Lonmin Platinum uses Description-based Spend Analysis software to Support Strategic Sourcing
Lonmin Platinum’s Procurement Centre of Excellence has moved away from manual spend analysis efforts, using spreadsheets, to an automated solution using CCI-Growthcon’s Description Based Spend Analysis (DBSA) software.Tony Davey (Head of the Lonmin Platinum, Procurement Centre of Excellence) explains that “we are being placed under increased pressure to obtain good quality products and services at the lowest possible price. We have recognised the need to have more “spend-under management”. In order to accomplish this, we need quicker and easier access to accurate spend data.”
“Lonmin Platinum has been using the software since mid-December 2006 and has already benefited significantly,” says Tony. He listed 4 ways in which the software has and will benefit their organisation:
1. Speed and accuracy of spend analysis
Tony estimates that a spend analysis exercise that took approximately 2 weeks in the past, now takes approximately 2 to 3 hours to complete, leaving the Sourcing Specialists with more time to focus on the strategic sourcing activities that follow-on from a spend analysis. He is also more convinced about the accuracy of the spend data since they are able to search for descriptions across all of their spend as opposed to within a specific commodity group, e.g. they can now search for “new motors” across all commodity groups and are not restricted to searching only within the Electrical Motors commodity group.
There is also the possibility that individuals categorise spend incorrectly by placing a free-text description against the incorrect commodity group. Since the DBSA software is not restricted to searching within one commodity group only, the sourcing specialists are able to quickly pick up these errors and obtain more accurate spend data.
2. Visibility of maverick spend – contract compliance
By searching for descriptions, Lonmin’s sourcing specialists are now able to quickly and easily identify maverick spend. Where goods and/or services are being purchased outside of a contract, the information is communicated back to the end-user who is then also made aware of the savings that could have been gained, had the end-user made use of the contract, says Tony. Contract compliance has additional implications relating to the use of Lonmin standard products and to site safety which is also communicated to the end-user whenever there are deviations from contract purchases. Tracking and ensuring contract compliance is no longer a huge effort, stated Tony.
3. Grouping around the supply market
An additional benefit of using the DBSA software is that Lonmin is now able to group the goods or services they buy around the supply market as opposed to pre-determined commodity groups. While searching on a particular description, sourcing specialists are able to easily determine what other products Lonmin buys from a particular supplier. What this means is that they then go to tender with a bigger pie of products or services, says Tony.
4. BEE Compliance
CCI-Growthcon provides Lonmin with a matching report, where they are able to see which products or services they purchased from a non-BEE supplier, when a BEE supplier could have been used. Tony states that the availability and use of such a report will help Lonmin to improve its BEE spend.