If you read my article last week, I talked about how the next path to procurement performance improvement will be blazed with the next generation of spend analytics and data-driven strategies. Today, enterprises that actively derive great value from their spend analysis systems and programs are likely satisfied with the results. But, they may also question how this tool set could improve the total impact of the procurement function. The answer lies within the “next generation of spend analysis,” an idea that spend analytics can move beyond aggregating and analyzing transactional data to produce strategic intelligence for sourcing and supplier management.

For many organizations, suppliers are segmented within the total vendor base. Many procurement professionals place a near-blind trust in their suppliers without truly knowing their impact beyond a simple line or chart of spend. While procurement may believe that its suppliers perform at a satisfactory level, a next-gen spend analytics approach can and should uncover information and intelligence that either validates the current view or shows otherwise with near certainty. The new approach can begin to capture and unearth different aspects of supplier management including:

• Ramifications of political unrest for specific global suppliers
• Legal issues that may inhibit delivery or quality
• Inflationary or other financial concerns for some suppliers
• Ethical issues, such as allegations of child or slave labor
• Other problems that may affect supplier performance, such as layoffs, factory closings, etc.

The above issues can dramatically change the risk profile of almost any supplier or prompt a procurement team to immediately execute a contingency plan. Procurement departments of any size or level of expertise can face serious consequences if they are unable to mitigate or minimize the potential fallout from a significant supplier issue. Even with visibility and a way to better predict and/or view the supplier problems that exist on the horizon, procurement teams can struggle to react and respond.

The next generation of visibility can make it much easier for a CPO to advocate for more internal or external resources if he or she is well-informed with deep data and intelligence. Likewise, executive teams will be far more likely to invest the needed resources when the need is more clearly communicated and the risk of inaction is better known. Next generation spend analysis strategies will help enterprises better identify and quantify supply risks so that informed decisions can be made as to how to respond or prepare.

If you are interested in learning more, consider listening (and subscribing) to Ardent’s “Procurement Rising” podcast series. Click below to listen to new episodes. The podcast is also available on Apple, Spotify, Stitcher, Google, or wherever you get your podcasts.

Tagged in: Big Data, Chief Procurement Officer, CPO, Spend Analysis, Technology, Visibility