Not too long ago, procurement was seen as a back-office function – it was all about negotiating contracts and managing vendors. No longer.
In today’s dynamic and challenging business world, procurement is a much more strategic function that could impact an organisation’s profitability. Organisations now look to procurement teams not just to cut costs, but to uncover efficiencies, support sustainability goals, and contribute to innovation. Data analytics plays a key role in empowering procurement operations at multiple levels – whether it is to uncover hidden costs and inefficiencies or to increase accuracy in demand forecasting.
So, what is the kind of data needed for effective and impactful procurement decisions?
Real-time data is needed for agile and effective procurement decisions as it enables quick responses to market changes, rapid insights, identification of suppliers based on current market requirements and enhanced supply chain resilience. This use of the right data leads to enhanced cost management and efficiency in procurement. It enables companies to stay agile in volatile business environments and provides actionable insights into inventory levels, sales trends, customer behaviour to name a few.
Here's a look at how data analytics has brought a paradigm shift to procurement operations and supply chain systems and enabled digital transformation.
Strategic procurement:
Traditionally, procurement has been seen to be a reactive function. Procurement teams tend to focus on purchase orders, policy compliances and negotiations. However, with data analytics, procurement is undergoing a transformation – from reactive and transactional to proactive and strategic. Spend analysis, which is a core application of procurement analytics, enables teams to uncover opportunities for vendor consolidation, renegotiation, and volume-based discounts. It even segments and categorises spending by supplier, category, geography, and business unit. It has the ability to enable cost cutting by detecting unauthorised spending outside preferred channels.
Effective negotiations through market intelligence
Procurement and its effectiveness for the success of an organisation is essentially driven by negotiations. Data-backed negotiations is a game changer and provides procurement teams with cost-structure breakdowns, benchmark pricing data and supplier market share analysis. When procurement officials have this intelligence in their hands, they have an upper hand during negotiations resulting in better terms and payment cycles and partnerships of a strategic nature that deliver long-term value.
Predictive Analytics for Demand Forecasting
The procurement function in an organisation has the responsibility to anticipate demand, and make purchases as per this anticipated demand. Again, this is an area where predictive analytics plays a crucial role. It analyses historical procurement data and predicts future procurement needs with a high degree of accuracy. This data is of great value to procurement teams. It gives them the ability to avoid stockouts and excess inventory, engage suppliers early on and lock in favourable terms. In industries such as manufacturing, automotive, and retail, predictive procurement can directly impact working capital optimisation and production continuity.
Supplier-relationship management
Data can be used very effectively in building and strengthening relationships with suppliers. It allows businesses to gain deep visibility into supplier performance, contract compliance, delivery timelines, and quality metrics. This transparency, in turn, enables more informed, objective conversations with suppliers—rooted in data rather than assumptions. For instance, real-time dashboards can track KPIs like defect rates and responsiveness to change orders. Data analytics also identifies top-performing suppliers who consistently meet or exceed expectations. To strengthen relationships with these suppliers, organisations could reward them with preferred vendor status or long-term contracts. Conversely, suppliers whose performance is not up to the mark, can be sent early alerts that inform them of lacunae, rather than facing sudden contract terminations.
ESG performance and regulatory compliance
We all know that ESG is no longer a can-have but an imperative for most large companies. Organisations are increasingly taking a data-driven approach to see how their business processes can be changed to meet regulatory and ethical standards. Therefore, procurement teams need to constantly evaluate their sustainability strategies and procure items with the least possible impact on the planet, in the most responsible manner. This can be done by working with suppliers who ensure that their practices are sustainable. Companies are doing this by using data analytics, and AI to measure and monitor their progress towards their sustainability goals.
It is increasingly evident that data analytics enables procurement teams to identify cost optimisation opportunities and ensure high-quality purchasing decisions tailored to specific business needs. It is the responsibility of organisations to utilise the power of data analytics to elevate their procurement function to the next level.
How Infosys BPM can help
At Infosys BPM, we serve as your comprehensive partner in transforming sourcing and procurement operations through advanced AI-powered solutions. For our Sourcing and Procurement Services, we leverage AI to automate spend analysis, offering clear visibility into spending patterns and uncovering cost-saving opportunities. Our predictive procurement tools forecast demand and market trends to enable proactive sourcing and minimise supply chain risks. Additionally, AI enhances supplier risk management and supports data-driven negotiation strategies, helping you secure optimal pricing and build more resilient, strategic supplier relationships.
