Sourcing and Procurement
Leveraging big data analytics for smarter procurement decisions
Procurement analytics is the process of using data analysis to gain insights into various aspects of the procurement and supply chain management processes. This involves gathering, analysing, and interpreting data related to all procurement-related activities, such as sourcing, costs, supplier performance, contract terms, and inventory records.
Traditionally, sourcing and procurement analytics focused on using historical data to understand past spend and vendor performance. Now, with advanced analytical tools, businesses are increasingly focusing on predictive and prescriptive analytics to enable demand forecasting, sustainability monitoring, and informed decision-making.
Leveraging big data in procurement can empower organisations to improve their financial stability and long-term spend management. Additionally, it can also find applications in resource management, business development, and sustainability practices.
The goal of data analytics in procurement
The primary goal of procurement analytics is to enable informed decision-making and efficiency in procurement operations. With data-driven insights, organisations can optimise critical processes such as supplier selection, negotiation strategies, inventory management, cost reduction, risk assessment, and supply chain disruption management.
In other words, big data analytics aims to transform procurement from a tactical function into a strategic one that adds measurable value to the organisation’s bottom line.
Using sourcing and procurement analytics for smarter decision making
Big data analytics for procurement involves a combination of descriptive, diagnostic, predictive, and prescriptive analytics to gain insights into various procurement processes. There are several types of sourcing and procurement analytics, each serving a specific role in enhancing procurement practices.
Below are some important types and their roles in enabling smarter decision-making:
- Spend analytics
- Contract analytics
- Supplier analytics
- Spend forecasting
- Demand forecasting
- Procure-to-pay (P2P) process analytics
- Risk analytics
- Sustainability analytics
Spend analytics involves categorising and interpreting historical spending data to gain insights into spend volumes, patterns, costs, and supplier performance. It helps organisations identify cost-saving opportunities, consolidate suppliers, and negotiate better contract terms.
Contract analysis involves analysing procurement contracts to ensure compliance, mitigate legal risks, identify opportunities for renegotiation, and foster better working relationships.
This involves assessing the performance of various suppliers on factors such as quality, compliance, and delivery time.
Supplier analysis is crucial in ensuring reliability, quality, and consistency in deliveries. It also helps identify risks associated with specific suppliers, such as financial instability and operational vulnerabilities.
Additionally, analysing supplier information can assist in strategic sourcing, as it helps organisations identify the right suppliers for specific projects.
Spend forecasting is a crucial function of sourcing and procurement analytics. It employs predictive AI to anticipate upcoming expenses and forecast future spending patterns. Spend forecasting enables businesses to manage cash flow more efficiently and plan new investments.
This involves predictive analytics to anticipate future demand for goods and services. Accurate demand forecasting helps procurement teams to optimise inventory levels, reduce stockouts, manage costs, and offer better customer service.
P2P analytics examines the end-to-end procurement process to identify bottlenecks, streamline workflows, and improve operational efficiency. It also plays a role in identifying discount opportunities, ensuring payment accuracy, and mitigating fraud.
Risk analytics can identify and evaluate risk in multiple variables across the supply chain, including demand and price fluctuations, regulatory changes, supplier issues, supply disruptions, and geopolitical factors.
Having this data at their fingertips can empower businesses to build better risk management strategies and mitigate supply chain disruptions.
Sustainability analytics in procurement helps uncover the Environmental, Social, And Governance (ESG) impact of procurement decisions. Sustainability data empowers organisations to ensure their procurement practices and supply chains align with global ethical standards and Corporate Social Responsibility (CSR) goals.
Advantages of data-driven decision-making in procurement
Big data plays a crucial role in transforming procurement processes through numerical insights. Here are the five key benefits of leveraging analytics for procurement decisions:
Procurement analytics helps identify cost-saving opportunities across the P2P cycle by analysing spending patterns, supplier performance, market trends, and more. This enables procurement teams to uncover discounts, negotiate better contract terms, and optimise sourcing strategies.
Using historical data and predictive insights, businesses can accurately forecast future demand, spending, and business needs. This helps them prevent stockouts or overstocking and ensures their budgets align with actual requirements.
With risk management statistics, procurement departments can identify weak links and potentially disruptive trends in the supply chain at an early stage. This information enables them to implement risk mitigation strategies at the right time.
Procurement analytics allows organisations to compare their procurement performance with industry benchmarks, leading to continuous improvement and innovation.
Procurement data can help discover opportunities for consolidating suppliers, categories, or business units, resulting in fewer redundancies and greater cost efficiency.
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How can Infosys BPM help?
Infosys BPM’s procurement outsourcing services can help you transform your procurement function through advanced AI and analytical solutions, enabling you to make smarter decisions. Our AI/ML platform is designed to drive up to 90% productivity improvement in your transactional processes through automation and innovation.
Know more about Infosys BPM’s sourcing and procurement outsourcing services.
