Exploring Big Data and Procurement Leveraging McKinsey’s Foundational Analysis (Part 2)

In the first post in this series, we referenced a landmark McKinsey study from last year that explored the concept of how "Big Data" will change how companies compete in the market through developing information advantages. Even though the McKinsey report is long on vision and examples, it is unfortunately short on procurement (we'll aim to extend some of the thinking from the report in this continuing series into the supply management realm). In their analysis, McKinsey suggests that one of the fundamental benefits of big data is "creating transparency."

In this area, McKinsey suggests that, "simply making big data more easily accessible to relevant stakeholders in a timely manner can create tremendous value. In the public sector, for example, making relevant data more readily accessible across otherwise separated departments can sharply reduce search and processing time. In manufacturing, integrating data from R&D, engineering, and manufacturing units to enable concurrent engineering can significantly cut time to market and improve quality."

Putting on a procurement hat, it's clear that Big Data will create greater transparency -- which will in turn lead to greater opportunity. In a recent research brief on Spend Matters PRO, The Meaning of Big Data for Procurement and Supply Chain: A Fundamental Information Shift, we suggest that part of transparency will include the ability to analyze larger datasets than before. Specifically, this level of transparency will help bridge a range of information such as traditional AP/invoice data alongside contract terms/information, part/SKU level data including part attribute and bill of material (BOM) details, warranty/claims data (for both products bought and those sold, commodity markets information, demand data, etc.

Transparency across spend will increasingly treat price as a single KPI among many to be looked at in context. Next up in this analysis, we'll turn our attention to the next benefit of Big Data that McKinsey cites: "Enabling experimentation to discover needs, expose variability, and improve performance."

- Jason Busch

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