Procurement Spend Analysis Case Study.
You have just accepted an entry-level position at American Red Cross (ARC). On your first day as a procurement professional, your manager provides you with an Excel spend file1 which has been cleansed after months of extensive effort by another associate.
She said, “I have a meeting with the Chief Procurement Officer (CPO) at the end of next week and I think this will be a good opportunity for you to show us what your supply chain degree has taught you. We need to know the amount of annual spend per sourceable category and sub-category. It will also be beneficial for us to know how many suppliers we have in each sourceable sub-category. From this analysis I want you to identify opportunities for cost reduction and savings. Since you are brand new and the meeting is next week, I have provided you a list of questions to help you organize your thoughts and present the information to me.
In addition, to help you continue to learn about the AMR, you should visit www.redcross.org/about-us and to understand what happens to donated blood, visit www.redcrossblood.org/donate-blood/blood-donation-process/what-happens-to-donated-blood.” When looking for savings opportunities it is important to understand the business.
1. The American Red Cross data provided for this analysis is simulated spend data, as third party spend information is confidential.
Spend Analysis Questions
1.
Type of Spend
a)
Define unaddressable spend and provide several examples from this case.
b)
Define uncategorized spend and provide several examples from this case.
c)
Why do companies not categorize all of their spend?
d)
Should unaddressable and uncategorized be included in an analysis for savings and why or why not? (note: which ever you select be consistent in your upcoming analysis)
e)
Define of direct spend and provide several examples from this case.
f)
Define indirect spend and provide several examples from this case.
g)
Why do companies spend money on indirect categories?
Charts
Analyze ARC’s annual spend from the spend data file and create three (3) charts to visually present the data in a professional manner.
·
Using pivot tables, sort by category first and then sort by sub-category. From the sorts, find the total annual sourceable spend per year by category and sub-category. Create two column charts (also known as a bar charts) of the sourceable categories and the top fifteen sub-categories by descending $ annual spend.
·
Using pivot tables, find the total number of suppliers (count) by sourceable sub-category. Perform a descending sort of the number of suppliers by sub-category and create a column chart of the top fifteen sourceable sub-categories by descending supplier count.