“Data is the new oil” has been spouted as a truism for a number of years. This is primarily due to the promises of all the nice things AI will do for us. But access to clean and correct data is a much more fundamental requirement than just enabling AI. Having correct supplier data, visibility into spend data, and access to third-party risk, ESG, and market data is crucial to run your operations.
CPOs are aware of the importance of data. In fact, according to our Procurement Metrics that Matters in 2024 research, CPOs consider better data visibility and analytical capabilities as one of the most important factors to move procurement to the next level. But there seems to be a disconnect between this realization and the willingness to do something about it. Developing or improving current data strategy is only fifth on the priority list for 2024, far behind other priorities like delivering cost savings or managing risk (although there is a strong argument that ensuring correct supplier data is in fact a key risk management factor). And only 10% of CPOs are planning to increase data science skills and develop “big data” strategies as a strategy to drive procurement initiatives and improve performance.
Another aspect is that good data is necessary for ensuring that different procurement systems work as advertised. CPOs acknowledge this and state that poor data quality and/or access to the technology is the biggest challenge to realize greater benefits from S2P tech. But only 10% consider data architecture/quality/access a top-three criteria when selecting procurement and S2P technology.
But here comes the paradox — the only way to improve the data (to get more benefits from technology) is to invest in technology! Yes, of course there are other components to it, but fixing the data problem is primarily a technology issue.
Supplier Data
Supplier data at its most basic level is the data you need to do business with your supplier (e.g., where to send the purchase order, how and where to pay the supplier, etc.). The best practice is to use a proper Supplier Information Management (SIM) solution/module to collect and maintain the supplier information. It can also be used to keep a golden record of supplier information that can be synched across all other solutions that need the supplier information to properly function. That said, many organizations use their ERP to store the golden record even if a SIM solution is used to collect the information (“onboard a supplier”) and maintain it.
Supplier data is also a major input into risk management. Knowing which suppliers you use where is critical. Enriching supplier data with third-party information can further improve risk management by adding information about supplier financials, geopolitical risks, ESG data, and so on.
Spend Data
Spend data is the other critical type of data for a procurement operation. Having correct granular spend data enables you to get more value out of spend analytics solutions, which is one of the fundamental procurement solutions that should be prioritized by any organization that is serious about managing their external spend.
Improving spend data can be done in different ways. The first is to move as many suppliers as possible to e-invoicing. This makes all the invoice information digital from the start and gives you access to invoice line descriptions at a line-item level and can be used to classify spend more exactly.
Another strategy is to drive more spend to purchase orders by using a classic P2P/eProcurement solution or even an intake management solution. If implemented correctly, the solution should automatically classify the spend correctly from the start and carry it over to the AP process (spend data is usually extracted from the AP system/module), removing the need for the spend analytics solution to classify the data in the next step.
Start Improving that Data Quality
Moving forward, it’s crucial for businesses to improve data quality. Building robust data management skills and prioritizing data management capabilities during procurement tech selection are essential steps for unlocking the true potential of these solutions in the age of AI. By focusing on data as a strategic asset and building a clear roadmap towards a solid data foundation, businesses can position themselves to leverage procurement tech for smarter procurement decisions, improved supplier relationships, and greater savings.
As always, Ardent Partners is here to help with any questions!
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