Big Data – Enabling Procurement To Play A More Strategic Role In Business

We welcome this guest post from James Waite, Head of Technology Product & Enablement, Gibbs Hybrid, on how big data paves the way for procurement teams to be more insight-led.

Procurement is quickly evolving in response to rapid advances in technology, skills and talent, changing consumer demands and business practices. Businesses across a range of industries are using data more and more as the basis of their strategic planning and to measure business performance.

Increasingly internet-connected devices are opening up additional streams of data from multiple sources. Getting a holistic view of spend and supplier data has long been the Holy Grail for procurement teams who are grappling with this information coming in from multiple streams. This data unleashes revenue-generating potential and cost savings for businesses to boost procurement productivity and engagement.

New business models and skills will be necessary to embrace and nurture the new capabilities required in the digital age. Whether you are presenting to the board, carrying out spend analysis or looking at supplier performance, data is a real asset which can influence buying decisions and overall business performance.

Every business recognises the value of big data, however a big pain point for procurement leaders is having their teams spend too much time on administrative tasks. Their time would be better spent on strategic tasks which contribute to the growth of the business.

Data is the lifeblood of procurement teams – without it, they cannot track how much their organisation is spending on goods and services. Without the data, it also makes it difficult to monitor and manage supplier and vendor relationships. Big data increases visibility of spend for procurement teams, helping them to manage cost savings and risk on supplier/vendor performance.

There are five distinct procurement performance areas within big data that can bring great value - spend analytics, category analytics, supplier analytics, compliance analytics and performance analytics.

Supply chain and procurement departments are reassessing their skill sets to become more data-driven and agile. Procurement teams are not inherently data scientists who can intuitively capture, mine and uncover patterns from data. This means CPOs need to foster a change in culture within the team which is more data-centric – using real-time insights to accelerate and facilitate business decisions.

CPOs and Procurement teams are often unable to effectively articulate a clear vision or strategy for the rest of the business. In order to move away from a siloed way of working, and refocus on the wider context of the business, more collaboration is required. Supply chain and procurement are becoming more involved in executive-level decision making, shifting from a cost-centre mentality towards being recognised as a strategic part of business operations.

Procurement teams are under ever-mounting pressure to reduce costs, maximise efficiency and enhance profit margins, while ensuring that the organisation is being supported by reliable and trustworthy suppliers. According to Ernst & Young, many procurement teams have little contact with finance. But with procurement typically spending 40% - 70% of a firm’s budget, more and more businesses are encouraging their finance and procurement teams to work closely together.[1]

Harnessing the power of big data is leading to greater opportunities for companies to predict market trends, spending, consumer behaviour and supply chain needs in real-time. By combining historical data and customer insight, a CPO can move away from making reactive decisions on fiscal data and instead take a forward-looking approach that is insight-led.

To avoid being overwhelmed by a data overload, procurement teams are turning to automaton solution as a way to redirect their focus towards unveiling strategic insight for the business. I was at an event last month where Christophe Villain, Global Head of Procurement Excellence at Nestlé said, “What’s harder – changing a lightbulb, or analysing 300 contracts? The answer is the 300 contracts for humans. It is actually the opposite for AI.” Before automation, procurement teams compiled mainly internal, structured data from transactions, operations and partners through laborious and time-intensive processes.

The spend analytics field has evolved to process complex data sets from a broad range of ERP systems, consolidating relevant information from multiple streams onto single dashboards in order to inform business decisions.  With the help of data, procurement teams can become a more strategic advisor to steer the direction of the business.

There needs to be a seamless integration between cloud-based solutions and existing IT infrastructures to drive business performance, agility, and visibility, and to control corporate spend and vendor management.

[1] http://www.ey.com/Publication/vwLUAssets/ey-empowered-by-analytics-procurement-in-2025/$FILE/ey-empowered-by-analytics-procurement-in-2025.pdf

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