Exploring Big Data and Procurement Leveraging McKinsey’s Foundational Analysis (Part 6)

Please click here for Part 1, Part 2, Part 3, Part 4, and Part 5 of this series.

In their summary analysis looking at the impact of Big Data on the economy and business, McKinsey's last observation is how the capability and approach will help with "Innovating new business models, products, and services." The authors suggest in this regard that "Big data enables companies to create new products and services, enhance existing ones, and invent entirely new business models. Manufacturers are using data obtained from the use of actual products to improve the development of the next generation of products and to create innovative after-sales service offerings."

There are numerous examples within procurement where Big Data is already leading to some fantastic offerings. SAP Supplier InfoNet (Click here to read our five-part series and more recent update on the offering) is one solution that truly leverages the power of data across organizations to provide a predictive edge on supplier risk and supplier performance. Other examples of Big Data driving new offerings in procurement include the decision guidance that VMS providers such as Beeline and Fieldglass are embedding based on characteristics of what classifies top performance (e.g., a rate card is "in range" or not).

In our own briefing on Spend Matters PRO,
http://www.spendmatterspro.com/pro/2012/05/18/the-meaning-of-big-data-for-procurement-and-supply-chain-a-fundamental-information-shift/>The Meaning of Big Data for Procurement and Supply Chain: A Fundamental Information Shift, we suggest that Big Data is useful in gaining a predictive edge on the market. We reference a discussion in the note from an individual at a highly sophisticated procurement organization that Spend Matters interviewed who suggested: "We want to get better at explaining the unexplainable."

We observe in this research brief that the unexplainable may take the form of commodity price rises (or decreases) that fall outside any expected set of behavior. Or the unexplainable might take the form of rapidly deteriorating quality or service level metrics at suppliers that were previously in the top quartile of performance. Gaining a predictive edge on the market and suppliers requires understanding not only what areas correlate but also when correlations break down. Big Data will introduce new scenario planning, predictive modeling and forecasting competencies into procurement. As these needs continue to grow among top performers and start to blip onto the radar for the rest of the market, we have no doubt that a new crop of solutions from providers, include new upstarts as well as established industry veterans, will begin to catch hold, leveraging the power distributed and aggregated information, computing power, analytics and decision support combined.

- Jason Busch

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