Exploring Big Data and Procurement Leveraging McKinsey’s Foundational Analysis (Part 3)

Please click here for Part 1 and Part 2 of this series.

Another fundamental benefit of big data strategies is that they will enable "experimentation to discover needs, expose variability, and improve performance," McKinsey suggests. Elaborating on this observation, the authors suggest that, "as they create and store more transactional data in digital form, organizations can collect more accurate and detailed performance data (in real or near real time) on everything from product inventories to personnel sick days. IT enables organizations to instrument processes and then set up controlled experiments. Using data to analyze variability in performance -- which either occurs naturally or is generated by controlled experiments -- and to understand its root causes can enable leaders to manage performance to higher levels.

In a recent research brief on Spend Matters PRO,
The Meaning of Big Data for Procurement and Supply Chain: A Fundamental Information Shift, we extend this observation to procurement by noting that big data will help organizations combine disparate datasets and blur the procurement/operations line. This continuous process of discovery to discover previously unmet opportunities and needs is one that Endeca (now part of Oracle) has been enabling for quite some time in manufacturing organizations.

Yet all organizations stand to benefit. As we suggest on Spend Matters PRO, It's our belief that for procurement and supply chain, the Big Data reality will often be centered on combining datasets from different sources such as contract data, spend data, project portfolio management, performance management, talent management and VMS data to better manage complex BPO engagements and relationships involving IT, HR and procurement.

This is a good juncture to bring up the point that Big Data is not just about mining larger and larger sources of information and exploring information in new analytical frameworks and environments. Rather, as McKinsey hints at in this specific observation, it's also about improving performance, which is as much about collaborative engagement with internal stakeholders and external suppliers as it is creating a truly unique spend cube that's never been done before -- and then driving a sourcing effort or compliance initiative as a result.

Next up on McKinsey's list (and our procurement-related extension and exploration): "Segmenting populations to customize actions."

- Jason Busch

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