Mark Bowen Director of Purchasing Why the University of Oxford embarked on spend analysis.
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Transcript of Mark Bowen Director of Purchasing Why the University of Oxford embarked on spend analysis.
Mark BowenDirector of Purchasing
Why the University of Oxford embarked on spend analysis
Purchasing department
• An insight into the challenges we faced and why we started spend analysis.
• An opportunity to see the types of report available by using line item data.
• An insight into how we used this data.
Purchasing department
What were the challenges we faced?
Typically we delivered savings by annual adversarial price negotiations.Over time this strategy is a diminishing returnNeed to deliver sustainable savings
To achieve the above we needed to change our strategyIntroduce Category ManagementIntroduce Supplier Relationship Management
To achieve both of these aims we needed to understand our spend data.
Purchasing department
• Typically we weren’t in a position to know whether the coded spend was correct or not
Level 1 Level 2
Consumables
Laboratory
Dell.
We could find IT supplier in Laboratory.
Only our knowledge of the supplier would allow us to then code correctly.
This was time consuming and expensive.
What did our data tell us?
Purchasing department
Clearly we had challenges• Our spend was supplier centric which was limiting
What good is it to know we spent £2 million with supplier X?• We didn’t know what products we bought?• We didn’t know which categories those products belonged too?
• We needed to be more granular.
How could we overcome these challenges?• Establish a taxonomy• Initially we started with the UNSPSC taxonomy.
Purchasing department
• Establish a hierarchical Category structure we could work with
• Map supplier spend into this structure .
• Analyse the resultant data.
• Provide robust information to Purchasing team and end users.
We soon realised this was too complex for all our spend.
Purchasing department
P-Code Hierarchy
Not derived from our GL coding structure but it is mapped to GL structure.
Purchasing department
Purchasing Category Mapping to UNSPSC
Category DescriptionDescription -
Level 1Description -
Level 2UNSPSC
Segment codeUNSPSC Family
codeUNSPSC Class
codeUNSPSC
Commodity code
301.3101
Scientific and Medical Equipment & Supplies -
Chemicals, Chemical Elements & Chemical
Reagents
Scientific and Medical Equipment
& Supplies
Chemicals, Chemical Elements
& Chemical Reagents
12000000 Chemicals
including Bio Chemicals and Gas Materials
All relevant sub codes, excluding
12130000 Explosive Materials
All relevant sub codes, excluding 12142000 Noble
Gases and 12142100
Industrial Use Gases
All relevant sub codes
301.3016Scientific and Medical
Equipment & Supplies - Pharmaceuticals
Scientific and Medical Equipment
& Supplies Pharmaceuticals
5100000 Drugs and
Pharmaceutical Products
All relevant sub codes
All relevant sub codes
All relevant sub codes
102.1021 Construction - Architects Construction Architects
102.1022 Construction - Engineers Construction Engineers
Purchasing department
Purchasing Category Mapping to ProcHECategory Description
Description - Level 1
Description - Level 2
Proc HE Code Proc HE Description
202.2021Supplies & Stationery - Stationery
& Office SuppliesSupplies & Stationery
Stationery & Office Supplies
SJ
General Stationery (envelopes, files, diaries,
sundries, etc)
202.2021Supplies & Stationery - Stationery
& Office SuppliesSupplies & Stationery
Stationery & Office Supplies
SH Pre-printed Stationery
202.2021Supplies & Stationery - Stationery
& Office SuppliesSupplies & Stationery
Stationery & Office Supplies
SF
Paper (Photocopying, pre-printed, listing, labels,
continuous) etc
401.4012IT - Desktops, Laptops and
TabletsIT
Desktops, Laptops and Tablets
KH
Desktop Computer (PC's) Purchase, Maintenance,
repair and hire
401.4012IT - Desktops, Laptops and
TabletsIT
Desktops, Laptops and Tablets
KF
Workstation/Mini-computer Purchase,
Maintenance, repair and hire
401.4012IT - Desktops, Laptops and
TabletsIT
Desktops, Laptops and Tablets
KK
Portable/Laptop Computer Purchase, Maintenance,
repair and hire
Purchasing department
Supplier Name Spend £ Pro HE CodesScrewfix 6,871.00 WH / WD
3,221.00 WC
8.00 WK
33.00 WI
40.00 WX
311.00 HD / HB / HJ / HK / HP
642.00 HF / UD / HC / HS
15.00 UB
216.00 UM / UJ / UE / UK
10.00 UC / UH / UN
19.00 UF
Enrich our EMM return.
Purchasing department
University PO Spend split by Purchasing Category FY14/15
Purchasing Category Spend FY14/15
102.Construction £97,481,780301.Scientific and Medical Equipment & Supplies £95,146,780401.IT £28,999,422103.Premises £28,332,032105.Utilities £12,769,402703.Consultancy £11,225,915701.Professional Services £11,000,953803.Travel & Subsistence £8,296,980104.Facilities £8,135,447501.Publications & Library £7,279,955Remaining 23 Categories £64,713,117
102.Construction£97,481,780
301.Scientific and Medical Equipment &
Supplies£95,146,780
401.IT, £28,999,422 ,
103.Premises£28,332,032
105.Utilities£12,769,402
703.Consultancy£11,225,915
701.Professional Services
£11,000,953
803.Travel & Subsistence£8,296,980
104.Facilities£8,135,447
501.Publications & Library
£7,279,955
Remaining 23 Categories
£64,713,117
An opportunity to see the types of report available.
Purchasing department
IT PO spend split by sub category and number of suppliers.
Purchasing department
IT spend (PO) split by supplierSupplier Name
PO Ordered GBP Amount
Av of PO Amount (GBP)
Nr of PO
PO Ordered GBP Amount
Av of PO Amount (GBP)
Nr of PO
Dell Corporation Ltd 4,862,169 2,008 2,422OCF Plc 2,263,224 70,726 32Apple Distribution International
1,730,700 1,001 1,729
Unify Enterprise Communications Ltd
1,199,506 85,679 14
Oracle Corporation (UK) Ltd
874,607 43,730 20
Civica Services Ltd 857,340 7,724 111CAE Technology Services Ltd
819,038 7,313 112
Cadence Resourcing Ltd
786,900 35,768 22
Pervasive Networks Ltd 751,343 83,483 9Insight UK 551,970 219 1,977Remaining 1043 suppliers
2,583,795 1,371 1,885 11,718,831 3,020 3,881
Purchasing department
IT Spend Split by Division
Contracted Spend by Division - £14,867,741
Off Contract Spend by Division - £14,131,681
Academic Services and University Collections;
£252,966.60Continuing Education;
£38,145.46
Estates Services; £54,439.71
Humanities Division; £158,755.18
Medical Sci-ences Divi-
sion; £4,141,405.4
2
MPLS Divi-sion;
£3,321,415.47
Social Sci-ences Divi-
sion; £900,235.56
University Administra-
tion and Services;
£2,600,903.47
University Chest;
£3,399,474.57
Academic Services and University Collections;
£746,191.70
Continuing Education; £43,775.83 Estates
Services; £338,762
.65Humani-ties Di-vision;
£258,454.18
Medical Sciences Division; £2,787,5
98.01
MPLS Division; £2,157,3
66.71
Social Sciences Division; £920,877.61
Univer-sity Ad-ministra-tion and
Services; £4,337,1
48.51
Univer-sity
Chest; £2,541,5
05.66
Purchasing department
Off Contract Spend in Medical Services Division by department.Department PO Value % of
Total
Psychiatry 303,374 10.9%
Medical Sciences Divisional Office 257,417 9.2%
Wellcome Trust Centre for Human Genetics 202,037 7.2%
Clinical Trial Service Unit 165,474 5.9%
Tropical Medicine 161,090 5.8%
Clinical Neurosciences 135,691 4.9%
Weatherall Institute of Molecular Medicine 118,273 4.2%
Obstetrics and Gynaecology 107,703 3.9%
NDORMS 102,075 3.7%
Structural Genomics Consortium 100,288 3.6%
Remaining 31 Departments 1,134,178 40.7%
Purchasing department
Who is buying off-contract by department.Department Name PO Requestor Supplier Name PO Ordered GBP Amount Nr of PO
Obstetrics and Gynaecology Ahmed A Jigsaw Systems Ltd 58 1Oxford Nanopore Technologies Ltd 779 1
Lesley C Flowjo LLC 1,501 1GraphPad Software Inc. 1,649 1
GV Multimedia Ltd 20 1
Rebecca D Systat Software UK Ltd 424 1
Philippa E Fry-It Limited 32,500 1Thomas I JBL Limited 231 1
Ann L Flashbay Ltd 1,436 2MedSciNet U.K. Ltd 53,350 3Neuroelectrics Barcelona S.L. 2,831 2
Posturite Ltd 179 1Simon L Fry-It Limited 12,480 1
Fullerscope Services Ltd 265 2Structural Genomics Consortium David D IT Support Business Ltd 55 1
Brian M Advanced Digital Dynamics Ltd 269 1Carbonite Inc. 523 1GraphPad Software Inc. 2,412 1
Molsoft LLC 71,839 1Oracle Corporation (UK) Ltd 2,421 1Schrodinger LLC 20,013 1VC Warehouse Ltd 968 1
Dinaben M City Audio Visual Ltd 270 1Romain T Identify Direct Ltd 524 1Garrick T Isocount Ltd 995 1
Purchasing department
• Details shown by searching on a CE505A cartridge▫ Majority of spend on contract▫ Details by supplier▫ Identified potential opportunities
Cost implications – on/off contract spend
Insight UK – Off contract and more expensive: one to address with requesters
Potential savings by switching to on-contractQC Supplies Ltd appear cheaper than contracted on face value – one for investigation
Price difference between the two preferred suppliers
Purchasing department
Improving our spend information
Providing purchasers with a more informed choice
Delivering additional savings
Negotiating better agreements
Benefits for us.
Supplier Relationship Management
Purchasing department
How might this help you and your suppliers?
• Move away from the transactional relationshipIf like us you spend weeks agreeing price reviews
• Use that time to agree• Targeted category initiatives • Conduct regular supplier reviews to track progress
• Use your time more effectively and drive further value into your relationships with suppliers.
Purchasing department
Opportunity to compare data
Negotiating better agreements
Delivering sustainable savings
Discussions on growing market share
Benefits for our suppliers.
Constructive relationships Win - WinMarket Share by Supplier – HPC Servers & Electronic Data Storage (Top Suppliers)
Purchasing department
So how could you embark on the same journey?
Admittedly we threw resource at the problem.Arguments put forward -• We don’t have a sophisticated ERP system!• We don’t have time or resources to analyse our spend• My FD doesn’t believe it will benefit us.• We don’t have any spare budget.
Solution.• Agree on a hierarchy – use ProcHE• Ask your suppliers for your spend data – they have everything you need to know.• Use a third party to anaylse your spend – consortia agreement with Spend 360• Engage with your FD/colleagues show them the results.
In one category initiative we identified spend in laboratory consumables.• Products were sold by three distributors• We tendered these products • We achieved a cashable saving of 10%.This one initiative has paid for our investment.
Purchasing department
Thank you for your time and listening
QUESTIONS