Procurement Underlying Technology: data management

A procurement data-driven organization is one where the gathering and analysis of data is central to the organization’s decision-making and fundamental strategies. Data is collected from various internal and external sources such as procurement systems, finance, business, social media, … Before going into AI, machine learnings and algorithms supporting all type of analysis, let’s talk about the fundamentals which need to be in place within your organization.

What is data management?

Data management is the process of collecting, organizing, and managing all information related to the acquisition of goods or services from external sources. It includes gathering data, such as supplier profiles, product specifications, price points, and delivery times. It involves the proper maintenance of item master data in an organization’s systems through the removal of duplicate entries so only updated, accurate, and reliable data remains.

?Successfully managing these tasks requires a comprehensive system for collecting, storing, analyzing, and reporting on procurement data. ERPs and Source to Pay software are critical for this. Data management is about making procurement data accessible, analyzable, and actionable for the management and concerned departments. It is the backbone of any successful organization’s purchasing strategy, driving cost savings, improving supplier relationships, and mitigating risks.

Why is data management important for success?

Effective procurement data management is crucial for streamlining sourcing processes and minimizing risks with third-party vendors. Here's a summary:

• Increased Efficiency: Quick and easy access to information reduces research time and minimizes manual work.
• Improved Visibility: Provides insight into the supply chain, beneficial for tracking orders and understanding supplier performance.
• Cost Savings: Automated systems reduce manual labor costs and enable more efficient category management.
• Reduced Risk: Comprehensive vendor data informs about potential risks and enable live follow-up.
• Improved Decision-Making: Full visibility allows better-informed decisions on supplier selection, especially for larger organizations with complex supply chains.
• Competitive Advantage: Identifying opportunities to reduce costs and optimize supply chain processes by analyzing data provides a competitive edge.

Successful data management is critical and should integrate all relevant procurement information into a single platform. The best systems include internal data (budgeting, forecasting, spend analysis) for a holistic view of the procurement process, helping identify improvement areas.

How do we get the right data available?

Procurement data structure refers to the organization and classification of data related to procurement activities. This includes information about suppliers, purchase orders, delivery times, prices, and more. The data is typically collected from various source systems and ERPs, then classified into standard or use-case-specific taxonomies.

Enterprise Resource Planning (ERP) Systems (SAP, Oracle, Microsoft Dynamics,…) serve as the primary source of procurement data. It is where internal data is held and fundamental to everything else. Procurement organizations often face the challenge of heterogeneous data landscapes. As many businesses are formed from more than one business unit, financial processes may vary on a regional or international basis or across businesses. So, creating a consolidated structured view is often the first step (i.e. data lake or data warehouse).

Then comes the concept of Data Lake or Data Warehouse. I will not go into detail about the differences between the two. They, however, have in common to be centralized repositories that allow you to store all your structured and unstructured data. It should aggregate data from different sources into a single, central, consistent data store to support data analysis, data mining, artificial intelligence (AI), and machine learning.

You cannot create a data driven organization without having first a consolidated database. It is boring, complicated, not fun, often expensive but the first fundamental steps. The good news is that technology evolved, and it is now easier to create those.

So, if you are starting your journey, it is the first thing you need to look at !

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About me: Passionate about driving organizational excellence and sharing expertise, I wrote two books available on Amazon . With a focus on strategic collaboration and digital transformation, I lead efforts to optimize sourcing and supply chain operations for enhanced business performance.

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