipulate it using our business intelligence (BI) system, QlikView, our dashboard reporting tool, and related systems.”
Manitowoc Foodservice's procurement team maintains hundreds of parts standard industry commodity codes, including approximately 25 different codes for electrical and electronic parts. And for the past ten years, the company has incorporated the ability to access technical drawings of product parts with CAD software tools from PTC and SolidWorks, which is integrated into its central data processes.
Tetlow said the company is elevating the level of commodity management in the spend analysis efforts by improving its data cleansing and enrichment process and combining requirements from across the global company when market-bidding specific commodity categories.
“Having that data, including accurate parts drawings in our CAD systems, allows us to initiate supplier bids more quickly and reduce the overall time needed to implement them,” said Tetlow.
Tetlow said the company's supplier analysis rating process is robust, and allows global cross functional teams to score suppliers on approximately 30 different categories, including quality metrics, supplier required services, risk, technical support, prices, and on-time delivery.
These systems include an automated process for managing suppliers that use conflict minerals. This system electronically sends the notifications and requirements to suppliers, automatically receives the supplier responses, edits the information, automatically issues notices to the suppliers if they have not properly completed forms, and has status reports. This minimizes time spent by procurement team members at Manitowoc Foodservice in managing the conflict mineral process. Electronic data systems are in place for other processes such as operations risk review, supplier audits and restriction of hazardous substances (RoHS2) directive.
“With our total cost structure approach to supplier total value analysis, the price is just one of dozens of cost metrics that we consider,” said Tetlow. “Our processes, systems and data accuracy consistently improves each year allowing Manitowoc to better analyze and forecast its materials information. This allows better global management of our commodities for all of our strategies. We couldn't achieve this sustained success without these technology solutions.”
What technologies are you leveraging for your spend analysis efforts? Let us know in the comments section below.