What Do Procurement Metrics and Procurement Analytics Have in Common?

big data

The clock is winding down to the Institute for Supply Management's Metrics and Analytics Symposium, which begins this Thursday in Philadelphia. (Register here.) Jason will be helping with a panel, and I will probably be heading down as well. If you can, you should definitely try to make it. Craig Reed, who is an ISM board member and heavy hitter practitioner, will be leading it. I know Craig, and I can tell you he knows his stuff! Other executives from Honeywell and DuPont will also be at the event, as well as the non-manufacturing side, represented by Nationwide.

Free Research: Navigating the Path from Tactical Procurement Analytics to Strategic Supply Analytics

You may wonder why there’s a conference on both metrics and analytics. Aren’t these 2 different topics? The former seems very organizational and the latter seems very technical. But the 2 are highly connected. Let me explain:

  • Supply metrics and supply analytics are both central to procurement management and procurement transformation, as well as broader supply chain management and supply chain transformation.
  • Metrics are foundational because they provide 360-degree alignment to internal customers, external customers, senior management, suppliers and procurement staff, aligning the metrics themselves to the value that procurement actually creates – as measured in Spend Matters’ latest ISM study on procurement/finance alignment. This alignment is particularly complex because there are so many stakeholders. You have to link business metrics to supply chain metrics to supply base and category metrics and then to supplier metrics.
  • Procurement’s job is to help build, align and improve such balanced scorecards of supply so they meet SMART criteria and then set improvement targets against them based on just steady state business management, such as aligning to the planning and budgeting cycle for indirect spend. This notion of supply performance management is part of a process called procurement performance management, which obviously has metrics as part of the discussion.
  • As an aside, you’ll also need capability metrics and leading metrics rather than just lagged KPIs, so you can focus your investments on the capabilities that matter and will have the biggest impact on your KPIs.
  • Metrics are core but so are analytics. In fact, if you’re trying to align your metrics to stakeholder metrics, you should understand the closed loop processes they use to run their part of the enterprise and then align suppliers and supplier performance to those requirements. I highly recommend using something like define, measure, analyze, improve and control (DMAIC) in this context – ask the DuPont folks about this at the conference – rather than a narrow, siloed and linear n-step sourcing process. The funny thing is, if you use DMAIC for steady state management – think hoshin planning – or transformation activities, you should put “A,” as in analytics, in the middle of that lifecycle. I call this DMAIC 2.0 in terms of using it for supply management. Analytics are foundational to enabling the D, M, I and C. So analytics directly integrates to M (measurement).

That means you should be analyzing which metrics to use, what targets to set, how well you’re progressing, what capabilities you need, leading metrics to include and how to repeat these steps ad infinitum. There are a lot of analytics needed here just around the measurement system itself.

Of course, supply analytics is a much broader topic regarding the vast types of analytics you can pursue, and you can check this out on our webcast here. But the better you can acquire and analyze timely data, especially external data, to develop better intelligence and make better decisions, the better and faster your procurement transformation will be.

Bottom line: If you're interested in these topics, come meet us at the ISM conference!

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