It’s paying off: Big Data in purchasing and supply chain management

“Data is the new oil” – we’ve all heard this phrase many times in the context of digitization, Industrial Internet of Things (IIoT), Artificial Intelligence as well as Big and Smart Data. But does this analogy really work or is it merely a thing people say while others nod along? Well, I certainly agree that data is what drives new, digital business models and hence it has a revolutionary influence on our industrial era – just like oil that can be changed into chemicals, gas, plastic, etc. and thus become a valuable entity of another kind. However, it needs to be refined first and that’s exactly true for data as well.

Exploiting great potentials

Collecting, analyzing and using data is also becoming increasingly important for purchasing and supply chain management (SCM). In the past, there was just … data. It took SCM organizations weeks to compile mainly internal, structured data from transactions, operations and partners through complex processes. Today, in times of digital activities and communication, sources for data have expanded to include a much more disparate pool of internal and external, structured and unstructured data which are obtained from automated processes and that can be made available in real time. What a treasure!

Modern purchasing and SCM systems can record and process enormous quantities of data from suppliers, production and delivery, manufacturers, catalogues, sales organizations, and many more. They are the sources to be tapped for fact-based decisions and optimization procedures. As purchasing is usually in charge of upstream suppliers and global sourcing, there are various advantages that Big and Smart Data have to offer: For instance, they enable predictive planning by analyzing trends and including changes in the market – with these insights, we can help our customers to move faster. By connecting a great number of suppliers with our agile customers, we can also create added value through real-time planning of demand changes, thus improving delivery and lead times. Moreover, smart data supports us in understanding and managing risks better and gradually building a risk-free supply chain. Last but not least, well-analyzed data provides good arguments in negotiations and creates transparency about operational efficiency for all partners involved.

Still a long way to go?

However, despite all the insights Big Data is offering, the industry is still at the beginning of exploiting the full potential arising from collecting, analyzing and using large volumes of data. For instance, in many purchasing organizations I’ve seen, data is often available unstructured, on different servers and file formats or even in non-digital form. Important information is hidden in hand-written or scanned documents, e-mail inboxes and spreadsheets, for example. If you want to retrieve this data treasure, it is important to think completely digital and take a structured approach. In addition, new talents and competencies need to be developed to turn Big Data into Smart Data. This area requires experts that know how to handle data and to establish a “data-focused culture”. The resulting business value will have a positive impact on purchasing and SCM roles and processes and increase their effectiveness and value creation.

Gaining a competitive edge

At the K?rber Group, we are exploring the opportunities of Big Data to continuously improve our purchasing and SCM activities many in different ways. One of them is the Purchasing Reporting System (PRS): We introduced this tool in all Business Areas of our Group to collect data from purchasing activities in the K?rber companies. The self-developed digital solution is connected to different Enterprise Resource Planning (ERP) systems and is fed – in most cases already fully automatically – with all kinds of information. This tool helps us to visualize the group-wide data from the purchasing community in one common system and to generate relevant key figures about purchasing volumes from suppliers and related conditions. Moreover, we are able to run analyses on payment behavior to improve our cash management. Believe me, this puts a big smile on everybody’s face who is involved in optimizing working capital! :-)

For us, this is only the beginning to benefit from what Big and Smart data has in store for purchasing and supply chain management. One major learning so far: The better and more comprehensive the data source, the more meaningful the analyses and results. Hence, you will want to invest a lot of energy in getting a lot of high quality data, because in the medium and long term this effort definitely pays off!

Future opportunities

I am excited to see where exploring Big and Smart Data will take us in the future. Technology is advancing rapidly and groundbreaking innovations such as the cognitive capabilities of the IBM Watson create new opportunities to predict our business partners’ needs more effectively. The data gained provides new insights and allows for decisions based on a potentially unlimited amount of information from multiple databases.

Moreover, linking our people’s know-how and expertise with data “wisdom” utilizing the guidance of "smart" SCM systems will completely redefine the way companies buy and sell. Combining innovative technologies and experienced users of these intelligent systems does give companies a decisive competitive edge as well as it does give SCM an enhanced raison d'être: to support businesses in their quest for innovation, mitigate risk and ensure a reliable supply chain.

Let me know what your experiences are with Big and Smart data in purchasing as well as supply chain management. Get in contact! I am looking forward to a more detailed exchange with you!