Archive: September, 2013

Big data

No one can deny that the world is becoming more complex. One reason is the growth of digitisation and the increasing inter-connectivity between people and things. This has led to the development of technology that is powerful enough to capture this complexity and propel us into the era of “big data”.

It is a seductive notion that there is something that can capture, curate, store, search, share, transfer, analysis and visualise the world around us. For procurement, this means that we have got something that can answer the burning questions on how to reduce costs, enhance competitiveness and achieve profitable growth.

A recent survey by Gartner showed that organisations are increasingly seeing investment in big data as critical to driving competitive advantage. According to their survey, “42% of IT leaders have invested in big data or plan to do so within a year”. Gartner comment that: “Although most of the big data hype is about handling the sheer size and speed of the data available, our research shows that the ultimate wins will be from those making sense of the broadening range of data sources.”

But what does this mean for purchasing, arguably an area that is already well advanced in its use of data analytics?

A recent report from Aberdeen titled “The CPO’s Agenda for 2012…and beyond” clearly illustrates the importance of data capture and analysis. Their key metrics in determining what makes a company best-in-class were:

  • Rate of spend under management
  • Rate of procurement contract compliance
  • Percentage of identified and negotiated savings that are actually realised and implemented

The challenge facing purchasing is three-fold: firstly, we have to ensure that the data is accurate; secondly, we have to have the skills to analyse it correctly and finally we have to convince those around us that our approach offers the best outcome.

The majority of data relates to suppliers and the products and services they sell. This information comes either from internal staff providing the data (e.g. raising purchase orders) or from suppliers (e.g. catalogues punched-out to suppliers’ websites). Unless this data is normalised into a consistent format (e.g. categories of spend, units of measure, pack sizes, etc.) and enhanced where important information is missing, then, at best, we will have difficulty finding what we are looking for, or worse, we may base business critical decisions on misleading or incomplete information.

Once we are confident we have accurate data, we have to understand it in the broader context of the corporate strategy and the environment we operate in. This not only requires knowledge of the political, economic, legal, social, technological and environmental constraints but the ability to apply it to the markets we operate in and then develop a robust approach to engage with suppliers.

And finally we have to convince those around us that the purchasing strategy we suggest is the best way to unlock the full savings potential from across the supply chains. This requires more than pretty pictures replacing tables of data. This means having the ability to manage relationship and persuade decision makers to change their minds.

Big data offers purchasing a great opportunity to better understand the world we operate in. There are a plethora of analytics tools available which can provide colourful dashboards on a myriad of different indicators. The challenge facing procurement is making sure the data is accurate, the analysis is robust and that others buy-in to the approach. Big data will become increasingly important but the power to think, visualise and define the road ahead ourselves will not diminish.

http://www.gartner.com/newsroom/id/2366515

http://www.aberdeen.com/Aberdeen-Library/7840/RA-procurement-spend-optimization.aspx