Elevating procurement management with procurement analytics

TL;DR: Procurement management is all about managing the processes related to acquiring products, materials, and goods and services needed for business operations. Procurement analytics offer a holistic view of the procurement process with the sheer depth of actionable insights it offers. Procurement analytics can be used to describe and understand past events, predict future events based on past and present trends, and support decision-making through predictive models. It can also be useful in a variety of procurement activities, such as strategic sourcing, category management, risk management, and more.

The management of procurement encompasses all the processes related to acquiring products, materials, and goods and services needed for business operations. Procurement processes for many global businesses were interrupted as a result of the supply chain disruptions that occurred from the effects of the pandemic.

In this environment, procurement functions in businesses are facing dire straits, and procurement managers are taking every step necessary to establish and maintain streamlined procurement processes.

One effective way to achieve this goal is to utilise the power of data and analytics and implement highly data-driven decision-making initiatives. This is where procurement analytics can have a significant impact on procurement management, and even procurement consulting .

What is procurement analytics?

Procurement analytics is the process of gathering, analysing, and extracting insights from the procurement data that an organisation has access to. This may include both internal and external data.

Internal data can consist of supplier-provided data like invoices and purchase orders and transactional data.

External data can consist of public data like supplier information and currency rates and third-party proprietary data like risk profiles and indexes.?

There are 4 main types of procurement analytics that you can use to elevate your procurement management functions in different ways:

1. Descriptive analytics: Describing what happened in the past through data analytics.
2. Diagnostic analytics: Describing why something happened by interpreting data.
3. Predictive analytics: Forecasting future procurement performance by analysing past data points.
4. Prescriptive analytics: Supporting decision-making through predictive models formulated from data.

Why utilise procurement analytics?

As procurement is a core business, the data that is extracted from it is not only useful for the procurement department but also for other departments like marketing, project management, IT, and finance in making decisions that complement strategic business objectives.

The scope of the insights offered by procurement analytics offers the following major benefits among countless others:

• Provides transparency: Procurement analytics allow the organisation to provide full transparency into its spending, which is crucial for the procurement management function
• Increases efficiency: Procurement analytics allow the organisation to automate menial, low-value tasks, which frees up procurement teams to engage in strategic, value-added activities
• Improves risk management: Procurement analytics offers the ability to forecast future procurement performance which can be used to pre-identify potential risks and formulate mitigation strategies
• Enhances forecasting: Procurement analytics takes a structured, data-driven approach to forecasting, resulting in highly precise forecasts that can inform decision-making for procurement
• Identifies cost-saving opportunities: Procurement analytics allows organisations to identify previously missed cost-saving opportunities within the supply chain, improving procurement performance

How can procurement analytics be used in procurement?

Procurement analytics can play a role in elevating multiple functions related to procurement.?

Here are some of the most prominent procurement activities that can be augmented with procurement analytics:

Strategic sourcing

The information provided by procurement analytics can be used to identify trends, changes in market conditions, and consolidation opportunities, allowing businesses to conduct sourcing activities in a strategically sound environment.

Category management

Category management by itself is a powerful tool for identifying cost-saving opportunities, segmenting suppliers, developing supplier relationships, and prioritising critical suppliers. Paired with analytics, this practice can be significantly improved to go above and beyond.

Sustainability

As sustainability and social responsibility considerations continue to rise, procurement analytics can be utilised to assess the environmental and social impact of procurement decisions and identify opportunities for implementing sustainability measures within the supply chain.

Risk management

As risks in the supply chain can be quite complex and can be influenced by a slew of factors, procurement analytics can help organisations methodically identify potential risks alongside the ideal mitigation strategies that can manage these risks effectively.

Elevate your procurement management function with procurement analytics

In the digital age, utilising data is a necessity to improve business processes.

Procurement analytics offer you the power of data to elevate your management of procurement function beyond traditional means and create a supply chain that supports the strategic objectives of your business.