Transforming Procurement and the Supply Chain: Will Advanced Analytics Change Everything? (Part 1)

As Spend Matters readers are aware -- especially those of you who have downloaded our free Compass research on spend visibility (including Beyond the Basics: Using Spend Visibility to Drive More Than Category Sourcing Strategies and Spend Reporting and Analytics and P2P: Using Spending and Payment Insights to Drive Savings and Working Capital Management Strategies) -- analytics is a topic that we believe procurement practitioners should be thinking much more about. In the fall of 2010, we covered a story from Supply Chain Management Review highlighting Deloitte's view on where supply chain analytics might head. Jerry O'Dwyer from Deloitte, the featured expert in the column we referenced, recently co-authored a much more in depth analysis in the most recent addition of SCMR. In the analysis, the authors suggest, "advanced analytics represents an operational shift away from management models built on responding to data."

But perhaps more important, "advanced supply chain analytics can help supply chain professionals analyze increasingly larger sets of data [emphasis added] using proven analytical and mathematical techniques (for example, regression analysis, stochastic modeling, linear and non-linear optimization)." The juxtaposition in this statement is critical to understanding how advanced analytics can help us better play in data sandboxes in procurement. Specifically, advanced analytics is not about changing the analysis or quant paradigm of how we crunch data, run regressions, etc. Rather, it's about looking at more data -- sometimes orders of magnitude more data -- more frequently and using this analysis to come up with potentially breakthrough insights.

The potential impact advanced supply chain analytics may have on procurement organizations is significant, especially as it pertains to our ability to influence and impact the rest of the business (let alone external relationships such as suppliers, partners, etc.) Consider that this new paradigm will shift the focus "from the internal cross-functional sharing of data to greater coordination and shared understanding of the data flows across value chain partners," which may help tear down "individual silos within the supply chain, suppliers, procurement, operations, sales," etc. What will advanced supply chain analytics scenarios look like in practice? And how will they influence our ability to make better decisions that impact cost reduction, supply risk reduction and related strategies? Stay tuned for Part 2 of this post.

Editor's note: The full edition of this linked article is only available to SCMR subscribers. Which is probably as good a reason as any to become one if you're not already!

- Jason Busch

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