You never know what you might learn in a spend-analysis exercise—or what your suppliers might learn. But the lessons can prompt changes that improve supplier relations and supply-chain management.

Within Motorola's Integrated Supply Chain (ISC) in Schaumberg, Ill., Director of Global Procurement David Buck and his team follow a rigorous strategic sourcing process they call the Rapid Sourcing Initiative (RCI). Spend analysis is a critical part of the process and it has helped the company cut its supply base, develop successful enterprise-wide category-leverage programs and save significant amounts of money.

It has also uncovered ways for Motorola to work with suppliers to reduce leadtimes, which, in turn, has benefited Motorola in terms of additional savings and stronger supplier partnerships.

"We look for opportunities for our suppliers to be more successful," says Buck. One way they do that is through "agility workshops" that they run in conjunction with spend analysis. In one workshop not long ago, Buck and his team discovered that a component went to four different countries before landing on Motorola's receiving docks. One location created a sub-component, another checked inventory, a third added components and the fourth finalized the assembly and did testing. That travel was adding almost a week to the leadtime for the assembly.

"The supplier investigated its own procedures and found that several of the steps increased leadtime, but with little value added," Buck recalls. Result: the supplier simplified the supply chain and took almost a week out of the leadtime. It's not the only time spend analysis and the agility workshops have produced such a result. "For three different products, we've found ways to realize a 40% reduction in supplier leadtimes," he says.

The other benefits

Traditionally, purchasing staffs think of spend analysis as opportunities for finding where to consolidate their own spend, and that is certainly important. Motorola, in fact, does that regularly. Most recently, after the company acquired Symbol Technologies, Buck and his team pulled spend data from the company's different versions of Oracle software and ran a match against Symbol's supply base. "After the close of the acquisition, we found supplier matches," he says. Then, Motorola launched RFQs that brought considerable savings to both companies.

In another case, after analyzing three years of spare-parts spending by one customer, the team helped the customer accurately project their needs for the next 12 months. That helped improve customer orders for spares and better enabled Garg and his team to manage their supply base.

At the $3.5 billion weapons and space systems company Alliant Tech Systems (ATK), in Edina, Minn., Director of Supply Chain Management Greg Shifflett is using software to get corporate-level spend data and drive sourcing strategy for 20 different category teams. It's part of a major effort to become more strategic in supply chain management. "We need a competitive supply chain to compete ourselves," Shifflett says.

Each of ATK's three divisions—Launch, Ammunition and Mission Systems—has its own purchasing organization and issues its own purchase orders. Before starting its transformation, ATK knew what the three divisions were spending with suppliers and knew who the suppliers were. "But," says Schifflett, "we didn't have a detailed holistic view from a corporate standpoint of exactly what we were buying or at what price, or how those prices compared across the organization. Now we have the detail at the corporate level."

The data is enabling the commodity teams to redesign their sourcing practices where appropriate. "We are looking for opportunities around cost reductions, improved quality, continuous improvement and risk management and mitigation," Shifflett says. "We'll be able to provide detailed spend visibility across the organization regardless of what system it resides in," Shifflett says. "Before, that was only happening on a manual basis."

For SNC-Lavalin, a Montreal-based engineering procurement and construction company that uses the e-sourcing suite of Emptoris software, spend analysis not only helps the company leverage spend and identify opportunities for supply-base rationalization, it raises the company's image with its customers and suppliers.

The company's clients build refineries, power plants and other facilities around the world. SNC-Lavalin helps them manage procurement. It works on more than 1,000 projects a year with 15,000 suppliers and processes over 5,000 RFPs a year. Before using Emptoris, the company had no global spend visibility. "Each project is like its own company," says Marc Escande, vice president of global procurement, "and spend information remained trapped at the project level." The company sources from large multinationals who do not always perceive SNC-Lavalin as an important client, since their sales organization is distributed by region and business unit. "Thanks to global spend visibility from spend analysis," he says, "we get them to understand that we are a big player for them."

“We look for opportunities for our suppliers to be more successful.” —David Buck, Motorola

And for Linda Potter, director of procurement at Sun Trust Banks in Atlanta, spend analysis not only provides her intelligence on where the company's $2 billion in spend goes each year, but also helps her get the support of managers throughout the organization for strategic sourcing.

Sun Trust downloads spend information from its accounts payable system and then groups suppliers into commodities. Line-of-business managers were tapped to be commodity executives with responsibility for selected commodities across the enterprise. Each line-of-business manager must work outside their reporting line to increase the value received from the relationships with suppliers in the assigned commodities. For example, human resources is responsible for all human capital goods and services. Some of the expense is not in the HR organization so it requires managing outside their comfort zone. "We gave them the list of suppliers we used last year and the savings they are responsible for achieving," Potter says. "Now they know how hard it is to do that without information."

Eventually, she says, commodity management may return to the purchasing department. "Then, those executives will support us because now they know what we have to go through." She predicts.

Potter had one other aid that helped garner executive support: the book Straight To The Bottom Line, by Rudzki, Smock, Katzorke and Stewart. "I gave it to my boss, and it gave him an appreciation for the challenges we face," she says.