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. First up – one of our favorites – spend analysis.
Spend Analysis: The Grandfather of Big Data Analytics for Procurement
In many respects, modern spend analysis solutions represent the “grandfather” of big data analytics for procurement. Their ability to manage and leverage disparate streams of data for enhanced understanding of enterprise spend makes it possible for business leaders and practitioners to make informed decisions, with their benefits cascading through the source-to-settle process stream. Spend analytics technologies have come a long way and solution providers continue to break ground on new ways to add more value to the mix. But let us review the basics.
Spend analysis is the solution that draws all of an enterprise’s spend information from all of its disparate, back-end systems throughout the organization. For a large company, this could mean 15-20 ERP systems, CRM systems, eProcurement systems, and several card programs, like travel and purchasing cards, spread out across different business units and geographic regions. Captured information is transactional in nature – what the enterprise purchased from whom and when. And although CRM and ERP systems do a lot of things really well, they do not manage procurement information well. That is where spend analysis technologies come in.
Ideally, these solutions automatically pull disparate sources of data into the system and begin the data management process there; but not all of them do, particularly earlier versions. Once the data is either pulled from the systems directly by the spend analysis tool or is manually fed into the tool, the system then aggregates all of that information and proceeds to classify or organize it into like formats. From there, it cleans the data so that it becomes more useful to the team. If needed, users can leverage the tool to enrich the data by adding complementary information that is known to exist outside of the system.
Turning Big Data Management into Spend Analysis
Once the data management part of the process is complete, users can really begin to leverage their spend data for maximum value. Having conducted most of the tedious data collection and management for the user, spend analysis solutions can then provide a clearer, more comprehensive picture of enterprise spend to users, who can conduct detailed and tailored analyses. Users can compare categories of spend, suppliers, and regions to see:
- where they are spending most of their money (by supplier, region, category, or other criteria)
- whether they are getting a good deal for the enterprise on a given category
- if there are ways within their existing supplier base to pool categories with suppliers and strategically source more goods and services.
In short, spend analysis solutions can convert spend data into spend intelligence for more informed buying decisions and supplier relationships.
These are merely the basic analyses that users can conduct with a holistic, enterprise-wide view of their spend. From there, they can take a forward-leaning posture by extrapolating their data and forecasting into the next quarter, year, and so on. They can mate internal spend analyses with external econometric analyses to layer in the two and provide a multi-dimensional view of their business and the world around them. Some innovative solutions are even leveraging artificial intelligence (AI) and machine learning to develop predictive analytics capabilities for procurement practitioners. Imagine being able to present a view of future buying habits based on past purchasing behaviors.
More advanced spend analysis solutions also feature reporting capabilities to keep procurement teams and senior leadership regularly and immediately informed on enterprise spend behaviors. Users can set reporting cycles for 30, 60, and 90 days, or as needed. They can also conduct ad-hoc spend analysis and reporting for senior leadership, complete with more detailed views of the data beyond header-level information. These analytic and reporting capabilities can also leverage data visualization tools that allow users to bring enterprise spend data to life that really “jump” off the page at the reader.
Final Thoughts
Spend analysis has come a long way over the last quarter century. As a process and a solution, spend analysis can now provide users with an array of data management, analytic, reporting, and visualization tools that can convert big data into intelligence, and intelligence into smarter buying decisions. Where procurement departments were once drowning in data, they are now buoyed by robust spend analysis tools, and are able to not only keep pace with the data deluge, but push forward into rising tides.
Want to learn more about The Future of Procurement Analytics, and How to Get Big Value from Big Data?, join Ardent Partners and Tamr on Wednesday, June 23 at 2 PM EST for a complimentary webinar. Register here!
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