Analytics: Procurement's New Best Friend

Data-driven decision-making is the next frontier of business management systems.

Procurement is no exception to this fact.

Analytics has topped the list for “technologies to make the biggest impact in the next two years” in — both — the 2017 & 2018 Deloitte CPO (Chief Procurement Officer) Survey.

For analytics to make the wide-sweeping impact that they are capable of, procurement-related data — of course — must be reliable. Procurement professionals have begun to understand the importance of storing and compiling data in scalable solutions. Without an effort on the side of procurement teams to store data-sets habitually, analytics isn’t really a possibility.

When data is stored in an agile and scalable manner (preferably utilizing cloud-based solutions) there is a lot more room to play with that data.

But, let’s take a step back…

Leveraging Supply Chain Data for Procurement Analytics

Before you and your analytics can start skipping down the sidewalk — holding hands and humming along to “Don’t Worry Be Happy” by Bob McFerrin — you’re going to have to take the steps necessary to ensure the quality of your procurement-related data sets.

45% of CPOs in 2018 believe that the “quality of data” is one of the main barriers to the application of technological solutions into procurement.

To ensure quality, data cleansing needs to be a focus. Obtaining quality data is typically an effort — contingent upon — the collaboration of several parties. Working from the assumption that suppliers have produced some of your procurement team’s supplier-related data, the accuracy of underlying data isn’t always 100%.

For this reason, stakeholders may not always share the same enthusiasm, of a procurement team, to start utilizing data as a means to make purchasing decisions. In fact, 30% of CPOs in the 2018 CPO Survey listed “limited senior stakeholder endorsement and prioritization”, an as a main barrier to the effective application of digital technology in procurement (Deloitte 2018).

While there are no absolutes in business… you can be damn sure analytics are going to play a big role in the future of procurement, and supply chain management at large.

Tell that to your senior stakeholders…

Data… Visualized

Without all the fluffy, and over-complicated, vernacular to confuse us, analytics are really quite a simple concept.

At their core, analytics are:

Visualized data sets.

Yes, of course, the creation of analytics is typically a bit more complex than just putting together bar graphs in excel, but the basis of analytics as a technology is the visualization of data through algorithmic calculation.

The ability to visualize data allows a procurement team to:

• Stay focused on common goals
• Report to management teams with ease
• Identify areas for improvement
• Allow the factual evidence to drive decision-making.

A Matter of Acceptance

The Digital Transformation of procurement is a matter of human acceptance.

Technology is linear.

The technology of the past will continue to improve, and tech’s future innovation and impact in our personal and professional lives is inevitable. The digital transformation of procurement isn’t reliant on the capabilities of technological advancements, but rather the willingness to adopt and adapt to emerging technology.

Technology comes with a learning curve, and without an organization-wide acceptance for furthered human education, there is no digital transformation occurring.

According to Deloitte’s 2018 CPO Survey, “The level and speed of digitalization across procurement, functions is lower than expected and needed. Only 4 percent of procurement leaders believe that procurement has a big influence in delivering their organization’s overall digital strategy and only 6 percent of the procurement leaders in the survey believe that their digital procurement strategy will help them to fully deliver on their objectives and improve enterprise value. Only 18 percent of procurement leaders have a digital procurement strategy supported by a complete business case” (Deloitte 2018).

If procurement leaders aren’t — themselves — accepting the importance for digitalization within their functions, then it’s rather difficult to scale technological advancement within the domain.

Even still, analytics have prevailed as a technology that procurement leaders will focus on making an impact in the next two years.

Looking at the graphic below, it’s clear that analytics have dipped in their ‘importance’ between 2017 and 2018…11% in fact.

Source: Deloitte

I know what you may be wondering. Why exactly am I writing this post, raving about the impact of analytics on the procurement function? Especially, when the belief of ‘future impact’ from CPOs is declining.

Well… referring again to the visual aid above, RPA (Robotics Process Automation) is a technology that spiked 13% in its belief for impact in the next two years in the 2018 survey. Yet, other data scientists and technology experts have considered cognitive procurement technology, such as RPA, in its infancy.

There are various technologies that will disrupt and transform the future of procurement; RPA being one of them. But, in the here and now, there’s remains one true queen upon the throne: Analytics.

Application

So… You get the point.

Analytics is a technological resource worth taking notice of, but what are their main uses for application?

The graphic below highlights the main uses for analytics in procurement teams surveyed in the 2018 CPO Survey.

As stated by Deloitte, “Procurement leaders globally recognize the power of better data-driven insights: 50 percent of respondents indicated that they are proactively leveraging intelligent and advanced analytics for cost optimization, and 48 percent process efficiency improvement”.

The more intelligent and predictive analytics become, the more areas for application will emerge. For the time being, let’s just respect where we’re at, and try and do our best to utilize the technology at our disposal.

Reach out your hand, feel the warm embrace…

That’s analytics… Your new best friend.