UNIVERSITY OF BATANGAS - LIPA CAMPUS
COLLEGE OF ENGINEERING AND ARCHITECTURE
INDUSTRIAL ENGINEERING
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SUPPLY CHAIN
MANAGEMENT
ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
PROCUREMENT
STRATEGIES
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
ANALYZING SUPPLY CHAIN MARKET
Supply market analysis assists procurement planning
and the ongoing management of supply arrangements
by identifying the following:
• Structure of the market
• Market behavior
• Barriers to market entry
• Environmental factors
• Ethical considerations
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
5 STEPS TO A SUPPLY CHAIN MARKET ANALYSIS
● Define your objectives, scope, and commodity profile
○ The primary goal of performing a market analysis can vary, but a
common goal is to develop key insights to drive better business
decisions and improve your competitive position via your supply
chain. Since every organization is unique, ensure you and your
stakeholders are in alignment prior to executing this analysis.
○ Before you begin any research, it is also critical to understand
the scope of your project. Define the breadth and depth of your
efforts and develop a clear understanding of the profile of the
commodity that you will research.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
5 STEPS TO A SUPPLY CHAIN MARKET ANALYSIS
● Research the market and pricing structure for your
commodity
○ Make sure you understand how pricing works for the goods or
services you are interested in; factors including material costs,
labor costs, transportation costs, energy and utility needs, and
overhead can influence the final price you pay.
○ Is the commodity’s availability influenced by the time of year? By
geopolitical events? By new laws coming into effect? This is the
time to find out.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
5 STEPS TO A SUPPLY CHAIN MARKET ANALYSIS
● Conduct in-depth supplier analysis
○ Identify the main players in your market and research them
thoroughly. From geographic locations to target customers and
competitive advantage, it’s important to understand the context in
which they operate.
○ It’s also not a bad idea to do some digging into their financial
background and research any lawsuits or other risky situations
they may be up against. One framework that can be helpful in this
step is a SWOT (Strengths, Weaknesses, Opportunities, Threats)
diagram, which can make it easier to compare suppliers against
one another.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
5 STEPS TO A SUPPLY CHAIN MARKET ANALYSIS
● Identify key market indicators
○ Finding the right indicators for your commodity can be difficult, but it can play
a significant role in your research conclusion and ultimately, your recommended
business strategy.
○ How? When viewed in context, the right indicators can help you understand
the current state of the market, and when tracked over a period of time, these
indicators can become predictors of what’s to come in the market. Four
categories of indicators you may consider measuring include:
■ Economic Indicators – pricing trends, inflation rates, and production rates
■ Pricing Indices – Consumer Pricing Index (CPI), Producers Pricing Index
(PPI), and Import/Export Price Indexes
■ Employment Indicators – unemployment claims, percentage of workforce
fully employed
■ Production Measurements – gross domestic product (GDP), industrial
production rates, and capacity utilization rates. Undeniably the Best!
ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
5 STEPS TO A SUPPLY CHAIN MARKET ANALYSIS
● Compile your findings and outline final recommendations
○ In this step, keep in mind the context and culture of your organization.
Risk tolerance, for example, can vary greatly from industry to industry
and company to company. Developed and implemented the right way for
your unique organization, your findings can enhance your business’
competitive advantage, reduce risk in your supply chain, and strengthen
your financial position.
○ Conducting your own supply chain market analysis is not an easy feat,
but with careful, comprehensive research and judiciously applied
recommendations, this analysis can prove very effective. From
increasing your supply chain’s strategic impact to enabling business
agility to outsmart unexpected circumstances, the outcomes of such an
analysis can be far-reaching and surprisingly valuable.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND MANAGEMENT
● Spend management is a continuous process of controlling and improving the
way a company spends money and typically includes strategic procurement
activities such as supplier management, category management, inventory
management, and product development.
● Ideally, an effective expense management strategy includes a comprehensive
spend analysis and helps companies maintain control of their purchases,
optimizes supplier relationships, and maximizes the ROI of every dollar they
spend.
● While spend management is often executed by procurement, it impacts many
internal and external stakeholders of a business who are also concerned with
budgeting and planning future profitability.
● They need spend management to stay in business and improve an
organization’s bottom line. Effective spend management will leverage real- time
analytics and insights to drive better decisions, create value, and cut costs.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND MANAGEMENT
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND MANAGEMENT
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND MANAGEMENT
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
HOW SPEND MANAGEMENT IMPROVES PROCUREMENT?
● Better sourcing opportunities
○ By mapping out all the costs involved in the supply chain
process, you can identify which suppliers are yielding the most
value and which ones are not. Supply chain management
becomes more efficient because you have a clearer picture of the
vendors who are the most cost-effective.
● Increased process efficiency
○ Spend management software eliminates manual processes that
take up valuable time and money and optimizes procure-to-pay
processes like strategic sourcing and contract management
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
HOW SPEND MANAGEMENT IMPROVES PROCUREMENT?
● More spend visibility
○ Spend management systems provide accurate and timely data
that lead to more insightful decisions around procurement. Spend
analytics support forecasting efforts that reduce maverick spend
and capitalize on savings opportunities.
● Better risk management
○ An end-to-end spend management solution provides the means
to assess the market, identify risk factors, and develop plans for
navigating around them before they occur and well into the future.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
HOW SPEND MANAGEMENT IMPROVES PROCUREMENT?
● Decreasing Maverick spend.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
HOW SPEND MANAGEMENT IMPROVES PROCUREMENT?
● Decreasing Maverick spend.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
HOW SPEND MANAGEMENT IMPROVES PROCUREMENT?
Increase Spend Economies of Scale
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
DEVELOPING SUPPLY STRATEGIES
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
DEVELOPING SUPPLY STRATEGIES
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
DEVELOPING SUPPLY STRATEGIES
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
HOW SPEND MANAGEMENT IMPROVES PROCUREMENT?
Make or Buy Decision
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
HOW SPEND MANAGEMENT IMPROVES PROCUREMENT?
Identification and selection of Suppliers
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
HOW SPEND MANAGEMENT IMPROVES PROCUREMENT?
Managing and improving supplier
relationships and capabilities
Monitoring and rewarding Supplier
performance
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
TACTICS TO IMPROVE YOUR SPEND MANAGEMENT PROCESS
● Identify expenses and company spending
○ The first step is to identify the sources of expenditure, which
encompasses both direct and indirect spend. It involves collecting
purchase orders, goods receipts, supplier invoices, and supplier
payment data. There is no room for error here and it can be an
extremely tedious task. That’s why investing in spend
management software that records expenses digitally is a good
idea.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
TACTICS TO IMPROVE YOUR SPEND MANAGEMENT PROCESS
● Centralize expense data
○ Once you have all your expense sources, you must gather this
information in a central database. Automation can help maintain
records of spend or you can put all your expense data in a digital
spreadsheet. Either way, make sure you assign this task to a
responsible individual.
● Verify data
○ The data that’s collected and stored must be cleansed. This
entails steps such as removing duplicates, correcting any spelling
mistakes, and ensuring that all spend data is recorded in a single
currency. Cleansing and verifying your database validates that the
data you’re using to make key company decisions is as accurate
as possible. Undeniably the Best!
ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
TACTICS TO IMPROVE YOUR SPEND MANAGEMENT PROCESS
● Create spend categories
○ Expenses come in all shapes and forms. It’s necessary to create top- level
spend categories that align with your company’s objectives. Examples could be
advertising expenses, supplier contracts, employee salaries, and so on.
Compartmentalizing helps with better understanding all the spend information
you’ve gathered.
● Analyze spend data
○ Now it’s time to conduct a detailed spend analysis that will give you real-time
visibility into your company’s purchasing history, spending patterns, and will
provide insight into supplier benchmarking and cost opportunities. This is also
how you can quantify cost savings and differences in terms of percentages and
aggregates/averages.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
TACTICS TO IMPROVE YOUR SPEND MANAGEMENT PROCESS
● Define a strategy
○ Based on the data you’ve collected, streamlined, and analyzed,
you can form a spend management strategy. This will most likely
involve implementing changes that affect all stakeholders, so
make sure they’re involved in the decision-making and
implementation process.
● Forecast and planning
○ When you obtain accurate and reliable data through a spend
management platform, you can identify savings and cost reduction
initiatives and estimate the impact it will have on your bottom line.
Data forecasting helps you prepare for the future, improve supplier
relationships, and provides the insights needed to adapt to
changes in supply and demand. Undeniably the Best!
ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS
● Spend Analysis is the starting point of strategic sourcing and
creates the foundation for spend visibility, compliance, and control.
● Spend analysis organizes procurement information via supplier
hierarchies, commodity alignment, and spend amount, in order to:
○ Ascertain true category spend
○Identify strategic sourcing opportunities through demand
aggregation and supplier rationalization.
○ Identify expense reduction through increased compliance –
in the form of vendor rebates, maverick spend, contract
compliance, and budget variance.
● The savings can range from 2 to 25% of total spend. Undeniably the Best!
ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS
● Spend analysis is the practice of analyzing procurement spend
to decrease costs, increase efficiency, or improve supplier
relationships.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
KEY TERMS AND DEFINITIONS
● Spend data (also known as procurement spend data) is
information dealing with a company’s expenditures on goods and
services purchased from external suppliers.
● Spend data management is the process of collecting, sorting,
and managing that spend data.
● Spend analytics is the process of collecting, cleansing,
classifying, and analyzing spend data through either dedicated
software or one-off spend cubes.
● Spend analysis is the practice of analyzing spend data to
decrease costs, increase efficiency, or improve supplier
relationships.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS
● Put simply, spend analysis is a process of systematically
analyzing the historical spend (purchasing) data of an organization
● The idea is to be able to examine these reports and identify
opportunities for savings.
● For example, if the spend associated with non preferred
suppliers is high, this category is clearly where spend “leakage” is
occurring because the prices and terms negotiated with preferred
suppliers are usually better than the prices and terms that are in
effect with non preferred suppliers.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS
● To understand this situation, take a look at figure 1.1, which
shows a few transactions pulled from the A/P (accounts payable)
systems of two divisions of a corporation. Examine these
transactions and try to quickly answer the following questions:
○ How much did the company spend on personal computers?
○ How much did the company spend with IBM on software?
○ What was the spend associated with IT and professional
services in Q3 and Q4 of 2006?
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS
● To understand this situation, take a look at figure 1.1, which
shows a few transactions pulled from the A/P (accounts payable)
systems of two divisions of a corporation. Examine these
transactions and try to quickly answer the following questions:
○ How much did the company spend on personal computers?
○ How much did the company spend with IBM on software?
○ What was the spend associated with IT and professional
services in Q3 and Q4 of 2006?
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYTICS VS. SPEND ANALYSIS
● Spend analytics is the art behind spend data management. It
begins with the collecting and cleansing of data. Then, there are
the important steps of classifying and consolidating the data, so
it’s grouped and named in understandable ways. After that, the
data can be merged with external data, and be ready for the
analysis stage.
● Spend analysis is often regarded as the fundamental foundation
of sourcing. It is a tool that sourcing executives can utilize to
engineer superior performance. The insights from spend analysis
can improve visibility into corporate spend, as well as drive
performance improvement, contract compliance, and most
importantly, cost savings.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS
These are the basic questions we are asking when performing
To extract valuable spend analysis:
information out of a spend
analysis, it involves pulling ○ What are we buying?
together purchase history ○ How much have we paid?
data to look at all angles of ○ How much have we bought?
an organization’s ○ Who are we buying from?
expenditures. This includes ○ Who is buying?
considering products, ○ On what terms did we buy?
prices, quantities, suppliers, ○ How often do we buy?
business units, and payment ○ When did we buy it?
terms. ○ Are we getting what had been promised?
○ Where were the items delivered to (geographical location)?
○ How does the data compare from previous years?
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS
Here are some of the most common sources of procurement spend
data.
○ enterprise resource planning (ERP) tools
○ general ledger information (i.e., an organization’s financial data)
○ purchase orders
○ data shared by suppliers
○ risk reviews
○ credit ratings
○ transaction data
○ other internal systems and external sources
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
ERP TOOLS
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DIRECT AND INDIRECT PROCUREMENT SPEND
● Direct spend in procurement refers to goods and services that are
directly related to making products. Examples may include raw
materials, components, hardware, and services related to
manufacturing processes.
● Indirect spend in procurement is the sourcing of goods and services
not directly related to manufacturing of products. Indirect procurement
enables businesses to maintain and develop its operations.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
DIRECT AND INDIRECT PROCUREMENT SPEND
● Examples of indirect spending categories include:
○ marketing services (media buying, agency fees)
○ professional services (consultancies, advisors)
○ travel and lodging
○ MRO (maintenance, repair, and operations)
○ information technology (hardware, software)
○ HR related services (recruitment, training)
○ transportation and fleet management
○ utilities (gas, electricity, water)
● In manufacturing industries, direct material spend covers most of the total spend –
sometimes it may account up to 80% of the total spend. But what is the difference
between direct spend and direct material spend?
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
BENEFITS OF SPEND ANALYSIS
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS IN 6 STEPS
● Identify Data Sources
○ To start a spend analysis, the first step is to get an overview of what
spend will be covered. Doing this allows you to restrict those
purchases to just a few key sources.
○ You can segment your spend into different groups and from there
determine all the spend data sources available from your departments,
plants, and business units. Start by identifying the areas of your
business that make significant purchases, such as procurement,
finance, and marketing.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS IN 6 STEPS
● Data Extraction
○ Once you have narrowed the scope down, you can now capture your spend data
and consolidate all of it into one central database. Data is usually in different formats,
different languages, and different currencies, so collecting it into one single source
might be challenging. There are, however, software programs available to make this
step easier.
● Data Cleansing
○ Cleansing is about detecting inaccuracies and removing corrupt records and
redundancies from a set of data. This includes finding and eliminating errors and
discrepancies in descriptions and transactions to ensure accuracy. Through data
cleansing, you can identify which contacts in your database are incomplete or
irrelevant. Typos are removed and missing codes are validated and corrected for up-
to-date information.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS IN 6 STEPS
● Data Enrichment ● Classification
○ Data enrichment refers to the ○ Classification typically involves grouping several
process of enhancing, refining, and suppliers of the same parent company or
improving raw spend data. It also organization. For example, Microsoft purchases like
includesstandardizing the spend data Microsoft 365, Azure, and Surface should all be
grouped together. At the same time, you can also
for easy viewing. Enriching the spend
categorize the data into meaningful groups (like
data makes sure that all the header marketing, office supplies, software) to identify how
and line- level names and details are and where the business is spending its money.
accurate and to a specific naming ○ Unifying heterogeneous spend data into clearly
standard. Data is often missing defined categories makes spend easier to address
specific fields, and misspellings and and manage across the whole organization.
abbreviations are common — as are Classification is about harmonizing all purchasing
incorrectly coded fields. transactions to a single taxonomy, enabling
procurement to gain visibility to the global spending
to make better sourcing decisions.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
SPEND ANALYSIS IN 6 STEPS
● Analysis of Data
○ The last step is to identify opportunities for savings and other
procurement improvements. Analysis can be geared towards
investigating all sorts of business problems, such as ensuring that you
have negotiated the best contract deals per supplier, or confirming
buyers are purchasing from preferred suppliers.
○ With this, you can identify opportunities of reducing the number of
suppliers per category and negotiating better rates. The best probable
method for cost savings can only be realized after the confirmed
estimates have been calculated properly.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
E-PROCUREMENT
● E-procurement is the process of buying and selling
supplies and services over the Internet. It differs from e-
commerce in that it makes use of a supplier’s closed system
typically available only to registered users.
● When implemented properly, e-procurement opens the
lines of communication between a company and a supplier
by creating a direct link and facilitating interactions such as
bids, purchase orders and emails.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
E-PROCUREMENT
● Cost Savings ● Shorter Purchasing Cycles
○ Built-in monitoring tools help ○ Centralized transaction tracking
control costs and maximize simplifies reporting on orders,
performance, reducing overhead payments, and requisitions, as
and paperwork. Fully automated well as ensuring contract
systems streamline processes compliance, all of which can
and can result in a faster cycle reduce delivery time. Buyers have
from creating an order to electronic access to available
fulfillment. There also is an products, services, and prices.
opportunity for a larger selection
of products and services.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
E-PROCUREMENT
● Improved Inventory Control ● Transparency
○ Procurement professionals ○ All information is centralized
can quickly locate products and can be made available
from preferred suppliers and are to management, stakeholders,
limited to the purchases shareholders or the public,
they can make, so inventory is as appropriate.
better controlled.
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
UNIVERSITY OF BATANGAS
LIPA CAMPUS
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COLLEGE OF ENGINEERING AND ARCHITECTURE
INDUSTRIAL ENGINEERING DEPARTMENT
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ENGR. REYVEN P. CULIS CLSSYB, PMFC, SO2 | reyven.culis@ub.edu.ph
