Sourcing and Procurement: Information, Data and Analytics Architecture (Part 1)

Over on Spend Matters PRO, Pierre Mitchell and I have spent quite a bit of time writing about what might seem like the dreary subject of procurement data architecture and analytics. PRO subscribers can read Pierre’s Dickensian serial below:

I’ve also taken a stab at the topic:

As procurement technologists, it’s somewhat amazing – though not at all entirely surprising – that we’ve placed such a great emphasis on the selection, implementation and adoption of procurement tools such as spend analysis, sourcing, contract management, supplier management, T&E, supplier networks and req-to-pay capabilities without first putting a systems architecture foundation in place that attempts to define, at as close to the atomic level as possible, what data we’re trying to manage, what we want to do with it and how it talks to each other.

Taking the time to answer these questions first and working closely with IT to figure out the optimal means to integrating existing ERP/MRP and other data sources, flows and systems into our procurement architecture and technology mix should be a full-time job for a senior procurement staffer inside every Global 2000 company. It should also be something that those on the VP and CPO level should feel comfortable talking about.

Moreover, truly nailing the system’s architecture (and procurement system thinking!) can change an organization’s mindset about how they adopt specific capabilities to accomplish certain tasks. For example, an organization might discover that the number one key to better negotiation and implemented savings outcomes is managing supplier and contract records and information (including item and catalog information) in the context of strategic sourcing rather than separately. Such a decision would dictate an architecture that either embraces a single vendor platform model for sourcing, contracts and supplier/item management or one built around functional technology tools which are tightly coupled and integrated with a central supplier management and MDM “hub.”

Investing the time up-front to really dig into these issues can also make the entire ERP vs. best-of-breed conundrum easier to understand. And as Pierre observes in Procurement Information Architecture Part 5: Workflow (System of Process):

In this research brief, and in the earlier versions of this Procurement Information Architecture series, it should become apparent that there are many ways to solve the ERP vs. Best of Breed problem. The best companies do not simply make the same grim trade-offs as other firms in the herd; they reduce the trade-offs, whether it’s a cost vs. service trade-off in the physical supply chain or a similar trade-off in the procurement “information supply chain.” Good design matters! By paying attention to the design [architecture] of your procurement systems landscape, you’ll manage your information better, and also your procurement performance and enterprise performance.

It’s clear to us that procurement architecture and fundamental spend, supplier and item/catalog plumbing are only going to become more important as information sources continue to proliferate and new regulatory requirements – such as Dodd-Frank/Conflict Minerals – become mandatory areas for procurement organizations to help address. In fact, we’ll bet that among leaders in the procurement market in the coming few years, that technology emphasis shifts away from making SAP, Oracle, Ariba (fill in your favorite vendor!) work more effectively or slotting in the coolest new best-of-breed capabilities alongside ERP tools, to truly getting an underlying architecture right to begin with.

Join us on Spend Matters PRO as we lead the charge in providing the blueprint for Procurement Information Architecture.

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