Faster, Higher, Stronger
The future of data analytics in procurement
With the Olympics in Paris this year, the ambition to be faster, higher and stronger is on our minds. In 2021 the Olympic Committee approved the addition of an en dash and the word ‘together’ to give us this updated version for Paris; faster, higher, stronger – together. A touching inclusive signal for a world very much in need of harmony.
Faster, higher, stronger – together, could just as easily apply to the way data analytics is transforming business. The fact is, finally, the dream of integrated data analysis can be realised, and procurement teams are sitting front and centre.
And, if a gold medal were to be given for the software that has enabled this transformation, it would go to the application programming interface (API). In short, APIs enable different computer systems to talk to each other. APIs grew slowly, but now they are ubiquitous.
At a personal level, APIs allow us to book a hotel, a flight, or a doctor’s appointment from our phones. Likewise for organisations, but with much greater complexity. APIs allow data to move easily.
This unassuming technology is responsible for the transformation of siloed data, from multiple sources and systems, into unprecedented integration and analytical capability. The sooner your organisation develops a mature data analytics capability the better it will be.
What are you waiting for?
A typical organisation will have valuable data at its fingertips. It will be in procurement systems, ERP systems and supplier databases. Good old Accounts Payable is usually sitting on a data gold mine. The technology now exists to make integration easy. And integration changes everything. A dim or obscured view suddenly becomes so much clearer.
Let’s start by taking spend data as an example. A progressive procurement team has real-time access to categorised spend data with presentation quality summary reports. These dashboards mean procurement leaders can report accurately, quickly, and consistently, as well as work to identify and target cost savings and efficiency opportunities.
Good analytics can support the way you manage supply chain risk. With the right analytics in place, you can risk profile your supply base, create global supplier sourcing risk dashboards with side-by-side evaluations, and use AI to rapidly identify supplier compliance with your regulatory and organisational requirements.
ESG analytics are becoming more important as the ESG agenda continues to evolve. Organisations are now collecting public data to assess scope 3 emissions of all the goods and services they procure. They can segment the supply base and better inform sourcing decisions by including carbon-adjusted scores. Going further, some leading teams are assessing carbon constants by product and country, and adjusting with inflation data, to provide a more complete spend-based carbon analysis.
We have now created a global matrix of ESG-related legislation around the world, which offers some relief to procurement and supply chain leaders who are struggling under the weight of pressure to become faster, higher and stronger in terms of their understanding of compliance, and risk mitigation in their supply chain. (You can read more here if you’d like).
Put your contracts on steroids
Last but not least, is classic contract analysis. The power to analyse and quantify all spend inside and outside of contract, identify overspend within existing and outdated contracts, create a contracts calendar to forecast renewal actions, quantify ‘leakage’ of maverick spend transacted outside of contract, and extract key contract terms and metrics. To help quantify the value of this, there are some case studies in this space that show a 9x increase in productivity and up to 90% savings in labour costs through automation and AI-powered contract analytics.
We see data analytics are a key enabler of the next generation of procurement. The analytics toolkit is constantly expanding, and we closely monitor developments and have relationships with key partners. This expertise allows us to perform rapid diagnostics to understand a client’s procurement technology stack, source the best tools, as well as optimise what they have already.
The goal is to successfully embed analytics into the whole source-to-pay procurement lifecycle. And the first step is to work out what faster, higher, stronger – together, looks like for your organisation, with your unique challenges and opportunities.
This analysis starts not with algorithms but with old-fashioned brainpower. It is a disciplined thinking through of what the future state of your procurement team, the next generation of procurement, should do now that the tools to do it are available.
Our diamond ring framework was developed precisely for challenges like developing data analytics capability. It gives us a robust and complete framework that enables the right expertise and tools to be identified. This is where being objective, and agnostic makes a difference. Our next-generation procurement expertise has access to both a huge pool of resources as well as specialist third-party technologies and tools. This allows us to develop unique data analytics capabilities, because ultimately, each client is unique and so is their data.
