Big Data = Big Opportunity for Procurement
SpendHQ welcomes the thoughts and insights of Ardent Partners Chief Research Officer, Andrew Bartolini.
Every year, big data for procurement seems to get bigger, with more and more diverse types of data being created and streaming into the typical procurement organization and presenting CPOs and their teams with immense opportunities to create value across the enterprise. But it’s not that simple. Many CPOs and procurement teams are overwhelmed with the sheer volume, intensity, and diversity of data today, and struggle just to manage that data, let alone leverage.
Consider the strategic sourcing process: procurement teams create or accumulate many different kinds of data at each stage – i.e., spend, sourcing, market/third-party intelligence, contract, supplier, procurement, and accounts payable/finance data. And this data comes in multiple forms – structured data (organized, searchable datasets) and unstructured data (unorganized datasets, or text-heavy documents, like catalogs, contracts, social media posts, etc.).
While more sourcing and procurement teams have adopted and are employing modern sourcing and procurement tools that facilitate data collection, management, and analysis (indeed, a majority of teams have adopted spend analysis, eSourcing and eProcurement solutions in 2018), many teams continue to wrangle their data the old-fashioned way. Put another way, many sourcing and procurement teams continue to struggle against the rising tide of big data, which it will continue to swell in the years ahead.
But if CPOs and their teams can overcome the management and analytic challenges of big data for procurement (ideally by adopting automated solutions, and standardizing and linking their processes), then they will be well positioned to extract value from their data and drive that value across the enterprise. Let’s examine a few use cases.
- Big Data for Sourcing: By collecting and analyzing suppliers’ past performance data, as well as current market pricing and risk assessments, sourcing teams can take a data-driven approach to awarding contracts to suppliers, rather than awarding them based on lowest price, an existing relationship, or “gut feel.” Sourcing teams can also examine shipping and carrier data to help them optimize sourcing routes and freight transporters, and help them extract more value from the logistics side of the process.
- Big Data for Contract Management: There are ample kinds of data that CPOs and their teams can find useful buried deep within their contracts: service-level agreements, terms and conditions, expiration and renewal dates, clauses, risk assignments, etc. The challenge for procurement has been to extract these data points from within a body of thousands of contacts and documents buried deep within dusty file cabinets or in someone’s email. Digital contract repositories, contact search, discovery, and analysis tools enable numerous stakeholders to be able to search digital contacts for keywords, dates, clauses, and language and be able to “surface” that information for quick and easy reference. With the right algorithm and search terms, anyone from across the source-to-settle value chain can find the operative language buried deep within a contract that will save the enterprise money or avoid risk.
- Big Data for Supply Risk Management: Supply risk is a beast that takes many shapes, particularly when it comes to supplier and supply risk data. Fortunately, there are a number of supplier or supply risk management solutions available that consolidate a significant number and variety of data sources onto one platform, saving analysts and managers from having to hop to multiple dashboards and tools. Platforms that fuse supplier information, performance, and risk information along with category, commodity, geographic, geopolitical, and meteorological information enable managers and analysts to be able to dynamically and holistically examine their supplier and category risk profiles rather than take a static, two-dimensional approach to supply risk management.
It is often said that the Chinese word for crisis is comprised of two symbols: danger and opportunity. For those procurement organizations that remain flooded with big data or are struggling to tread water, they will continue to be in danger of being overwhelmed and unable to make use of that data. But for those teams that have automated their sourcing and procurement processes, and are linking and standardizing them, there are numerous opportunities before them to not only manage big data for procurement but leverage it for greater organizational and enterprise value.
Andrew Bartolini is a globally recognized expert in sourcing, procurement, accounts payable, and supply management. At Ardent Partners, Andrew focuses his research and efforts on helping enterprises develop and execute strategies to achieve operational excellence within their procurement and finance departments. Andrew recently published his 13th annual procurement-themed benchmark research report, CPO Rising 2018: The Age of Intelligence. This year’s study is based on survey data and interviews collected from 341 Chief Procurement Officers (CPOs) and other procurement executives and is available for download by clicking here.