CPO Rising 2023: The Big Data Tipping Point - CPO RISING - THE SITE FOR CHIEF PROCUREMENT OFFICERS & LEADERS IN SUPPLY MANAGEMENT

Today, we feature our ongoing coverage of this year’s 18th-annual CPO-themed report, where my team and I continue our nearly two-decade-long dialogue with chief procurement officers (CPOs) and other procurement leaders.

The report is based on research by Ardent Partners and represents a comprehensive, industry-wide view of what is happening in the world of procurement and captures the experience, performance, perspective, and intentions of 341 CPOs and other procurement executives.

In our final post of this year’s 18th-annual CPO-themed report, we’ll explore how CPOs must recognize the crucial role that intelligence can and will play in shaping procurement strategy and execution and go all-in on big data intelligence.

The Big Data Tipping Point

In its 2018 edition of this report, CPO Rising 2018: the Age of Intelligence, Ardent Partners wrote: “Over the next few years, Ardent Partners predicts that a new type of intelligence is going to enable CPOs to view their operations differently and, by doing so, it is going to force these same CPOs to manage them differently. Procurement’s “Age of Intelligence” demands powerful analytics and deep insights. It demands agility. The ability to make better-informed decisions across an organization can and will be game-changing; this new intelligence coupled with agility are going to be the fundamental drivers that push procurement and supply chain to the next level. Intelligent procurement teams are both created and evolve over time. Chief Procurement Officers must hire new talent while developing their existing roster; institute new processes while refining existing ones; and invest in new technologies while enhancing existing tools. They must remember that Big Data is coming. They must ready their teams.”

Five years ago, procurement professionals were aware of their challenges in managing big data, but also recognized the opportunities they had to improve the role technology could play in aiding them. In 2018, a majority of CPOs believed that supply management technology, predictive analytics, and data science would have a significant impact on their operations in the years to come.

In 2023, the world is very different and the importance of big data has reached a tipping point. The expanded usage and broad commercialization of AI tools have unlocked countless new possibilities for utilizing these potent analytical engines. While still emerging, it is clear that the growth and impact of AI tools for procurement over the next few years will be extraordinary. CPOs must recognize the crucial role that intelligence can and will play in shaping procurement strategy and execution and go all-in on big data intelligence.

Unfortunately, most CPOs have “not readied their teams” as a majority of CPOs have either no plans to invest (44%) in big data management in 2023 or are unsure about investments this year (11%). Meanwhile, only a relative few (7%) plan to make a significant investment this year. Linking data intelligence to direct decision-making is where CPOs should be focusing their efforts to create real value. Some of the immediate benefits from AI (and big data analytics) to procurement today include:

Improved decision-making including valuable insights into procurement trends, supplier performance, market conditions, and other factors that can impact their sourcing decisions.

Increased automation of some procurement processes, such as supplier selection, invoice processing, and contract management. This can save time and reduce errors, while also improving accuracy and efficiency.

Greater visibility to help monitor supplier performance, track spending patterns, and identify potential risks.

Predictive analytics can be used to forecast future trends, such as demand for certain products, supply chain disruptions, or changes in market conditions. This can help procurement plan ahead and make more accurate ordering decisions.

Improved supplier relationships by providing valuable insights into supplier performance, such as on-time delivery, quality of goods or services, and pricing trends. This can help build stronger supplier relationships and negotiate better contracts.

Personalization can be used to personalize the procurement process for individual stakeholders and suppliers. This can help to improve satisfaction levels and increase the adoption of P2P and other tools.

Big Data’s Big Picture

Beyond the near-term promise of AI, it is vitally important to understand that there is a bigger picture to procurement’s big data opportunity. AI and data science have transformed various industries and professions in recent years. In healthcare, AI algorithms can analyze medical images to detect diseases, predict patient outcomes, and recommend treatments. In finance, AI algorithms can analyze financial data to identify fraudulent activities, predict stock price changes, and optimize investment portfolios. In marketing, AI algorithms can analyze consumer data to personalize marketing campaigns, recommend products, and improve customer engagement. Similar innovations are all but guaranteed for procurement.

To make a real breakthrough, however, procurement leaders will need to embrace experimentation and adopt a mindset that redefines their field. This means following the lead of other industries and professions that have embraced data science and analytics to great effect. In less than a decade, data science has radically transformed professional sports management and medicine. The challenge for procurement leaders is not simply to think outside the box but to redefine the box itself.

As “Modern artists” redefined art by introducing novel and innovative ideas and materials, procurement leaders are going to redefine their profession by embracing data science and analytics. In doing so, new intelligence will emerge that enables CPOs to take an entirely different view of their operations and the levers that drive value. This will, in turn, force these same CPOs to develop new strategies and industry best practices.