Rosslyn Tail Spend Analysis Tool Software User Guide

Rosslyn Tail Spend Analysis Tool Software

Product Information

The product is a Tail Spend analysis tool that helps businesses manage and analyze their non-managed spend categories. The tool aims to reduce costs, increase process efficiency, reduce risk, and improve supplier management by analyzing Tail Spend.

• Cost reduction between 5% and 20%
• Increase in process efficiency of over 10%
• Reduced risk across the supply chain
• Increase in the amount of strategically managed spend from the average 80% to over 90%
• Increased usage of, and compliance with, procurement systems  processes
• Increased visibility across the procurement process
• Improved and effective contract and supplier management of all suppliers

Product Usage Instructions

1. Select a target business category to filter the Tail Spend analysis.
2. View the main Chart and Table report widgets to analyze Tail Spend by supplier within the selected business category.
3. Type ranges of values into the ‘Pareto % Limit’ box to change the Pareto scale from a range of 0% to 100%.
4. Click away from the ‘Pareto % Limit’ box to apply the typed-in value.

Introduction

• Tail Spend is that spend for any business, which is not actively managed in all the spend categories and may have an impact on the organisation’s financial performance due to its impact.
• Tail Spend contains a small portion of the spend (10–20% under each spend category, typically) but a large number of suppliers accounting for it.
• Tail Spend can hide maverick purchasing, waste and even fraud, which is why many organisations are starting to realise the benefits of tackling it through careful management and analysis.
• Tail Spend – also called long tail, or low value spend – is the 20% of spend that typically goes unmanaged within an organisation. This 20% tends to be spread across multiple spend categories and via a large number of low value transactions with numerous suppliers, many of which are used very infrequently. In fact, Tail Spend often accounts for 80% of all an organisation’s suppliers.
• Tail Spend tends to be unclassified, and therefore ‘invisible’, because the purchases are too small, or too infrequent to go through an organisation’s procurement system. This is one of the key factors which makes Tail Spend hard to manage. And, while the value of Tail Spend will obviously vary depending on the size of an organisation, that invisible 20% often contains a few ‘maverick’ high-cost purchases that should have gone through a more strategic purchasing process, or even in some cases, procurement fraud.

The effective management and analysis of Tail Spend can achieve

1. cost reduction between 5% and 20%
2. an increase in process efficiency of over 10%
3. reduced risk across the supply chain
4. an increase in the amount of strategically managed spend from the average 80% to over 90%
5. increased usage of, and compliance with, procurement systems/processes
6. increased visibility across the procurement process
7. improved and effective contract and supplier management of all suppliers

Analysing Tail Spend

Navigate to ‘Spend Dashboard: Analysis – Tail Analysis’

The Tail Analysis sheet will display on the screen. (By default, the user adjustable analysis Pareto scale will be set at 80%.)

The ‘Tail Analysis’ screen consists of:

1. Analysis tools window (to the left side of the screen)
2. Dimension & Tail Spend doughnut chart
3. Dimension & Tail Spend Over Time chart
4. Dimension that cumulates % of Spend chart
5. Dimension that cumulates % of Spend table
   Note: All charts and tables on this screen are filterable.

The Analysis Tools

In addition to the normal filtering opportunities, the ‘Analysis Tools’ window (occupying the left side quarter of the screen) offers the user a range of adjustable analysis tools. Charts and tables in the main screen report widgets will react to the user settings applied with the ‘Analysis Tools’:

• Pareto % Limit – type in the box to adjust the Pareto scale from 0%to 100%, as required.
• Change Report View – Toggle between Dimension view and Category view in screen reports
• Dimension Settings – In Dimension view, select the required Dimension from the dropdown list
• Category Settings – In Category view, select the Category and the Category Level from the dropdown lists
• Hide UNKNOWN DESCRIPTION –Select this to hide any data described as ‘UNKNOWN’
• Category Level Filters – Select a Level as an instant Filter from those displayed (in this example L1/L2/L3/L4 only)

Tail Spend Analysis Example

Scenario
An analysis of the Tail Spend by Supplier within a specific business category.

• Starting with the ‘Analysis Tools’ the Pareto % Limit remains at the default 80%setting.
• The ‘Change Report View’ toggle button is set at ‘Category’
• From either the Chart report widget or the Table view report widget, select and apply a target business category as a filter (in the example shown ‘Published Products’ has been selected at Level 1)

• Select ‘Dimension’ view using the ‘Change Report View’ toggle button
• All report widgets will now focus on the Suppliers within the target Category. Specifically, the main Chart and Table report widgets

• Expand to Full Screen each of the Chart view and Table view report widgets to examine the results

• Head Spend, in this example, is colour coded blue and Tail Spend is colour coded red, for easy reference.
• To close Full Screen mode, left click on at the top right corner of the expanded report widget. The screen will revert to the Tail Analysis ‘Sheet’
• Further analysis can be performed to establish the relationship between Head and Tail spend by typing ranges of values into the ‘Pareto % Limit’ box, changing the Pareto scale from a range of 0% to 100%. Remember to left click away from the ‘Pareto % Limit’ box once you have typed in a value. This will apply the value typed in.

SC/RDT – V1 February 2022

www.rosslyndatatech.com  

References

• Procurement Analytics And Spend Management Software Solutions
• Procurement Analytics And Spend Management Software Solutions

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