Assignment One: Goods Spend Analysis in Your Organization

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Goods spend analysis is the process of collecting, cleansing, classifying, and analysing expenditure data with the purpose of reducing procurement costs, improving efficiencies, and monitoring compliance. It can also be used in areas such as inventory management, budgeting and planning, and product development. Spend analysis consists of three different components: Suppliers, Customers, Commodities and Services.

1. Show the steps you would use to conduct goods spend analysis for your organization. PROcure Healthcare SSO uses an e-procurement/P2P (procure-to-pay) system which has a few monitoring and compliance checking capabilities without involving spend analysis solutions. Unfortunately our current procurement system cannot manage all spend and provide the highlevel of detail required for effective analysis. For this reason, PROcure has implemented a SAP Crystal Reporting system which, combined with the current P2P system, provides much more sophisticated types of analysis, monitoring and compliance checking reports. The steps in completing an effective spend analysis include: I. Plan: The planning step includes: setting the direction and goals, assessing readiness, project planning, exposing data issues, loading sourcing data, making the data usable (cleanse/classify), frequently refresh data. II. Analyse: The analysis step should be guided by a set of priorities for a particular goal or objective. With the flexibility of our combined spend analysis systems we are able to manipulate the data stored within the procurement system in an infinite number of ways, ultimately producing very detailed and creative reports. This is where the experience, skill and creativity of the analyst team will make a difference in how quickly and effectively

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answers are found. It is useful to provide training, mentoring and knowledge-sharing for this step in order to achieve the most out of the spend analysis systems capabilities. The following is an example of selecting data to be analysed within our Crystal Reporting system:

III.

Execute: This execution step is where all the hard work pays off the generation of the spend analysis report and executing the changes required within the opportunity areas discovered. This step is usually performed by the procurement, sourcing and finance teams. The information provided in this analysis report should meet the initial goal or objective and provide awareness to the direction required to achieve the strategic initiatives. The following is an example of the information/report that is generated from the analysis, which can be exported to a program of choice for further manipulation:

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IV.

Monitor: This is the final step to monitor the actual results. PROcure is able to measure and demonstrate the improvements achieved to our member Hospitals as a whole or individually. This success is then built on throughout the organizations by creating metrics to monitor and improve on a continuous basis to further achieve the strategic initiatives.

2. Describe specific key triggers and why you chose them. Some key triggers to initiate spend analysis and the benefits they will achieve include: High dollar value of commodities or services -Take advantage of volume and group spending benefits, realize standardization and consolidation opportunities, supplier management, and risk assessments.

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High number of transactions for commodities and services Realize opportunity for Just-In-Time product lines, consolidation and standardization, volume spend benefits, and seeking better responsiveness from suppliers.

High dollar value for suppliers Opportunity to reduce cost by leveraging bargaining position with preferred vendors, supplier management, relationship management, seek better quality products at a lower price, and supplier risk assessments.

High number of transactions for suppliers Leverage bargaining position with preferred suppliers, volume spend benefits, and uncover opportunities to enter into stronger relationships.

High percentage of sole source for any of commodities, services, suppliers, or customers Volume/Group spend benefits, seeking a better quality product, and risk assessment opportunities.

3. Describe how spend analysis would fit within your current procurement strategy. As described on our website, PROcure was created in 2008 with the goal of improving patient care, providing better service to front-line professionals, increasing value from suppliers and lowering hospital costs. With a focus on "Teamwork", PROcure maintains solid partnerships with our member hospitals and supporters, as well as a harmonized flow of consolidated functions within the PROcure environment. Hospitals within the ESC LHIN have a history of successful collaboration and leadership in advancing "best practices" in health care delivery for the province. The Erie-St. Clair Region is committed to integrating health care supply chain functions through the adoption of leading practices that supports the diversity of its participating organizations.
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In our first official full year of operation PROcure was given the task of providing our member hospitals with 1.5 million in savings. Through data and supplier management, intricate spend analysis, contract consolidation, product standardization, volume spend benefits, strategic sourcing and other key initiatives PROcure greatly surpassed that goal and saved over 2.7 million. It was through our P2P and Crystal Reporting systems that PROcure was able to benchmark our 5-member Hospitals spend and continue to locate areas for effective future savings initiatives. This aligns with the Hospitals strategic goals and provides realized savings from the onset of the initiatives, ultimately providing financial relief on the tax payers without sacrificing quality of care for our patients. PROcure uses a combination of spend analysis tools and applications to realize much more powerful capabilities for savings and improve efficiencies. PROcure analyses data including spend amounts, supplier performance, inventory levels, product forecasts, warranty data and failure rates, risk factors, external data about commodity prices, options for pricing risk mitigation, etc. These spend analytics are used throughout our organization to achieve both PROcure and our member Hospitals strategic initiatives; which achieve added benefits to our ultimate customer, the hospital patients. Spend analytics are integrated into our procurement tools to help our team make smarter decisions and recommendations to our Hospital departments. PROcure is able to show each Hospital and their members actual performances and break down their individual total costs to help the end-users make more educated decisions regarding their product and service requirements while considering the strategic goals of each organization.

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