Category Profile Spend Analysis Template

Revised 01/26/11

SPD-PS004b

 Spend analysis Overall Opportunities Subcategory Opportunities

A.T. Kearney X/mm.yyyy/00000

Example

Georgia Spend Cube Data

Sources of Spend Cube Data
AP & P-Card Data - $106 MM No line item detail Contains the aggregate spend for a transaction with an State Entity/Supplier Data sources include AP without PO visibility, P-Card, GSFIC $52,412,947 of the spend falls under No State Entity Listed $104,098,316 of the spend fall under NO NIGP code PO Data - $19 MM Contains Line Item Detail Item Description, Quantity, Unit Price, Buyer Name/ID Contains PO Type Description Open Market, Statewide Contract Release, State Entity Contract and Releases, Construction-PW-A and E, Sole Source-Per GPM, Exempt-Per OCGA 50-5-58, Sole Brand-Per GPM, Mandatory-CS, GCI, GEPS, GIB, Intergovernmental Agreement

Combination of various sources indicates $125 MM in unadjusted MRO spend

Source: AP&P-Card data; PO Data from State of Georgia, 2005
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Example

Spend by State Entity

$12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000

Transportation Georgia Perimeter Human Resources Univerisity of West Georgia Natural Resources Central Georgia Juvenile Justice Regents of the University Georgia Southern Columbus State Fort Valley State Armstrong Atlantic State Kennesaw State Savannah State Forestry Commission

$Corrections

106 state entities are represented in data.

University of Georgia, Georgia State, Georgia Tech and the Medical College of Georgia are not included in the spend current spend cube. GSFIC represents $52 Million in spend cube and has no identifiable entities.

Source:

SAO and Regents A/P and PO extracts, BoA P-Card extracts, and SAO General Ledger for FY05

Valdosta State South Georgia Technical

Public Safety

Defense

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Example

Georgia MRO Spend Data

Complexity of MRO Spend
Sources AP & P-Card PO Total
Mis Categorized Adjusted Total

Spend $106,198,680 $18,792,611 $124,991,291

$39,074,680 $85,916,611

# Line Items 52,439 11,524 63,963

9,332 54,631

# Vendors 3,401 2,659 4,584

681 3,903

# Entities 66 105 106

100 106

Sub Categorized Misc MRO Spend

Spend $62,769,098 $23,147,513 $85,916,611

# Line Items 27,010 27,621 54,631

# Vendors 597 3,184 3,781

# Entities 102 105 106

20 Suppliers account for 64% percent of MRO Spend (1)

Notes: Source:

(1) 20 vendors account for $54,797,460 of $85,916,611 of the total MRO spend - 64% SAO and Regents A/P and PO extracts, BoA P-Card extracts, and SAO General Ledger for FY05

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Example

MRO Spend Currently Sub Categorized

Top 15 MRO Sub-Categories(1) by Spend and Number of Suppliers (Spend in $MMs)
$18 $15 $12 $9 $6 $3 $0
Industrial Gases PVF Molded Plastic Parts, Tapes MRO Distributor Retail Light Bulbs Misc Services Electrical Paints Industrial / Chemicals Safety HVAC Cleaning Solutions Other Gas Door Hardw are $5 $4 $4 $3 $2 $1 $1 $1 $1 $17 $17

120 100 80 60 40 20
$1 $1 $1 $1

Spend

# Vendors

All sub categorized spend represents $63 Million of the $85 Million is MRO spend Industrial Gases is composed of a single supplier, Linde Gas. Linde Gas current contract was estimated at $53,000 (2) $16 Million in Pipes, Valves and Fittings is 1 transaction with no detail to American Piping Supply Molded Plastic Parts does not contain information regarding the state entity, regent or item (s) that were purchased Industrial Supplies via distributor is largely Grainger spend via the Western States Contract Alliance Major Retail spend is Home Depot, Lowes, Ace Hardware, Wal-Mart, Target, etc. Light Bulbs are currently under contract. However, Bulb Direct, a non-contracted supplier, has the most spend The average spend per supplier of the top 15 categories is $105,141
Notes: Source: (1) 15 categories (408 suppliers) in chart account for $59,451,531 of $62,769,098 of the total sub categorized spend (2) Monthly vendor reporting to DOAS SAO and Regents A/P and PO extracts, BoA P-Card extracts, and SAO General Ledger for FY05

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Example

Miscellaneous MRO Spend

Sub Categorized Misc MRO Spend

Spend $62,769,098 $23,147,513 $85,916,611

# Line Items 27,010 27,621 54,631

# Vendors 597 3,184 3,781

# Entities 102 105 106

$23 MM of the $85 MM is miscellaneous, local (supplier) and rogue spend in industrial supplies The average spend of the 3,184 suppliers is $7,270 21,761 of 27,621 items are without line item detail Likely that a majority of items could be purchased on Grainger WSCA contract if mandated (Grainger offers over 500,000 items via Western States Contract Alliance)

Next steps are to continue sifting through detailed portion of the data to subcategorize the spend; however, it is unlikely that any major nuggets of spend or new categories will be found

Source:

SAO and Regents A/P and PO extracts, BoA P-Card extracts, and SAO General Ledger for FY05

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Example

Current State-Wide MRO Contracts

Estimated Effective Date Expiration Date Annual Spend 11/30/2006 6/30/2006 5/31/2007 3/31/2006 2/28/2006 8/30/2006 3/31/2006 10/31/2007 5/31/2006 $ $ $ $ $ $ $ $ $ $ 4,529,931 1,535,055 1,439,864 1,200,000 1,000,000 262,176 233,380 67,267 52,589 10,320,262

Category Maintenance, Repair & Operations 8/1/2003 Lamps, Electric & Ballast, Electronic 1/1/2002 Paper, Personal: Towels, Tissue 6/1/2005 Liners, Plastic Can 12/1/2003 Paint, Interior - Exterior and Supplies 3/1/2002 Air Filters/HVAC 12/11/2003 Dishwashing Compound 4/1/2002 Air Conditioners/Heat Pumps 8/1/2001 Industrial Gases 6/1/2004 Total spend on state-wide contracts

Incumbent Vendor W.W. Grainger Mult-Vendor Fulton Paper Company Fulton Paper Company Duron, Inc d.b.a/ The SherwinWilliams Company Multi-Vendor Ecolab, Inc. Multi-Vendor Linde Gas LLC

$10,320,262 is not a significant amount of total MRO spend, but presents a large opportunity for contract compliance and the development of new contracts
Linde Gas spend reports are grossly less than the spend cube - $52,589 versus $17,007,312 in spend cube Seven of the nine contracts are expiring in next six months In the short term, A.T. Kearney recommended extending the Liners, Paint and Dishwashing Compounds Other contracts will be evaluated for sourcing, consolidation, renewal and extensions

Source:

Contract and spend information is from supplier reporting to DOAS

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 Spend analysis Overall Opportunities Subcategory Opportunities

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Example

There are a number of potential ways in which additional value may be created for Georgia in the MRO category
Potential Opportunities Key Questions Total Cost of Ownership can be Reduced by...
Creating contracts for large sub-categories currently not available on contract Re-biding long standing contracts and contracts approaching expiration Using contract mandate and volume to re-negotiate deal with Grainger

Increase Leverage Increase use of Existing Contracts Practice Standardization

Redirecting large amounts of spend from the open market to current agreements when available

Encouraging the use of P-Cards for purchasing MRO items Providing MRO buying guide with contract coverage and supplier contacts

Consolidation

Reducing 3,900, or 90% of suppliers, by putting contracts in place and mandating them

Specification Standardization

Standardizing specifications and reducing the number of SKUs/ suppliers of commodity items

Source:

A.T. Kearney Analysis

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 Spend analysis Overall Opportunities Subcategory Opportunities

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Example

Sub Category Industrial Gases

Category Description/Scope & Team

Spend Details Spend ($MM) Data Type # of Transactions 2628 # of Suppliers

Contract Type

Contract Expiration

Linde Gas is primary supplier Includes: Welding: Acetylene, Argon, Carbon Dioxide, Oxygen, etc. Training aids for industrial trades Equipment rental and custom purchases Assessment/Opportunities

State Wide Contract 1

May 31, 2006

$17 M

Less than 2% is PO data

Recommendation for Sub Category With $17 Million in spend, a majority off contract, this category should be a priority. First, obtain detailed data from Linde Gas. Then, analyze the spend, assess gaps in contract and complete an industry analysis. Second, negotiate directly with Linde Gas via the current agreement. Third, source category via RF(x).

Majority of spend is: No State Entity Listed Open Market Purchase Without line item detail It appears that the contract is not comprehensive OR state entities and regents do not know about the contract. However, 95% of the industrial gas spend goes through Linde Gas Buyer, Ed Scott, was not aware of that $17 Million was spent through Linde Gas. This is likely because it was purchased off contract. Risks

Next Steps

This is not a popular category to source because of the complexity of the category. Linde Gas might not want to negotiate considering they have 95% of the business now.

Investigate the GSFIC portion of spend to determine if it is in scope and sourcable. Ed Scott has requested a second report from Linde Gas. The original report showed $100,000 in sales. Complete industry analysis in preparation for negotiation or sourcing project.

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Example

Sub Category Pipes, Valves and Fittings

Category Description/Scope & Team

Spend Details Spend ($MM) Data Type # of Transactions 26 # of Suppliers

Contract Type

Contract Description N/A

Pipes, Valves and Fittings (PVF) Includes: General plumbing and piping supply for new and existing systems

$16 M

98% AP data without detail

2 (99% with 1 supplier)

No known State Wide or State Entity contract

Assessment/Opportunities There is 1 transaction of $16 Million to American Piping Supply. There is no detailed information regarding the state entity, regent or item(s) that were purchased. Many PVF items be purchased via Grainger contract. Ed Scott and Ricky Thomas were unaware of American Piping Supply.

Recommendation for Sub Category Investigate the purchase and determine the ongoing PVF needs. Determine if process for 1 time competitive purchases is achieving greatest value. Potential bid as own sub category.

Risks

Next Steps

Future volume will not be leveraged via DOAS contracts.

Investigate the GSFIC portion of spend to determine if it is in scope and sourcable. Obtain a supplier specific report from data management team to get more detail. Follow up with buying team regarding American Piping Supply

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