The Future of Procurement Will Depend on Analytics

By April 26, 2016Procurement
Procurement Analytics

In today’s world, optimizing your procurement performance means leveraging data and analytics. But if you’re waiting for the perfect system…don’t.

As we rely more and more on big data and analytics to make company decisions, it’s important to remember that nothing, not even data-driven decisions, is perfect. That doesn’t mean you shouldn’t use the data you accumulate. I recently attended the Spend Matters’ Global Procurement Tech Summit in Baltimore, where Robert Handfield. Professor of supply chain management at the Poole College of Management, North Carolina State University spoke on the value of analytics when it comes to procurement technology.

One of Procurement’s major issues is being brought into the conversation after goals and priorities have already been set. Procurement is rarely considered as a resource when it comes to the data and analytics senior management look to in order to make major business decisions. But once senior stakeholders understand the value that an analytics-driven procurement team can add to the enterprise, their attitude quickly changes. In fact, a growing number of CPOs are looking to focus at least as much on analytics as on product itself. But they need to view analytics, especially predictive analytics, realistically.

Rather than looking at predictive analytics as infallible, Professor Handfield noted that “Predictive analytics is about getting it roughly right compared to totally wrong.” But with this caveat in mind, he also made clear that, when it comes to procurement, it’s important to start with the data that you have. And when it comes to predictive analytics, even starting small about where you are today and what your goals are for a specific future is helpful enough to get started. An important point Handfield stressed was the need for an independent data analytics team and a data scientist that understands both statistics and models, but can also speak about logistics and supply chain management. This expertise is vital in order to get C-suite buy-in to procurement’s efforts.

What has stood in the way of procurement being able to fulfill their potential, according to Handfield, has been a “lack of a robust source-to-pay integrated solution.” However, this void is being filled by a number of providers, leading to the likelihood that an increasing number of companies will be able to create a data platform for procurement analytics. Along with that, procurement needs spend analytic solutions that offer real-time, anytime visibility. It’s that lack of visibility, noted Handfield that is the barrier to procurement being predictive since they were relying on historical data only. That’s kept procurement “backward looking and probabilistic.”

Companies that look at procurement as a strategic player rather than simply a procurer of goods and services should be willing to invest in systems capability, spend analysis, contract management systems, risk metrics, and suppler lifecycle systems. The effect this will have is substantial. As Handfield said, “Improved systems drive more reliable data that provides the basis for additional insights and engagement.”

If you’re lacking the above systems and team, however, don’t give up, urged Handfield. He encouraged procurement professionals to simply start with whatever data you have to show stakeholders something that will get their attention. Once that’s accomplished, you’ll be able to justify doing more and spending more in order to build a robust analytics platform.

Mike Rowbotham

About Mike Rowbotham

Mike Rowbotham is Vice President of Strategy & Innovation for AmeriQuest Business Services. He is responsible for establishing the company’s overall strategic direction, which includes identifying inorganic growth opportunities. He also drives organic growth through product innovation and market expansion. Previously, Mike developed leading-edge network and infrastructure systems of AmeriQuest and its subsidiary companies to successfully accommodate AmeriQuest’s high-growth strategy.

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