Editor’s Note: Today we’re talking about procurement analytics and the quest for visibility in 2016. On June 23, we’re going to be discussing The Future of Procurement Analytics: How to Get Big Value from Big Data in a webinar sponsored by Tamr. If you’d like to learn more about this topic, we invite you to register for this webinar by clicking here.
In 2016, visibility is a tale of haves and have-nots. On the one hand, the need for procurement to become more efficient and improve its data collection, management, and visibility capabilities has led many groups to adopt supply management systems that standardize, digitize, and automate processes that were previously disparate, disconnected, and generally manual. Those that have successfully deployed and use these solutions and their reporting/analytics capabilities frequently report transformational gains because analyzing procurement data and gaining visibility into processes and performance allows procurement staffs to make better informed decisions. In turn, they can deliver more value to the enterprise in terms of enhanced compliance, increased savings, and reduced risk.
On the other hand, there are still many procurement organizations that remain stuck in manual, paper-based processes and/or struggle to digitize and automate their processes in order to get any kind of efficiency, scalability, and visibility into their processes. These poor souls lack either the budget, the talent/skills, or the executive mandate, or a combination, to adopt and drive wide-scale data management and analytics within their operations. As a result, they struggle to understand their operations, correct course, and improve performance.
To be fair, many enterprise procurement teams trace an arc of progression through data management and analysis: they begin with process standardization, digitization, and automation, continue onto data analysis across the source-to-settle process, and then graduate to more advanced analytic capabilities, like data optimization and predictive analytics. Unfortunately, a majority of enterprise procurement teams in 2016 still work with manual, paper-based processes that are not standardized across the source-to-settle value chain. Thus, the typical procurement team has inconsistent and often poor visibility into multiple performance measures, like spend under management (55%), realized savings (41%), and supplier performance and risk issues (30%).
For sure, the Best-in-Class report significantly better visibility into these metrics (and more) than the competition, although everyone has some work to do, because in a perfect world, these numbers would be at or near 100%. All enterprises should be able to have “eyes” on their procurement metrics, understand what and where the savings opportunities are, and then convert that intelligence into more informed sourcing, buying, contracting, and procurement decisions. The same can be said for other key performance indicators (KPIs) and performance metrics, like contract compliance, identified savings, and supplier performance. While it may be impossible to gain total visibility into each KPI and metric, procurement organizations should prioritize gaining greater visibility into them if they hope to increase savings and compliance, reduce risk, and provide greater overall value to the organization. But where to start?
This procurement visibility gap has created a demand for enterprises to invest in their people by hiring the best and brightest minds they can find, like data scientists, data analysts, and financial analysts. These folks can bring the desired skill sets to the organization and help CPOs organically develop skill sets in-house by training their peers. The visibility gap is also pushing organizations to invest in formal training programs to get their staff up-to-speed on the new and improved technologies available today. And of course, CPOs and business leaders are exploring the technology market for robust data analytics tools, which are becoming more affordable, scalable, and user-friendly every year.
Final Thoughts
Procurement visibility does not have to be a tale of “haves” and “have nots”, although in 2016 it is. Fortunately, as procurement technologies become more affordable, capable, and user-friendly, more procurement organizations will have access to the tools necessary to gain greater visibility into key processes and KPIs, increase efficiencies, and drive greater value to the enterprise. CPOs need to press their teams’ needs and sell the value that these technologies can provide. Ultimately, greater visibility is in everyone’s interests.
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