SAS Spend Analysis

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SAS? Spend Analysis

Reduce procurement spend through increased visibility and dynamic supplier ranking

Most procurement organizations are evaluated by their ability to reduce enterprise spend year after year. But traditional procurement software systems tend to offer only initial savings that quickly dry up. Because of this phenomenon, procurement executives struggle to sustain cost reductions and meet financial goals from year to year.

Difficulties reducing procurement spend can often be traced to a lack of visibility across suppliers and commodities. If you don't have both detailed and big-picture perspectives of spending patterns--exactly what the company buys, when, why, how and from whom--your company will certainly miss opportunities to reduce spend.

A number of factors contribute to this lack of visibility:

? Procurement data is typically spread across many systems, making it hard to validate data or roll it up for summary views across suppliers, categories or business groups.

? Purchased items are not named or numbered consistently, making it difficult to assess total spend by product or category.

? Data volumes are too large to aggregate across the enterprise, residing on platforms that can't scale to support complex global organizations.

Trending and purchasing forecasts are not accurate, often because they are based on suspect data and lightweight analytics.

Even once these issues have been addressed, the central problem of reducing supplier spend is only partially solved. Spend information must then be used to rank suppliers according to the criteria most important to your company. Unfortunately, the process of developing weighted supplier rankings is not straightforward, due to the numerous and possibly conflicting criteria that may be used for ranking.

Because of such frustrations, procurement organizations often struggle to:

? Identify best suppliers.

? Prioritize and consolidate them.

? Negotiate more favorable contracts.

? Ensure compliance with existing contracts.

? Curb maverick spending and manage supplier risk.

SAS? Spend Analysis helps you reduce enterprise spend through increased visibility into procurement information. You can also perform weighted supplier ranking to identify your best suppliers.

Reduce enterprise spend through procurement visibility By providing greater visibility, SAS Spend Analysis lets you leverage corporate buying power for improved cost savings and determine how to buy more effectively and efficiently from valued suppliers.

This strategic application lets you identify not only from whom you are buying, but what you are purchasing

SAS Spend Analysis is one integrated component of SAS? Supplier Relationship Management. Beginning with a foundation of normalized, classified spend data, SAS? Supplier Relationship Management lets you:

? Discover your true spend.

? Analyze your supplier performance.

? Determine your sourcing strategy.

? Execute that strategy.

? Monitor your strategy against goals.

from each supplier, when the items were purchased and how they were purchased. Able to pull data from any existing systems, SAS Spend Analysis can identify vital commodities from thousands of different suppliers and help prioritize your strategic sourcing efforts.

With SAS Spend Analysis, procurement executives can:

? Fully understand total spend and use corporate buying power to negotiate more effectively with valued suppliers.

? Understand spend behavior for specific commodities to reduce costs and build a basis for more strategic, mutually beneficial relationships with suppliers.

? Identify and curtail maverick spending and any behavior that threatens contract compliance.

? Create customized views of spend information, so the most appropriate information is always readily available in a form suitable for different types of decision makers.

? Evaluate the financial risks of spend reduction strategies.

Rank suppliers Through a process of weighted supplier ranking that uses the criteria most important to you, SAS also helps you reduce total spend and supplier risk. With SAS, you can determine which suppliers are best suited for your company's needs.

The process of ranking suppliers has traditionally involved complex, difficult negotiations. If one supplier is the obvious leader in one area but falls short in another, it becomes unclear how to proceed with the comparison. Criteria are normally weighted to resolve such conflicts, but the weights themselves can be highly subjective and difficult to agree on.

Some of the problematic criteria that procurement organizations use to rank suppliers include supplier type, quality of supply, lead times, purchase price, financial viability, timeliness and technological advancement. Failure to evaluate suppliers on the most important criteria can frustrate efforts to consolidate suppliers, reduce risk and negotiate better rates.

SAS allows you to establish an objective, repeatable and adaptable measuring system that reliably identifies the best suppliers for your organization.

Built specifically for procurement professionals, SAS Spend Analysis includes an application for dynamic weighting, which involves setting an upper and lower boundary for each evaluation criteria. The dynamic weight approach adds balance and flexibility to the process of evaluating suppliers, since the influence of each criterion can be adjusted dynamically, unlike the fixed weights used in a traditional weighted averages approach.

Some criteria that SAS Sourcing Strategy can use to rank suppliers include:

? Fill rates. Evaluate the percentage of orders that are delivered complete.

? Material rejection. Identify how often suppliers' initial materials have failed to conform to established standards.

? Portfolio. Look at touchpoints with each supplier across the entire enterprise to help determine supplier types, quality, performance and price.

? Supplier type. Categorize suppliers into appropriate types to help determine which ones should be considered strategic and which should not.

? Quality and performance. Find out which suppliers consistently have lower quality than others, so you can replace them.

? Price. Compare prices based on a view of each supplier's complete portfolio to determine which suppliers offer the best price and which should be negotiated down or replaced.

? Financial viability. Reduce supplier risk by determining which suppliers are financially stable and which may be going out of business.

? On-time delivery. Rank suppliers by reliability of delivery times and promised dates.

? Technological advancement. Determine the level of technology used by vendors to minimize delays and overhead.

SAS? Sourcing Strategy Currently available as an add-on to SAS Spend Analysis, SAS? Sourcing Strategy presents the next step in sophistication for strategic sourcing. While supplier ranking in SAS Spend Analysis creates an ordered list of suppliers according to your most important criteria, SAS Sourcing Strategy employs user-defined business rules to narrow that list and recommend the best way achieve your procurement goals.

Specifically, SAS Sourcing Strategy includes a wizard-driven application that guides business users through the process of selecting a commodity group, identifying a measurable objective (e.g., reducing spend or optimizing risk exposure) and defining business rules to constrain the calculation. SAS then calculates not only which suppliers you should retain, but how much money you should spend with each one to best meet your stated objective.

This analysis provides guidance for answering such strategic questions as:

? From whom should we buy?

? Should we spend more or less with a given supplier?

? What should we buy from a given supplier?

? How should we alter our buying practices?

SAS? Supplier Relationship Management SAS Spend Analysis is a component of SAS? Supplier Relationship Management, a comprehensive, integrated set of data management and analytic applications that help organizations gain greater insights about all aspects of procurement activity, leading to more effective strategic sourcing decisions.

SAS Supplier Relationship Management provides data quality routines and commodity classification, along with spend analysis, supplier ranking, optimization and procurement scorecarding--all from a single vendor. This SAS offering can be delivered as a suite or as stand-alone modules, allowing you to focus on your greatest challenge today and then expand into other areas of improvement.

From SAS, a world leader in business intelligence SAS is the market leader in providing a new generation of business intelligence software and services that create true enterprise intelligence. SAS solutions are used at more than 40,000 sites-- including 96 of the top 100 of the 2003 FORTUNE Global 500?--to develop more profitable relationships with customers and suppliers; to enable better, more accurate and informed decisions; and to drive organizations forward.

SAS is the only vendor that completely integrates leading data warehousing, analytics and traditional BI applications to create intelligence from massive amounts of data. For nearly three decades, SAS has been giving customers around the world The Power to Know?.

The four integrated components of SAS? Supplier Relationship Management

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