Spend Analysis

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Prepared By: Mohammad Ahsan

Company Introduction:

Mobilicity Wireless, Canada’s smart mobile carrier, was created to bring down the cost of wireless with unlimited talk, text and data plans, affordable North American coverage, plus popular handsets and smart phones – without locking customers into contracts or charging extra or hidden fees. Formerly known as Data & Audio-Visual Enterprises Wireless Inc. (DAVE Wireless), the company is led by Obelysk, a diversified Canadian holding company, and Quadrangle Capital Partners, a global investor in the telecommunications and media sectors. Mobilicity was named one of Canada’s Top 25 Up and Coming Information & Communication Technology start-ups in 2010 by the Branham Group Inc. Further information about Mobilicity can be found at www.mobilicity.ca.

1. Goods Spend Analysis in your organization.

Goods spend Analysis is the process of organizing a company’s spend, leveraging spend data for the purpose of gaining visibility into cost reduction, performance improvement and uncovering hidden savings opportunities. Spend Analysis consist of three different components which are Suppliers, Customers and Commodities & Services. The output of a spend analysis is a summary of purchases by various variables, such as category, supplier, and/or business unit. Each component should be measured in dollars and number of transactions which should be a potential source of improvement and cost saving. I believe spend Analysis serves three internal user groups in a company which comprises of:

1. Leadership of the organization usually the Chief Executive Officer (CEO) and Chief Operating Officer (COO) who needs up-to- date reports to drive strategic direction.
2. Managers, Accountants or Chief Financial Officer (CFO) who need to drill down into a spend data set to explore specific areas of interest or track down payment specifics.
3. Sourcing power users who need to locate, drive, and monitor the next set of savings initiatives.

Companies that developed formal, centralized spend analysis programs have found that they have been able to conduct effective and ongoing spend analysis through the use of five key processes, involving automating, extracting, supplementing, organizing, and analyzing data.

Mobilicity Powers Up Spending Analysis to Improve Supplier Relationship Management Company-wide

Business Challenge

Mobilicity spends more than $200 million on goods and services each year, approximately 60% on direct and 40% on indirect materials. The company had little ability to leverage its own aggregate spending power and to collect and analyze data across divisions hindered effectiveness of centralized procurement initiative.

Spending Analysis Strategy

In 2009, Mobilicity set itself goals to better manage spend, leverage its total buying power, and identify sourcing opportunities for optimum supplier relationships.  It outlined a specific plan to focus on high impact commodities, aggregate the spend with a few best performing suppliers, and move business to these partners to gain savings of 5% to 10% of total costs.  

Two key requirements for success were identified:

• a comprehensive spending analysis solution and
• management buy-in to support the commodity teams, change management required, and the measurement of the cost savings metrics.

Spending Analysis Selection and Deployment

Following a diligent decision process involving a weighted analysis of some key criteria categories, Mobilicity selected SAS Institute Inc. because its solution was user-friendly, fit in well with the existing Mobilicity technology infrastructure, SAS’s committed schedule for design, development, and implementation.

The Web-enabled SAS system was installed at the company’s headquarters in October 2010, with automated connections to five key ERPs and Excel data uploads from other systems.  A phased roll-out across the enterprise targeted the largest ERP systems, largest locations, and largest business units to get as much volume in the system as quickly as possible in six months.

Data was categorized in a three level proprietary commodity classification schema, and SAS has achieved a 92% accuracy rate at correctly normalizing suppliers and categorizing commodities automatically.  Updated on a weekly basis, today the SAS spending analysis solution at Mobilicity encompasses more than 75% of total spend, representing more than 500k transactions, 10,000 items from 1,000 suppliers, and more than $ 400 million in historical spending over a rolling 12 month period.  Approximately 180 employees are registered to use the tool, averaging 10 concurrent users at any given time from 675 sites.

Results

In the first phase of the roll-out, the solution was used for spend aggregation and detailed spending analysis.  The company was able to determine who its key suppliers were, how much business was being allocated to them, and to differentiate between contracted value and actual placed purchase volume.

Decision support capabilities leveraged in the early stages included graphical analysis of commodity cost comparisons, target costs and cost savings trending.  The SAS solution was also able to help the company normalize its vendor quotes across different currencies to understand cross-boarder aggregation opportunities.

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