Several organisations invest effort into improving their material master only to have their material master improperly used. The problem is firstly that users often place a unique (free-text) order for goods and services that have already been created in the material master, and, secondly that the material master is incomplete and does not cater for all the goods and services required by the organisation.
Jacoe Bezuidenhout, Group Procurement Technical Co-Coordinator: Commercial Services for Xstrata Alloys told SmartProcurement how the Ferrochrome and Primary Vanadium producer is using software to eliminate maverick expenditure from its operations.
“At Xstrata we are constantly looking for ways to reduce free text-spend and increase the use of our material master. We have put in a great deal of effort to enhance our material master by fixing poor descriptions and adding new items, but all this would be undone if users fail to use the materials master.”
“This maverick spend has several consequences:
• We do not use the correct contract – contracts are linked to material numbers – and end up paying more than we should and / or use the incorrect vendor.
• We buy something that we already have in stock and do not need to buy.
• We have incorrect usage information in our inventory management system which relies on material numbers. The system will therefore not keep the correct stock levels resulting in potential stock outs and over supply.
“Xstrata’s sourcing team already uses SearchLight to correctly classify free-text spend for contracting and commercial purposes, but in materials management we needed a way to prevent free-text spend before it happens.
“So we have started using the SearchLight MatchIT software to help prevent maverick spend and identify new items to add to our material master.
The system compares all outstanding requisitions to the material master and tells us whenever the free-text description that someone has used looks similar to something that already exists in the material master. We then notify the end user showing the correct material number so that they can update their requisition.
Figure 1: Example possible matches
Figure 2: Example of free text items that did match the material master
“The software gives us a list of items that did not match so that we can add these items to the material master.
Figure 3: Example of free text items that did not match the material master
“The software is a great help; ensuring that Xstrata’s material master is properly used and indicating what to add to the material master.
Contact Jacoe Bezuidenhout for more info on how SearchLight MatchIT has nipped Xstrata’s maverick spend in the bud.