Publisher’s Note: We should note that the concept of “Moneyball for Procurement” was introduced to the world by Jacob Larsen of Maersk at the CPO Rising 2016 Summit in Boston last March. This presentation was covered in detail in Ardent’s annual CPO-themed report. The article below builds upon of the ideas presented at that event.
Ardent Partners’ recent research report, Sourcing and Procurement: The 2016-2017 Technology and Innovation Outlook Report, chronicles the evolution of sourcing and procurement technologies over the last two decades to where they are today and poised to go tomorrow. This report, which is chock full of great insights on many advanced, distinct sourcing and procurement technologies, has spawned a series here on CPO Rising that looks in depth at each of the innovative solutions coming onto the market today and in the near future. Today’s installment: “Moneyball for Procurement.”
“Moneyball for procurement” takes its name from the 2003 best-selling book, Moneyball: The Art of Winning an Unfair Game, by Michael Lewis, which describes the shift by recruiters in building a baseball team based on data-driven analyses of prospective players’ performance rather than by scouting and subjective performance assessments. The “Moneyball” idea is not a new one; but what is new is the data-driven, empirical approach that Chief Procurement Officers and procurement teams can take with regard to making sourcing and procurement decisions. It is a function of business processes, automation tools, Big Data, and data analytics combined to produce insights that are greater than the whole of its parts. Here’s how it works.
For starters, the process requires a lot of data from multiple sources. Practitioners need to examine internal data, like operational and transactional data, as well as external data, like supplier and third-party data (e.g., catalogs, supplier performance, the ISM Purchasing Manager’s Index) in order to gather enough variables to ensure a rigorous analysis and then make buying decisions based on the analysis. This would be a daunting process were it not for the rise of innovative technologies, particularly automated spend analysis, ERP, and master data management tools, that capture, aggregate, cleanse, and then analyze the reams of structured and unstructured data required to produce a blended analysis such as this.
“Moneyball for procurement” is more than a data-driven approach to buying. It means leveraging analytics to look holistically at internal and external factors – thinking outside of the box – in order to find procurement efficiencies and best practices. It involves isolating performance drivers within reams of structured and unstructured data, as well as opportunities within the line-of-business and the supply base to increase operational efficiencies. By taking a multi-factored approach to procurement, analysts can uncover hidden insights residing deep within their data, connect the dots, and make better-informed decisions.
Since “Moneyball” is a data-driven approach to procurement, one that leverages the power of process automation, Big Data, and data analysis, Chief Procurement Officers and supply management leaders keen on taking this approach would be best served by hiring more data analysts and scientists that can take modelling and analytics to the next level. It is a complex process that involves many data inputs, many “turns of the wheel,” and astute interpretation of the results in order to provide its customers with useful outputs. Although the concept is still being operationalized, one thing is for sure: it is not your grandfather’s scouting report.
Want to learn more? Get your hands on Ardent Partners’ latest and greatest technology-focused research, Sourcing and Procurement: The 2016-2017 Technology and Innovation Outlook Report! Click here to download (registration required).