Leveraging Tableau in Support of Procurement

McKinsey’s latest benchmarking survey shows that the best #procurement organizations understand that success in today’s complex and fast-moving environment requires mastery of data-driven decision-making. These organizations have invested in the digital infrastructure and analytical capabilities necessary to achieve that goal. With the advancement in digital technology, often with more user-friendly features, these analytical tools and capabilities are increasingly accessible to a wider user group. The report contends that “the ability to adapt, innovate, and harness the power of data-driven decision-making will be key to procurement excellence in the next decade and beyond.” The McKinsey report cites two case studies to illustrate:

One company, an international petrochemical company, invested in new digital tools and analytics approaches, and ran an in-depth analysis of its spend across more than 50 high-value categories, identifying savings opportunities of about $100 million per year. It then engaged the procurement organization in several category-specific initiatives to capture those savings, and implemented a new dashboard system to track team performance. A year later, the company exceeded its savings targets, reducing spend in the targeted categories by $120 million, at an average savings rate of 12 percent.

Another company, a global retail chain, used a data-driven procurement approach to achieve a tenfold improvement in savings across portions of its $4 billion annual indirect spend. Applying a suite of digital and analytics tools to target six of its largest indirect categories, it moved its historical annual savings rate from 1 percent to above 2 percent, reducing indirect spend by more than $500 million.

The McKinsey report cited above illustrates the increasingly critical role that #Procurement is called to play in delivering earnings improvement to companies, often in collaboration with #Finance. In the pages that follow, I highlight one digital tool I find particularly useful in enabling the collaboration of Procurement and Finance in delivering these savings: #Tableau. ?Although Procurement can extract ?savings from compensation costs, ?as with outsourcing projects, in this article I focus on savings from non-compensation cost categories.

Our case study for this exercise is Parks Pharmaceutical, a fictional biopharma company based in Newark, New Jersey and comprising four business units, spread across Europe and North America.?? The #Tableau dashboard referenced here brings together data from the company’s ERP system as well as from other data sources such as the sourcing databases managed by Procurement. The dashboard therefore gives a comprehensive and integrated view of third party spend that Senior Management, in collaboration with Procurement and Finance, can then act on to pursue spend reduction initiatives across the enterprise. We will navigate the dashboard by walking through the following schedules:

.01 Overview of Spend grouped by Business Units

.02 Overview of Spend grouped by Categories

.03 Project Plans Review

.04 Top N Suppliers by Categories

.05 Top N Suppliers by Brands

.06 Top N Savings Projects

.07 Savings Targets by Categories

.01 Overview of Spend by Business Units

As background, spend is categorized a number of different ways for reporting at Parks Pharmaceuticals. In the figure below, the three views of spend at Parks are the view for Statutory (external) reporting, for Corporate (Internal) reporting, and for Category management. The category view is that used mainly by Procurement to manage spend at the supplier level and to initiate savings projects, such as from supplier consolidation, etc. In this example, the category view comprises the non-compensation cost of Travel, Training, Project and other third-party spend.

We begin at the landing page of the dashboard, which gives a three- year view of spend across the enterprise by business units.? In addition to the spend trend, we also have the savings and savings rate being delivered by Procurement for FY2023 and FY2024, measured against the spend base for those respective years. By these yardsticks, we observed that while the US Market is delivering the most savings compared to other business units, i.e. $141M in FY2024 against a FY2024 budget of $3,260M (i.e. 4% savings rate), France is delivering a 5% savings rate against its smaller budget of $57M for FY2024. This implies that the US Market may have room to deliver more savings, notwithstanding its already high contribution of savings when measured in absolute dollars. As such, the dashboard should trigger a discussion with the US Market team whether opportunities exist to deliver more savings on its spend base for FY2024. For convenience, the dashboard has a sorting filter that allows the user to sort by % savings (and other criteria) to draw attention to different variables in the dashboard.

A click on any business unit displays the spend by category for that business unit. ?Below screenshot of the dashboard displays a drill-down on the US Market, the BU to investigate if opportunities for more savings exist. In this drill-down view, an opportunity to deliver more savings may lie in Logistics (now at 2% savings) or in Patient Support ($0 contribution). A discussion with the category managers for those categories could give rise to initiatives to deliver more savings for the US Market.

.02 Overview by Spend Categories

Next, we look at the trend by spend categories. For example, we see the same spend for FY2023 of $3,291 previously at the BU level, now at the category level. A drill-down on Advertising, for example, shows US Market at $756M for FY2023, the same when we drilled down at the BU level into the underlying spend categories. Management can now use this information to implement a category strategy across the enterprise, assessing the impact by business unit. Kudos to #Tableau for enabling this insight.

.03 Project Plans Review

Next, we look at the Project Spend underlying each business unit and spend category. For example, the projects underlying the FY 2024 spend of $945M in US Market for Advertising can be reviewed by drilling (clicking) into each line item of interest, down to the underlying projects.

A subcategory of Advertising is Digital Media, amounting to $217M of which $166M is spent on the Santeza brand. ?That $166M in turn is made up of 14 projects as shown below, displayed when the user clicks on the Santeza brand. With this information, the category lead for Advertising, as well as other interested parties, can review these projects and assess whether other opportunities exist to squeeze more savings above the current 5% against the $166M in Digital Media spend under Santeza. Clicking on any line at this level reverts to the summary level. This multi-level review capability is a rather powerful feature of #Tableau.

.04 Top N Suppliers by Categories

Next, we look at the Top N Suppliers by categories. Here the category lead, along with the BU lead and Finance, can review the dashboard ?information and assess whether opportunities exist to extract savings from the supply base by consolidating suppliers or by other levers applied to the supply base. ?In the US Market, we see that the top 10 suppliers, 5% of suppliers, account for 69% of spend, using FY2023 historical spend as the base. ?However, if the #Procurement team can pull off further consolidation to bring the Top 10 to say, 80% of spend, that could generate enough savings to fund additional projects, such as for Santeza, above the 14 projects already funded in Digital Media. Again, a very useful feature that #Tableau brings to the table.

.05 Top N Suppliers by Brands

The Top N feature can also be used to assess suppliers spread across brands, providing additional insights. For example, here we see that Laser Ltd is servicing multiple brands, while a larger supplier like North America Sante is servicing one brand. The teams can use this information from the dashboard to assess the impact on the brands if further consolidation of suppliers were to be pursued in the interest of generating additional savings.

.06 Top N Savings Projects

Here, we use the Top N feature yet again to track progress on savings initiatives. This page of the dashboard demonstrates how the Procurement team is progressing in delivering on savings projects.? In the US, a mere 0.3% of projects (Top 10) accounts for 27% of savings ($38M).

.07 Savings Targets by Categories

Continuing with the US Market example, the Procurement team has identified 3,956 projects that will deliver $141M in savings, but Senior Management has given the US team a savings target of $152M (See below). Pulling the levers identified below by the category parameters will deliver savings of $161M, exceeding the target. Parameters are a powerful tool in Tableau that can be used to run multiple scenarios to assess different options in achieving a certain goal. Here we use parameters to show the different options in category savings that would deliver (or exceed) a certain target.

The review in this article demonstrates in no uncertain terms the capabilities that #Tableau brings to the table in facilitating the collaboration of #Finance and #Procurement in supporting data-driven decision-making by our business partners. This gives strong support for organiztions to invest heavily in digital capabilities if they are to get ahead and stay ahead in this increasingly complex and highly competitive business environment.

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?Reference:

McKinsey & Company, “Where procurement is going next”, July 12, 2024, by Riccardo Drentin and Samir Khushalani.