In the digital age, organizations as a whole and procurement departments in particular swim in data. It is everywhere, spread across an alphabet soup of internal and external systems – some connected, some not; some refined, some not; some structured, some not. It wasn’t always this way. Twenty-five years ago, the procurement function was manual, paper-based, and transaction-oriented. “Data” was but a character on Star Trek: The Next Generation. All of that has changed in the past 15 years, following the dot.com bubble and the wave of digitization, connectivity, and automation that has swept over the world. Now, “Big Data” permeates and drives the digital world, and it will only get more intense from here.
There is a Big Data “crisis” sweeping organizations and procurement teams today. But with the right people, processes, technologies, and ultimately the right attitude, this “crisis” can be an opportunity for Chief Procurement Officers (CPOs) and their teams to transform operations and deliver more value to the enterprise. Technologies exist today that allow procurement to not only manage Big Data up and down the source-to-settle value chain, but also leverage it for greater value.
Thus, the following series will explore further each of the eight sub processes to illustrate just how Big Data can be managed and leveraged to make procurement’s life easier and extract the most value out of the data residing inside and outside of the enterprise. Next up, the most widely adopted supply management solution today, eSourcing.
eSourcing: a Melting Pot of Sourcing and Procurement Data
In the context of sourcing and procurement, Big Data can take many forms of information:
- enterprise spend analysis,
- past sourcing documents, such as RFIs, RFPs, and RFQs,
- supplier information, such as bids, performance assessments, and points of contact (POCs),
- third-party market and supplier risk assessments from firms like Dunn & Bradstreet and IHS,
- sourcing best practices (which suppliers were chosen and why; which were not and why), and
- examples of contract awards.
Big Data for sourcing and procurement can also include transactional and process information, like how fast the enterprise and the supplier converted a requisition into a purchase order (PO), a PO to an invoice, a PO to a delivery, and so on. These qualifications can all get wrapped into supplier performance.
Leveraging Big Data for Sourcing
So where does eSourcing come into play here? It turns out that modern eSourcing platforms can be melting pots of enterprise, supplier, and third-party information that can help sourcing and procurement professionals source more efficiently and more intelligently. Here, they can aggregate best practices from past sourcing events based on RFIs, RFPs, RFQs, and bids, and consider factors such as:
- Who were the bidders?
- How were they evaluated?
- Who did we select and why?
- Who didn’t we select and why?
- Who should we invite to the next sourcing event?
Essentially, Big Data for eSourcing means using what has been captured in the system during previous sourcing events in order to make smarter sourcing decisions and to accelerate the process going forward. Capturing all of this information is useful not just for efficiency and speed, but also because the practitioners that initially conducted the sourcing event may no longer be there, and this information should be transferred in order to facilitate a smooth continuity of operations.
From there, sourcing and procurement practitioners can leverage eSourcing more directly – by pulling in spend analyses based on historical data, either with current or former suppliers, and then comparing pricing according to suppliers, regions, categories, and other header-level criteria. The best deal in the market may be with the incumbent supplier; it may be with their competitor; or it may be in an alternative commodity sourced by either supplier. Performing a spend analysis and then linking it with the sourcing event can reveal the best price, best value, and or best supplier for the job.
On that note, sourcing teams can use eSourcing platforms to capture supplier performance information, like scorecards and surveys that are “downstream” from them since most of it is system-based. Once connected, they can find that information by category or supplier and utilize it to develop their new RFP. They can also use it to narrow a list of qualified suppliers, or to “burden the bid” of a low-performing incumbent supplier. Some eSourcing tools, like supplier networks, feature community rating capabilities, like those found on Amazon, Google, or Yelp, that sourcing teams can include in their selection process.
Many eSourcing platforms also allow sourcing teams to pull in third-party information in order to assist them in the selection process. Firms like D&B, IHS, Lexis Nexis, and other third-party market intelligence and risk assessment firms can provide sourcing teams with an unbiased source of information that can help them create a holistic view of the supplier or suppliers in question.
eSourcing tools not only benefit sourcing teams – they can also benefit suppliers that are preparing to bid on contracts. Connected suppliers can use eSourcing platforms to receive supplier criteria or examples of the contract that can help manage expectations.
Taking eSourcing to the Next Level
Once enterprise sourcing teams have conducted a high volume of sourcing events (hundreds and thousands), they can use the data captured during these events to build sophisticated data models. These models can assist sourcing teams in answering specific questions about the market and future sourcing events – like what is the optimal day of the week to source a particular good or service, or what is the optimal number of suppliers that they should invite to a sourcing event. The answers lie within the data that they have collected over hundreds and thousands of sourcing events, and allow sourcing teams to conduct future sourcing events based in large part on empirical evidence rather than their “gut feeling.”
Sourcing teams that swim in Big Data – in all forms from all locations – take heart: eSourcing, in addition to being a powerful tool for sourcing goods and services, is also a robust data management and fusion platform. Sourcing teams can leverage them to incorporate multiple streams of data from inside and outside of the organization to get unparalleled visibility into the supply market and intelligently source. It is no wonder that eSourcing adoption has taken off in recent years and continues to grow.