Spend

Analysis
Turn Procurement Data into
Tangible Opportunities
Agenda
Overview pp 4-5

Challenges pp 6-7

Benefits of Advanced Spend Analysis pp 8-13

Direct and Indirect Spend pp 14-15

Sievo Approach p 16

Key Benefits of Sievo Spend Analysis p 17

Features p 18

2
Data Extraction pp 19-22

Data Classification pp 23-26

Applications of Spend Analysis pp 27-28

Data-Driven Decision-Making pp 29-30

Supplier Rationalization pp 31-32

Managing Volatile Category Optimization pp 33-34

Recognizing Payment Term Opportunities pp 35-36

Compliance Tracking pp 37-38

Internal Benchmarking pp 39-40

Combined Spend Data with Savings Tracking pp 41-42

Beyond Traditional Spend Analysis pp 43-44

Whiteboard Session with Sievo pp 45-46

What Spend Matters Says About the Solution pp 47-48

Case Study with Pentair pp 49-52

Conclusion pp 53-54

About Us pp 55

3
Overview

Identifying opportunities, driving savings and controlling costs are

driven by a good understanding of what you’re spending. Even
though spend data exists in the systems, getting sense of it is often
far from straightforward. Challenge lies in capturing data, ensuring
it’s both reliable and relevant, and providing intuitive access to
spend data for different users. An access to an accurate spend
visibility is the key for massive savings and potentially realizing the
opportunities.

4
Analysing procurement spend provides data that can be used
as a baseline to measure improvements, and to also provide
reliable data for deciding strategies to realize short and long
term savings. As procurement moves to a more strategic
function in the company, spend analysis is its fundamental
strategic technique which establishes a parallel process that
guides senior leaders and budget holders in maximizing value
for the organization’s dollar.

CPOs are accelerating adoption of new digital and analytical

solutions whilst also upgrading core solutions.

Technology areas that will have the most impact in the next two years

Analytics 54%
Renewal of strategic procurement tools 43%
Renewal of operational procurement tools 43%
Renewal of ERP platform 33%

Digital 26%

Cloud computing 25%

Robotics Process Automation (RPA) 24%

Cybersecurity/ data privacy 18%

Emerging Technology 14%

Source: The Deloitte Global CPO- Survey 2018

5
Challenges
Too many data sources/ disparate systems

Multiple disparate systems drive complexity and confusion

for procurement leaders. Spend data is often times sprinkled
throughout different systems across the organization, including
AP, GL, ERP, and many others. These employ different classification
schemes, making it difficult to extract and analyze. When there
are too many or incompatible data sources, organizations cannot
efficiently leverage their spend analytics efforts in sourcing
activities. To reap the full benefits of spend analysis, spend data
must be migrated to one centralized repository in a standardized
fashion.

Complex and labour-intensive cleansing and classification process

For most large organizations, classifying the billions of dollars of

procurement spend is not easy. The problem is not just in volume,
but also in the fact that the data is extremely immense to the point
that it could take years to properly classify all of the spend. But this
granularity is required to achieve the necessary business actions
that generate value. Some methods to overcome this problem
has been proven not effective, like classifying spend data at the
highest level commodity class. This, however, provide insufficient
insight and often inaccurate analysis. One method collaborates with
humans, but it is also not sustainable as the tremendous efforts
exerted would require repetition of the process frequently and this
would render the newest data out-of-date. No solution will give
you 100% classified data all the time. The key thing is to build in
appropriate checks and balances so most errors can be caught and
corrected immediately. Making sure that this is done consistently
will maintain trust in the data and in the classification

6
process, and enable the data to be used consistently for ongoing
decisions.

Wrong tools or having too many data systems and tools to

choose from

A spend analysis is not the kind of project you want to take on

without the right tools. It is always about understanding what
your organizations need and getting the proper solutions that will
address the current situations. Attempts on doing spend analysis
incorrectly and without the proper solution have put the validity of
analysis in jeopardy. Organizations should make base their initiative
on a proper spend analysis tool weighing all the considerable
shortcomings of each before deciding. Most spend analysis
initiatives fail to deliver additional results after 12 to 18 months
because they have insufficient or ineffective systems in place to
measure savings. Challenges are daunting and many solutions
fail to address all of them. An organization should ensure that the
solution selected addresses all issues and associated challenges
that are relevant to its own situation.

7
 Benefits of
Advanced Spend Analysis

Having a robust spend analysis solution in place has become a

prerequisite for running a professional sourcing organization. But do you
get all the possible benefits from your current spend cube?

Having worked with multiple consulting organizations and 50+ clients

across industries, Sievo experts have listed the 12 most important
benefits that sourcing organizations get from advanced spend analysis.

8
 Support creating and managing a category management organization

All procurement transformation projects tend to start with the same

approach – and for a good reason! First, you create a spend cube to
divide your spend into different categories. This serves as a foundation for
dividing the responsibility for managing the spend.

As simple as it may sound, this is often the most difficult phase in any
spend analysis exercise. This is because – to get there, you typically need
to collect spend data from multiple source systems as well as cleanse and
harmonize the data from different structures. Once your data is in order,
it should be easy to conduct also the more advanced analytics described
below.

Minimize maverick purchasing

All too often sourcing organizations focus only on what happens before
signing the contract. What may be surprising for many, is how often
available contracts are not being used. This is true especially in the case
of indirect spend.

Minimizing maverick purchasing is not only about getting those better

prices and terms that you have negotiated, but more importantly
ensuring legal and CSR compliance through using approved suppliers.

After starting a systematic measurement, we have seen an average

reduction of 40 % in maverick purchasing across our clients.

Rationalize supplier base

Rationalizing supplier base is one of the most common levers of easy

savings identification through spend analysis. Strategies include
recognizing inefficiencies after growing through acquisitions, sourcing
selected categories globally as well as managing tail spend through
reducing the number of suppliers.
9
9
 Benchmark performance against market development

‘My prices for chemical A have increased 25 % during the last 12 months
while my prices for logistics have reduced 10 % during the same time
period. Have I been successful in sourcing these two categories?’

Optimize working capital

Optimizing working capital is one of the quick-wins that you can take
through robust spend analysis. Identifying categories and suppliers
with lower-than-policy-level payment terms provides a great starting
point for freeing working capital.

10
 Identify price arbitrages

Theoretically, this is as simple as it gets – do you get the same price

for the same items across suppliers and across your business units?

In reality, it may be much more difficult since you may need to

harmonize data across source systems to identify comparable
purchases. And, how about incoterms and logistics costs?

Internal performance benchmarking

You can also benchmark your performance internally across business

units / geographies. How much do you spend on facility management
per sqm across units? How about office supplies per headcount?

Local vs. low-cost-country sourcing

This is a hot topic in many organizations. Low-cost-country sourcing

may give you better price points while local purchasing can provide
shorter lead times and lower logistic costs – most often also a lower
carbon footprint. You should have the visibility to see how you comply
with your policies across categories and geographies.

Improve delivery performance

Another quick-win once you have the data in order. We have seen
huge improvements in supplier delivery performance after taking a
systematic measurement process into use. Being able to share delivery
performance data with your suppliers overall and on a transaction data
level has proven to bring results.

11
 Manage risk

One of the major tasks of procurement is to minimize supply chain

disturbances on production. With spend analysis, you can identify
single-sourced items and develop a robust supplier base to ensure
critical items are always available.

In addition, by combining your supplier data with external sources, you

can identify the parts of your spend that are on suppliers with risky
credit ratings.

Category-specific opportunity levers

Described above are mostly opportunity identification levers that can

be shared across categories. Naturally, not all categories are similar in
the end. There are a lot of category-specific levers that you can utilize
to identify opportunities – be it controlling travel class in air travel,
harmonizing job profiles in temporary labor or analyzing packaging
premiums in chemicals, you name it.

12
 Improve data quality

One of the most common points of discussion that I have had in relation
to spend analysis, is the lack of sufficient data quality. While that may
be true, the only way to improve your data quality is to use it. As one of
our client CPOs once said: ‘Unused data will always be bad data’.

13
Direct and Indirect Spend

At a broad level, corporate spend can be classified to direct and

indirect spend. Knowing the nature of the spend will influence the
nature of your sourcing decisions and methods. When preparing a
cost savings and sourcing strategy in spend analysis, it is important
to have a distinction between these two categories.

Direct spend refers to all spend associated with raw materials

and services that go into the actual products. Usually supervised
more closely in any organization, these are directly incorporated
into a product being manufactured and used to build a product
or outsourced processed. Examples include raw materials,
components, hardware.

Indirect spend are purchases of goods and services that work as

supporting materials needed to build the core products of the
company. They are related to the process and needed for a day-
to-day operation but remain fixed hence often rarely monitored.
These include office supplies, cleaning services, furniture,
telecommunications, etc.

Direct material categories have traditionally been better sourced

than indirect categories. But the spend needs need to be
categorized to a higher granularity to identify opportunities.

From a spend analysis perspective, indirect spend is viewed

separately because it is not managed centrally. However, because
this category can account for as much as 20% of the overall spend,
a decentralized management can potentially cause inefficiencies
and maverick spending.

14
Although indirect spend also presents a valuable entity to the
whole process and undeniably makes an impact too, most of the
time, direct spend counts more than indirect, because they are
managed from process and cost perspective of the Procurement
Category Manager. With this, direct spend stirs more interest to
customers and usually presents good arguments for price increase.

Moreover, indirect cost savings are usually invisible. Most of the

time, when these savings are achieved like in terms of remarkable
wage reduction due to cost center changes, or costs in logistics
have been significantly reduced because lower prices have
been negotiated, the money saved usually tends to vanish as it
is used to improve something else, say the current IT setup of
the organization. Most organizations focus on direct category
development because it can be used as an argument in end
product pricing decisions.

15
 Sievo Approach:
Automated Source-to Screen
Process

1 from source...
2 ...to screen
3
Extract Cleanse Report
data and Enrich and Analyze

Sievo Data Extractor Supplier Dashboards, maps

+ consolidation
Extend Dynamic drill-downs
From suppliers with Collaborative
a web upload tool classification Audit trail to
transactional data
Translations

16
16
Key Benefits of
Sievo Spend Analysis

360° view on procurement KPIs

Get a unified view on all KPIs including
spend data, savings, payment terms
and delivery performance

Savings opportunities identified

Advanced analytics helps unlock
savings opportunities

Combined internal and external data

Unlock new insights by combining
external data such as market prices and
supplier risk information with spend
information

Prove procurement contribution

Make an impact on the organization and
elevate the position of procurement by
gaining trust with the stakeholders

17
Features
Data
✓ Automatic extraction of spend data from any source systems
✓ Enrich dataset with data from key suppliers

Cleanse and Enrich

✓ Collaborative classification- machine learning
✓
Supplier consolidation
✓
Translation (multiple language capabilities and support when
extracting

Report and Analyze

✓ View spend data from any angle by categories, suppliers,
units, etc.
✓ Adhoc analytics capabilities or create your own reports
✓ Role-based dashboards
✓ Automatic opportunity identification
✓ Strong user management capabilities to ensure data security

18
Data Extraction

In a big company in a real business world, pulling out large amounts

of data out of  myriad of sources without a standard interface can be
quite challenging. Data extraction requires tremendous human and
capital investment. On top of that, most systems weren’t built for the
intensive load an extract will put on them, especially internal databases
that need to continue serving users during the data pull. Because of
the unexpected amount of stress put on the servers, considerably big
performance problems can occur during the process. The amount
of data to extract and the amount of maintenance required result
to pulling out data records out of systems longer than the time it is
expected to.

The good news is, there’s always a better way to do things. The
Sievo Data Extractor is designed to connect and extract the most
complicated and extensive procurement data from all kinds of data
sources and deliver it for further analytical processing.

19
Sievo Data Extractor

With its trusted and ready-made plug and play templates, the Sievo
Data Extractor Tool does the heavy lifting. With massive amounts of
data on hand, the best chance of success is to work with the company
who does not only have the technical expertise, but also understands
the procurement data and has perfected this process . And Sievo
systems have the ability to deal with all kinds of idiosyncrasies and
challenges that make the extraordinarily dirty data, outdated and
messy sources of information into an easy-to-comprehend format ready
for analysis.

1. Even if extraction can be done in-house, using Data Extractor

incredibly shortens the lead time as it takes away the erroneous
manual work. It has a pre-configured template for extraction to take
the correct data with possibility of additional data fields. The challenge
of spend data extraction lies in the fact that you need to collect data
from multiple modules of an ERP, in a way that you get a coherent view
on spend. Building this logic is trickier than it seems at the outset,
but luckily Data Extractor has prebuilt capabilities of doing this for
most ERPs.  Because the tool cuts away a significant amount of time
and effort, there is no need to involve too many people in the whole
process, like for example heavily involving internal IT which generally
means longer lead times.

20
2. The tool represents an easy way to extract data from multiple systems
with complete data security. Many companies like to have a full control
over sensitive data, but this tool guarantees a secured way of extracting
data, delivering it for further processing with a possibility for customers
to still keep control.

3. Installed to a client’s computer within minutes, and with its

compatibility to practically any ERP, procurement and finance systems,
it seamlessly captures all the data and pushes it to the Sievo cloud.
Correct extraction paves the way for conducting quick data cleansing and
analysis.

4. The tool allows us to monitor all processes, in cases of exceptions.

We have all the tools to proactively fix the issues, and our unrelenting
experience allows us to know how to react to errors such as connections
not working or only partial data sets extracted. This results to more
reliable processes and up-to-date reports with less support needed from
the customer.

5. Once the data gets extracted, it is now ready to get enriched and
cleansed . After the transformation logic, what you’re left with is a clean,
consolidated and filtered format which then makes the rest of the process
easier and faster.

21
 Sievo has extensive experience on spend data integration.

+500 179BEur
active system spend
integrations in place managed yearly

130m 73 000
lines files
managed yearly managed yearly

Fully automated process from data extraction to reporting and complete

control on all steps of the process

22
 Data Classification

Effective spend analysis is not possible without precise data

classification. Without classification, everything is cluttered and
unorganized. Many of the large enterprises Sievo works with have many
ERP’s, each having its own structure, material numbers, accounts and
a lot more. Let’s take the example of a laptop. In a larger organization,
this one item can be called differently depending on how it has been
sourced in tens of different ways, it can be Dell X260, Power Laptop, or
perhaps Ordenador in Spanish.

Unifying heterogeneous spend data into clearly defined categories

makes them easier to address and manage across the whole
organization. Even with the example of the pen, knowing exactly how
many pens are bought by different departments and subsidiaries of
a company and at what price gives procurement the upper hand in
negotiations with new vendors. So, in essence, classification is about
harmonizing all purchasing transactions to a single taxonomy enabling
customers to gain visibility to the global spending in order to make
better sourcing decisions.

23 23
The answer to accurate classification is not a black box

Complex data classification solutions are not always simple to

implement, but they can be improved over time. What stands out
with Sievo’s data classification tool is that it’s not a black box—it is
transparent. Customers can see how information has been classified
and make exceptions to the classifications where they feel necessary.
For example, if one category is classified wrongly, it can be changed
effectively as needed. Sievo empowers users to add data categorization
based on their own business logic and they can easily classify data
through intuitive add-ons and different levels of categorization. They
can slice and dice data to smaller managable junks on any attribute.
Hierarchical classification decisions enable them to manage and
pinpoint exceptions both at scale and in detail.

The visibility for the customers makes the whole process collaborative
as the customers can freely participate and make exceptions if
necessary. Once classified, the information goes standard across the
organization and users can see based on what data characteristics the
classification has been done.

24
The key to success is collaborative classification

According to Spend Matters, Sievo’s collaborative classification

engine is one of the most distinct spend classification platforms
in the market today. Not only does it break down spend into
categories and sub-categories, the classification can also be
assigned to customer category experts. This results in expert system
implementation where the knowledge of the expert is capitalized
in ensuring deeper level classification within a category or sub-
category and resulting to higher level of accuracy.

For organizations with billions of dollars of spend, this level of

collaboration is revolutionary. No one person can be expected
to know the full organization’s spend inside-out, but individual
category managers can contribute to a more accurate level of
classification, and the end result can be ground-breaking. The best
practice in spend classification suggests at least 90% accuracy
to identify spend opportunities, however reaching 95% or better
accuracy level is crucial for savings tracking and management. As the
further breakdown occurs for a deeper level reporting and tracking
management, Sievo’s collaborative classification approach allows
spend to be mapped down to the last dimension 100% error free.

Collaborative tools for spend classification

25
'AI-powered spend analysis solution combining procurement expertise
and machine learning to deliver more reliable spend visibility, faster

Even when category experts can improve classification close to the

100% error free level, there is still the question of prioritization. How
many hours of an expert’s time is worth spending improving the
classification of less strategic, long tail spend?

The answer to this comes from a relatively new field of computer

science called machine learning.

At Sievo, we’re developing an approach of human + machine

collaboration, where the advanced knowledge of procurement
experts is complemented by our own proprietary machine learning
solutions. In practice, we continuously train computers to learn and
adapt the classification techniques performed by humans. The more
data computers see classified, the more they learn. This approach
is currently tested with a limited number of clients, but we believe
in the future we can reach even greater levels of precision on data
classification by using the best skills of both humans and computers
– the next stage in a truly collaborative classification experience for
procurement organizations.

26
Applications of
Spend Analysis

Data-Driven Decision-Making
99 Transparency over global spend over all source
systems on suppliers, categories, business units,
products, etc.

Supplier Rationalization
99 Consolidation opportunities
99 Managing supplier tail
99 Single-sourcing risk
99 Local sourcing vs Global sourcing

Working Capital
99 Visibility on actual payment terms
99 Automated opportunity identification

27
Internal Benchmarking
99 Algorithms to automatically identify extremely high
prices based on material numbers (direct) and proxies
(indirect)
99 Consolidation and savings opportunities identification

Volatile Category Optimization

99 Compare prices to market prices
99 Apply cost structures for complex commodities

Compliance Tracking
99 Minimizing maverick buying
99 Disobediance of contract prices

Combine Spend Data with Savings

Tracking
99 Support with savings project decision-making
99 Automated realized savings tracking

28
Data-Driven Decision-Making

Most organizations have insufficient and inaccurate information about

their spending patterns and supplier data. The challenge of spend
analysis is in managing vast volumes of internal and external supplier
data due to the disparate nature of systems and data sources.
Overwhelmed with a large global supply base and scattered data on
supplier information, there is a pressing challenge on how to apply
procurement analytics to drive data-based decision making.

Sievo’s Spend Analysis solution tackles both the data management

and data analytics competencies. It has the ability to address issues
of data extraction and the capacity to analyse data for optimization.
Procurement analytics provides the fuel for an organization to drive
strategic and better sourcing decisions faster.

Big data insights significantly eliminate arbitrary decision-making

as it reduces the chances of making decisions based on gut,
emotion and self-interest. Data-driven analytics, when integrated
effectively into procurement processes, can defend decisions with
greater precision. Organizations can count on shorter order-to-
delivery times, lowered costs, increased supply chain efficiencies
and improved supplier-client relationships. Insights that stem from
data help streamline purchasing operations and refine procurement
strategies and processes. The use of data-driven decision making
drives sustainable procurement-value in the long term, but its
success relies on the quality of the data and its effectivity and
interpretation.

29
Sievo's Spend Analysis dashboard provides dynamic and drillable
visualizations that allow the user to view spend in various angles. It
also shows data up to the transactional level.

The spend dashboard also shows the distribution of suppliers per

category as well the supplier base from a helicopter view via the
vendor geographical location visualization.

30
Supplier Rationalization

Leveraging spend analysis to supplier base rationalization leads to

more strategic partnerships. The main objective is to streamline
the organization’s spend to fewer suppliers while mapping and
categorizing the supply base to business needs. Doing this leads
to driving better value from those supplier relationships and allows
focusing efforts on those suppliers that offer the best value. Having
sufficient visibility on the suppliers is the first step on conducting this
analysis. Rationalizing the supplier portfolio optimizes spending and
improves performance.

Sievo’s Spend Analysis enables optimization and prioritization of

the supply base. Information visibility through the solution takes the
step to understand the requirements of the business. It provides a
detailed picture of what can be done to improve the relationship
with the suppliers, and enhance the opportunities presented to
them. Supplier rationalization brings a more in-depth analysis
answering questions like the need to renegotiate with certain
suppliers or if solving a conflict with a particular vendor is actually
worth the cost and effort.

Having the data on hand is the basis for analysing the suppliers. The
insights can result to making changes based on knowing who you
are buying from, how much you buy and how much does it cost for
the organization to do so. It enables a dynamic way of increasing
supply efficiency and effectiveness.

31
The supplier base dashboard allows you to see from a high level
your aggregated spend and what % of the supplier base it is coming
from. This then allows you to see the long tail in your supplier base
which is often complex and challenging. This dashboard allows
users to pick a category, look at the pareto chart and then identify
which suppliers can be combined into strategic suppliers and which
suppliers can be rationalized. It also shows if same supplier has been
used by separate units within the organization. Knowing this enables
group buying opportunities.

32
Managing Volatile Category
Optimization

Category Management creates the foundation for an effective

and reliable supply chain. As a key part of the whole procurement
process, its primary goal is to create leverage and make sure that
every dollar is well spent while maximizing the potential return to the
business.

For categories, it’s very important and strategic to have some

indexes to track your performance against, and of course the price of
how much the item has been purchased, say if it has been purchased
at the right time when the index is low.

Sievo’s Spend Analysis provides dashboards where you can see the
average price for a given material and its quantities. Selecting one
item and a corresponding market index, it will show how much the
increase is relative to price and quantity. The data can show the
opportunities where the price has not really evolved as the index
mark. If you want to generate a composite index, there is also an
option to select several market indices. And if you want to see in
more details, you can also look at the different materials related to
the chemical you’ve selected. From there, you can see the baseline
and how the average price of each of those materials has behaved
in the following month, like where it has decreased or potentially
increased. You can also look at supplier and how this price trend has
behaved for different vendors. You can compare performance against
index and see where you have savings opportunities.

33
The tools shows the total price opportunity every month. You will
have a better view of how big the opportunity is, and also put
a price tag on it. For example, if you wish to purchase a certain
material at the same price that is the index, you will be able to see
the evolution, and for different facilities where the opportunities lie
and which facilities or if you prefer for which suppliers. This shows a
negotiation list which refers to the vendors to whom you should be
talking with first and try to get lower prices. Negotiation knowledge
is key when you know exactly this sizeable opportunity with a given
supplier. If you know that the index is much lower and has been
decreasing, it gives you an edge in negotiation.

34
Recognizing Payment Term
Opportunities

Insights into actual supplier spend, and visibility into on-time

payment performance with suppliers, current payment terms and
payment accuracy will give the information needed to manage
supply base, manage internal compliance with contracts and
negotiate better contracts with suppliers.

To do this in the Sievo’s Spend Analysis tool, you start with

selecting one category which will list all the suppliers. The
tool allows you to close scenarios, like set a target number of
days and define the working capital, which will then calculate
the working capital improvement and PnL impact. This is good
information but what makes it actionable is having the key metric,
which is the price tag for each of the suppliers. The highest ones
show the biggest opportunities which might come because of
high volumes. You will have the clear visibility and the list of the
companies with the detailed information on how to optimize
working capital. A great starting point for freeing working capital
is identifying categories and suppliers with payment terms that
are lower than policy level.

35
 The report compares prices for
same materials. It shows the
local and global potential
within the price differences.

The detailed grid shows the

exact prices paid for the
material.

36
Compliance Tracking

To get the most out of contractual relationships, you should be able

to measure compliance against negotiated contracts. With spend
analytics, compliance is improved and the decision-making process
is more efficient. Limited visibility restricts your ability to maximize
supplier relationships and improve purchasing performace.

Sievo’s Spend Analysis helps identify and resolve non-compliant

contracts by providing global visibility across the organizations’
historical spend data. The solution has analytics configuration that
will help identify savings and compliance opportunities of good
and services. With the tool, you can identify single-sourced items
and have an extensive supplier base to make sure that critical items
never go out of supply. Contract compliance tracking can also help
to identify potential product or service related issues that need to
be addressed by the supplier or through internal training. The tool
also features collaborative classification that unifies heterogeneous
spend data into clearly defined categories. After starting a
systematic measurement, we have seen an average reduction of 40
% in maverick purchasing across our clients.

The focus should not only be on what happens before signing the
contract. Minimizing maverick buying ensures legal compliance
through using approved suppliers. When your spend data has
vendor information, like annual revenue and credit scores, there will
be a better assessment of the overall supply chain failure risk of the
organization. Sievo’s solution provides the data that allows you to
track and identify suppliers who have non-contracted spend and

37
those with non-contracted vendors. It identifies the categories of
spend that has too many non-contracted suppliers. The risk in the
contract is shown in the pricing, and reducing this risk translates
into lower costs. Critical to savings, contract compliance information
enriches spend data with the supplier risk information that helps
utilize spend data and avoids supply chain disturbances.

Spend analysis and performance management can help the

procurement organizations track compliance, identify spending
irregularities, and do corrective measures if necessary.

38
Internal Benchmarking

Having spend analysis gives you the opportunity to benchmark your

performance internally across business units in different locations. It
could measure how much is spend on office supplies globally. This
paves way to meaningful comparisons that can be used for strategic
decision-making. Collecting and organizing spend data together
in one place enables you to answer a wider range of questions
such as the average number of vendors or spend by category, and
which vendors are generating the highest aggregate revenues.
Understanding this is crucial to set targets for improvement that are
realistic and achievable.

Data extracted and analysed using Sievo’s spend analysis tool

plays a major role in the strategic planning of the procurement
function. Organizations must find ways to measure the performance
of their practices to gain efficiency, identify the root problems and
encourage continuous improvement. Analyzing the overall sourcing
performance and the detailed spend patterns of the organisation
identifies rough cut saving potential and opportunities. Because data
will show that goals have been already accomplished somewhere
in the company, it is much easier to apply them on a global basis.
Internal benchmarking also provides opportunities for rewarding
outstanding performance and opens the line of the communication
across the organization.

39
 Internal benchmarks on any metric can be performed in a few clicks

Analysis of the largest

suppliers globally and per
region for the category
Facilities

Analysis of the average price

paid for paperboard boxes
across different production
units

40
Combined Spend Data with
Savings Tracking
What really matters is that a savings opportunity is turned into a
way of reducing expenses. Good intentions will only be significant
if they are converted into concrete action and if they bring results.
One thing to also take into consideration is the relevance of savings
initiative evaluation to determine if the objective has really been
achieved. This can best be done by conducting spend analysis as
it can also pave way to new saving options. It is important to have
a correct, and complete report as it gives a clear insight into the
performance of the procurement function that will build credibility
and the trust of the management.

Sievo offers possibilities to measure savings at three different stages

of the value creation cycle. First is the Spend Analysis, which has
the direct spend that provides visibility on a material number level
and indirect spend on a subcategory level. Then from identified
savings to approved savings, there is a solution called Savings
Program Management, which shows visibility on a project level. From
approved savings to realized savings, there is the Realized Savings
Measurement that provides visibility on SKU level, combining items.

Linking spend analysis tightly with savings tracking helps monitor

progress and thus ensure success in realizing the cost savings
targets and sourcing opportunities. By tracking actual savings
and creating metrics across spend categories with reports and
dashboards, trust is maintained across the organization.

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When spend data is combined with savings plans, the output is the
realized savings measurement where you can see if the planned
savings are actualized into real savings. It can show from which
spend categories have savings been achieved, the savings pipeline
for the year and the approved savings plans vs. realized savings.
Connecting spend and savings brings credibility and increases
relevance.

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Beyond Traditional
Spend Analysis

Best practices on traditional procurement analytics was very

focused on spend analysis and contracted savings. While both
KPIs are very important, they are very fundamentally limited in two
ways: backward-looking and not aligned with business. A modern
procurement organizaton needs to be able to manage a forward-
looking view and not restricted to just the procurement language.

With organizations going through the roadmap of maturity, the

typical first step is to take active opportunity pipeline management.
This means both using spend data to identify opportunities and to
actively manage the pipeline of activities together with the different
business stakeholders. The more challenging part is to create metrics
and language integrated with business and have a vocabulary that
resonates with stakeholders: costs, PnL account, etc. The focus
should not be only on procurement activities, but also on what
affects the costs, such as market prices and currency fluctuations.

There is a need to isolate the savings from the market-driven

components to be able to create a full picture relevant to
stakeholders. Using the same concepts, calculations and methods
in a forward looking manner creates constructive dialogue, elevates
procurement’s position and drives cross-functional actions. This
helps create visibility on the future profitability and the different
drivers affecting that.

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Sievo created the concept of the SavingsBridge™. This method
closes the gap between these two functions and ceases the never-
ending discussions of where the savings really went. Once the
terminologies are aligned and understood on both ends, and the
non-controllable drivers have been isolated, this opens the path
to focusing on what impacts the bottom line, and what will help
improve the company’s profitability.

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Whiteboard Session:
Spend Analysis

45
 Sammeli, Sievo’s co-
founder, drives the
company’s sales
activities and is
responsible for its
growing revenue
globally. His objective
is to ensure that
Sievo is recognized
as the leader in
the Procurement
Performance
Management space.

“It's not enough to have access to Prior to Sievo,

external and internal data assets. Sammeli gained
Yo u n e e d t o b e a b l e t o t u r n t h e s e experience both
data into insights and actions. in management
Yo u n e e d t o t u r n p r o c u r e m e n t consulting and in
data into dollars. " enterprise IT. Sammeli
also ran his own
software development
company before
establishing Sievo.

Sammeli holds a
Master of Science from
SAMMELI SAMMALKORPI Helsinki University of
Vice-President, Customers Technology, where he
and Co-Founder majored in business
strategy.
Sievo

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What Spend Matters
Says about the Solution

The Sievo product was built for spend analysis. The provider
designed its solution to support a powerful, collaborative
classification approach that allows users to quickly classify large
data sets with comparatively high levels of accuracy. It's the first
application that the reviewers have seen since BIQ that makes
it easy for users to classify data completely, accurately and
quickly.

With Sievo's collaborative classification, users can break out

any subset of data on any dimensions they choose during the
classification process and see what percentage of the records
within each set of dimensions has been classified at any one
time. For example, a user can break data down by material
group and description and then map each entry to a category
in the hierarchy by material group. Or they can break data down
by GL Code and vendor and then map each entry in the pairing
to a category in the hierarchy by description — or breakdown
further if need be.

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The approach may sound complicated, but in practice, it is
quick and easy for a user, and the mapping percentages allow a
user to see how much data has been mapped at any time. It’s a
level of control that is quite uncommon when it comes to spend
classification in general.

Spend Analysis Data Services

Sievo is a provider that takes responsibility for data — from source

to screen. It handles all of the integration requirements and can,
out-of-the-box today, take data from more than 100 ERP/data
systems, as well as a large number of market feeds. Sievo also
handles the cleansing, normalization and enrichment of all spend
and supply data inputs. It typically does refreshes across massive
data sets in less than two days, and a customer’s data is always
available. This also includes supplier normalization and product
normalization components, if required.
Reference: Spend Matters

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 Case Study
“Sievo Spend Pentair using Sievo Spend
Analytics tool is
an outstanding Analysis to improve process
solution that efficiency
enabled us with
eff icient spend
analytics that we
have struggled Overview
to do in the past.
It has vastly Pentair is a global leader in water, fluid,
improved thermal management and equipment
our process protection dedicated to building a safer,
eff iciency more sustainable world by delivering
as it reduced the industry leading products, services and
cycle time of solutions.
category
managers for Pentair strengthened its global presence in
spend fast growing regions, including China, Latin
analysis from America and Middle East.
weeks to just
m i n u t e s .”
Objective

To have a solution that is simple, intuitive

and will allow category leads and managers
ALLAN HARRAH
to do independent spend analysis with same
Vice-President, set of numbers globally
Global Supply
Management
Pentair

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Challenges
✓ Former technology used was stagnant and did not evolve enough
to keep up with the technology development

✓ The former solution offered a complicated, complex tool that was

not intuitive

✓ Spending weeks on spend analytics to figure out spend and align

the gaps and missing pieces with different business units

✓ Not enough visibility on several key metrics

Key Metric Measured

✓ Spend classification
✓ Payment terms
✓ Supplier consolidation
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Why Sievo

Pentair has selected Sievo as their global solution because of

their best-of-breed procurement analytics capabilities. This,
backed up with strong customer focus, responsiveness and
flexibility to meet their needs, is the reason why Sievo has
surpassed Pentair’s prior solutions capabilities.

✓ Learned about Sievo from a leading analyst company

✓ Deemed to have the best technology after a lengthy

benchmarking, discussion and assessment

✓ Global capability and experienced player

✓ Responsive to needs, agile and flexible, with multilingual

capabilities

✓ Strategic partner who continues to support Pentair in

accomplishing their plans with supply management

Solution & Roll-Out

Pentair took the approach in selection process that involved

different business stakeholders, and key users. Because of
the intuitive and easy-to use features of the Spend Analytics
tool, Sievo training was conducted in just less than two hours.
Employees were more engaged even giving their suggestions
and feedback. They easily adapted to the powerful tool, using
it as a standard solution for doing their sourcing activities. With
agile implementation approach, Sievo was implemented globally
in just two months for both Spend Analytics and Contract
Management.

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Results
✓ Dramatic improvement on spend
accuracy both from a classification and “ We h a v e s e l e c t e d
supplier rationalization perspective Sievo as our global
solution for
✓ Category managers were able to identify spend analytics
and drive savings opportunities, supplier and contract
consolidation activities, and payment management for
terms improvement efforts their best-ofbreed
procurement
✓ Pentair was able to look at weighted analytics
lead time as an opportunity to reduce capabilities. Sievo
inventory with suppliers by improving has backed up
lead times at minimum order quantities their promise of
strong customer
✓ Spend visibility also gave the opportunity focus, flexible and
agile solutions to
to consolidate suppliers with over 10%
meet our needs
improvement this year
and has become a
valued business
✓ Over 90% accuracy in spend partner that has
classification significantly
surpassed our
✓ $15M working capital improvement prior solutions
through negotiation in payment terms capabilities and
r e s p o n s i v e n e s s ."

ALLAN HARRAH
Vice-President,
Global Supply
Management
Pentair

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Data fuels business but
advantage comes in
knowing what to do
with it
Data matters. But getting the right one, and
knowing exactly what to do with it is not an
easy step. It all starts with clear visibility
and understanding of spend. This is where
spend analysis comes useful. It is like putting
a microscope on any aspect of the spend and
applying procurement expertise that results
to savings opportunities.

Sievo's Spend Analysis solution can help you

stay ahead of the game by giving you the
spend visibility to deliver insightful analysis
for accelerated opportunity identification,
smarter sourcing decisions and full control
on your spending. By providing the means
to put more spend under management and
by revealing opportunities for strategic
sourcing, this solution has transformed
procurement businesses. With Sievo, your
data is in good hands.

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How do you turn procurement
data into dollars?

Start spend management journey at sievo.com

Book demo

54
About Us

Sievo is a leading procurement analytics SaaS solution company

2008, 2009, 2010, 2011,
that provides spend visibility, but also goes way beyond that.
We help our clients identify opportunities, translate these 2012, 2013, 2014, 2015
opportunities into projects, embed created value into budgets
and ensure that savings truly hit the bottom line. We speak the
language of procurement and also translate numbers into the
financial view.

Our solution is used by thousands of users in best-in-class

procurement organizations, such as Deutsche Telekom, ISS and
Kellogg’s. With our clients, we don’t stop at backward-looking
reporting but deliver more by creating forward-looking forecasts
and comprehensive analytics. We combine internal information
with external data sources. With Sievo, human input and machine
learning technologies are integrated together. In short, we
translate procurement data into dollars.

Since our founding in 2003, we have experienced rapid, profitable

and self-financed growth. Currently we employ more than 100
professionals and have offices in Europe and US.

© Sievo

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