Is Procurement Stuck in the Paleolithic Analytics Era?

- December 19, 2013 9:56 AM
Categories: Learning / Research, Procurement Commentary | Tags: ,

Like probably many parents, I’m fond of telling my children that the world was different when we were you. Dinosaurs roamed the streets and you had to watch out for the hungry T-Rex or being trampled by a hoard of brontosauruses looking for their next forest to munch on. Life was simple back then, I tell my boys. We all simply reacted to the environment around us instinctively, by visual and other cues. Formal planning? Fugetaboutit. No school, No SATs, and of course, no homework. No studying for tests or planning ahead.

Of course this was not the era we grew up in as parents. That was like millions of years ago. But it’s a good story nonetheless. The problem with procurement today is that the function is still largely functioning in the same reactive mode with little planning or foresight. Maybe procurement is not functioning in the metaphorical equivalent of the time of dinosaurs, but it’s not much further ahead. We’ll be kind and call it the Paleolithic era of spend and spend analytics (which gives the best clues of all as to where we stand).

Deloitte’s latest CPO study (see links to our previous coverage below) provides strong evidence that the function is still largely operating in fight or flight mode when it comes to the use of data and how we analyze it. Consider that 75% of organizations rely on “retrospective” analytics today (think classic rear-facing spend analysis – on data that is weeks, months, or even quarters old). 33% use real-time analysis. But only 22% do predictive analysis! I’ll get into why there’s no excuse for this in a follow-up post. A range of tools exists for forecasting and planning from the most granular (such as commodity price forecasting) to the higher-level (e.g., spend budgeting and planning).

What’s holding procurement back from the more strategic use of analytics? Data quality tops the reasons at 67%, according to Deloitte’s CPO survey. Availability of data comes in at 36%, and skills and capability at 33%. So to go back to my Paleolithic analogy, we’re spending far too much time looking back, running from spend predators, and not doing enough to look ahead – let alone gaining access to the right tools (think the modern equivalent of metal tools and wheels) to do the job right.

The full Deloitte report can be downloaded via this link, along with more information on today’s sad state of analytics adoption.

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