Master the Key Challenges of Strategic Spend Management

In many companies, purchasing is no longer seen as merely an ordering process; rather, the functioning purchasing department has to start operating strategically. Paradoxically, in many multi-level and respectively multinational companies, purchasing is still performed as a local task: This makes it difficult for headquarters to gain precise information of a particular activity, price and conditions required for centralized decision making and profit maximization.

In order to counter these developments, many companies have implemented centralized strategic purchasing centers. Within a management board, the Chief Procurement Officer (CPO) is responsible for all purchases made throughout the entire organization. The prerequisite for the CPO to work effectively is a company-wide reporting and analysis tool that supports companywide purchasing activities and decisions, and respectively presents the results transparent and measurable.

SpendControl provides CPOs with a flexible and professional system for all facets of spend management.

How to Optimize Margins and Implement Efficient Controlling

SpendControl, a modern software for purchasing controlling, creates sustained data transparency by means of a detailed, common data base for the entire company. SpendControl implements automated categorization using standard taxonomies (e.g. eClass or UNSPSC), in order for companies to continuously improve the quality of their data.

The spend cube ensures the integrity of your data and makes it measurable. Source data is directly extracted from your ERP system. With SpendControl, necessary calculations are performed and manual interfaces are reduced to a minimum. Users may check the plausibility of the data and correct it if necessary. Since the system automatically generates reports, there is little to no risk of subjective influences or even manipulated results.

Uniform and automated classification create a common basis for all purchasing data. In this way, a common company-wide “wording” is established: All data is collected and processed by using the same methods and taxonomy.

Correspondingly, all data, analyses, and results can be compared easily throughout a company providing a foundation for fact-based decisions for significant and sustainable savings within the purchasing department.

SpendControl enables one to perform calculations of savings (cost reduction as well as cost avoidance) and to analyze the effects of prices, volumes, raw material price changes or even currency fluctuations separately. For all participants involved, the success of your purchasing department becomes measurable and transparent.

Automated reporting tools play a major role in supporting spend management processes. With SpendControl, predefined, standard templates are leveraged, or on the other hand reports are created individually. All reports may be updated automatically at regular intervals, and distributed to various receivers in different formats. SpendControl also provides powerful functionality to help business users perform ad-hoc queries, without needing any particular technical skill.

Additionally, SpendControl improves the efficiency and management of local purchasing processes because the quality of master data becomes transparent.

How to Save 3-10 % of Your Purchasing Volume through Data Transparency

Extensive experience in strategic sourcing projects shows that companies can typically save from 3-10 % of their external purchasing volume simply by creating more transparency in their data.

On average, by means of increased transparency, sourcing initiatives can help create additional savings of up to 7%. The following chart shows average numbers of projects implemented by us in the last few years.

CPOs are expected to provide significant cost savings:

SpendControl helps meet these expectations by identifying consolidation opportunities. These bundling concepts can form the basis for new price negotiations or supplier changes.

Without transparent and classified data CPOs cannot organize and execute the tasks optimally which places CPOs in weak negotiating positions vis-à-vis suppliers. Furthermore, CPOs cannot clearly measure actual savings or validate numbers (or those of their staff) to the management board without transparent veracity and transparency. With SpendControl, CPOs can counter this trend.

Find and Leverage Savings Potential in Strategic Sourcing

SpendControl helps identify and leverage savings potential in strategic purchasing. For this, we have created the term “savings-mining”. The concept is analogous to “data mining”: To search and find savings potential on the basis of your own purchasing data.

Orpheus SpendControl implements an advanced spend management system with specific analytical methods that have been proven in several customer projects and are almost fully automated. Your spend data will be extracted directly from your ERP-systems.

In a unique semantic data-management-process, you can get the most out of source data, and thus, create transparency that you need to support your strategic purchasing decisions and your controlling.

Through application of rules, statistical procedures and artificial intelligence methods, all data is organized into a single point of access and is tailored to your purchasing department’s requirements. Suppliers are normalized, grouped and classified into hierarchies so that identical or related data and suppliers will appear only once in your management reports.

Analyze your data using the wide choice of standard reports of the spend analysis system or customize your own reports.

Answer questions quickly and without any particular technical skill right in between a meeting with SpendControl’s powerful ad-hoc query function.

Most Important Aspects of Strategic Spend Management

Orpheus SpendControl provides support in all areas of strategic sourcing:

  • cost reduction and cost avoidance
  • improvement of purchasing processes
  • optimization of working capital
  • compliance improvements
  • quality and logistics
  • analysis of potential and measurement of performance

» The SpendControl Library of KPIs (PDF)

By fulfilling the basic need of creating more transparency and finding answers to complex strategic questions, the software also helps create a stronger connection between purchasing and accounting departments.

SpendControl provides six different types of analyses with a wide range of built-in measures which can be supplemented individually.

All important purchasing key figures are powered by strong technical features ranging from basic to advanced:

Procurement ­Spend Volume

  • order and invoice ­volume
  • proportion of spend per category
  • low cost country quote

Savings

  • changes in the prices of materials
  • process costs
  • negotiation success
  • cost driver analysis

Working Capital

  • payment targets (initial)
  • payment targets (negotiated)
  • utilized payment days
  • stocks / inventory

Compliance

  • maverick buying quote
  • payment behavior analysis
  • price compliance
  • degree of process automation

Supplier / Supply Chain

  • bundling of suppliers
  • product range
  • top supplier per category
  • delivery and deadline compliance
  • quality

Prices

  • price trend
  • deviations
  • raw material effects
  • exchage rate effects
  • benchmarks

SpendControl Combines Solid and Sustainable Transparency of Purchasing Costs and Informative Reports

SpendControl unites necessary conditions for strategic purchasing and for efficient controlling in one single system.

SpendControl automatically extracts all relevant data from different source systems. In accordance with tried and tested Orpheus specifications, your IT experts develop necessary interfaces together with our most experienced employees. For standardized ERP-systems like SAP, IFS or Microsoft Dynamics, preconfigured connectors are immediately operational. A unique and semantic content management process cleanses, enriches and classifies data into strategic categories which can be customized to any business requirement.

Afterwards, the data is available for reports. SpendControl provides a series of standard reports and analysis that have proven value in numerous projects. Opportunities for definitions of customized reports and respectively KPIs (key figures for your procurement controlling) are virtually limitless.

Fast and Lasting Transparency for Purchasing Data

SpendControl provides two separate modules for the improvement of data quality:

  • Consolidation of master data records (e.g. supplier, items / parts)
  • Semi-automated classification of master data and transactional data (invoices, orders, etc)

In particular, the current categorization module provides unparalleled capabilities compared to other spend management systems available on the market. Only few vendors offer this wide range of functionality.

These modules were developed following project requirements of customers. Both modules are structured in a pragmatic and easy to use manner even under enormous time pressure.

Both modules have been tried and tested in various customer projects as well as everyday use. They have successfully met all user requirements so far indicating that its functionality has reached a high degree of maturity.

Use Hard- and Software of Your choice

SpendControl may be used both for Microsoft Azure-platforms and SAP-Hana. This has the distinctive advantage that you remain flexible with regard to hard- and software requirements.

Even when a system is changed, SpendControl solutions can still be used. Integration of data from other systems (e.g. when making acquisitions) is easy.

Reporting can be set up on both platforms (SAP and Microsoft). Even Qlik-View is supported as front-end-technology. Moreover, any relational database system can be used.

SpendControl has been tested in practice and meets standard requirements of real-world businesses. The software was developed during several customer projects. It was designed for and successfully implemented in medium-to-large-sized companies. SpendControl has proven its value in one-time projects as well as dynamic and sustainable implempentations. Contents and concept of SpendControl integrate knowledge of our international consultants and IT experts so that you can profit from immense know-how and experience.

Optimization of Working Capital and Supply Chain Parameter

The management is increasingly focusing on working capital of a company. Payment behavior as well as company’s stock management may tie up large amounts of capital.

With SpendControl, however, you flexibly analyze:

  • stocks / inventory
  • order / dispo parameter and strategies
  • long processing times
  • insufficient utilization of payment conditions and payment durations

With specific analyzes and thereby associated measures, SpendControl indicates where to exploit capital more efficiently.

Your profit: more resp. better “balanced” liquidity.

The Liberation from Excel

Without a company-wide reporting tool Excel-based solutions are widely used for procurement controlling. Every month, the local units gather their data and submit it to headquarters. This

This common approach has many disadvantages:

  • Adding additional stress on employees outside of their primary activities
  • Paralyzing the entire purchasing organization at the beginning of each month
  • Spending too much time consolidating Excel sheets manually due to the difficulty of enforcing a common structure
  • Increasing the risk of error due to manual processing of reports
  • Generating basic analyses often requires IT support (thereby overtaxing IT-departments)

By far the most severe disadvantages are the subjectivity of data and different methodology used to prepare reports. Employees responsible for data compilation make numerous decisions throughout this process, some of which may be manipulated in order to put themselves and their actions in the most positive light.

In extreme cases, the data in manually consolidated reports can be manipulated, which may only be detected following a certain delay.

Thus, CPOs need to evaluate their staff based on numbers that they complied themselves – a rather paradox phenomena.

Another key disadvantage of using data from numerous Excel spreadsheets is that it is difficult to compare or create benchmarks between business units.

With SpendControl, you are not only able to replace Excel but also to resolve the foregoing issues with positive outcomes to the bottom line.

This system (SpendControl) tightly integrates with ERP and accounting systems in your subsidiaries or branch offices, automatically extracting the data without manual interventions and respectively without manipulating source data.

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