In 2019, it is not enough to rely solely on internal data for procurement organizations. It has become obvious that data is everywhere and keeps growing.
This reality is particularly true for data generated outside the organization. In the search of new insights, the convergence of data from multiple sources appears to be very beneficial for those who manage to leverage it. However, very few procurement organizations have integrated external data in their strategy and those who did are not using it at its full potential.
Internal data is still somehow a challenge for many organizations. It is actually not that easy to use spend data, contract data, and SRM data. Furthermore, most organizations are still struggling with siloed information and have not yet tried to combine data from different departments of the same organization. But in case you have already mastered your internal data then, you might consider taking a look at the data that is out there.
Most Procurement decision-makers understand that concepts like analytics and process automation are the present and future of this field, alongside cutting-edge technologies such as Machine Learning, IoT and Natural Language Processing. However, only a few do not underestimate the value of data created externally. Indeed, both internal and external data are equally important in your Procurement strategy.
At this moment, you might be wondering what kind of external data could you harness … Well, it depends on several elements. After several experiences, we noticed that usually, some specific indicators are strongly related to your procurement overall performance. For instance, the price of a natural resource can hugely impact your forecast. Moreover, price indexes can also be used to monitor performance relative to the market. Procurement needs external information whether it is on the company’s competition, commodity and category markets, supply base, and economy.
External data can be found almost everywhere, you just need to determine the right data that will help you confront your own data. We also recommend procurement organizations to use news feeds directly into your decision-making tool. With the proliferation of APIs and Open data culture, it becomes possible to gather new data and confront it with your own to identify a pattern. For instance, we envision a short-term future in which predictive analysis of price and demand or supply-chain disruption forecasts models will be developed for most strategic commodities. This ability to harness the potential of internal and external data in order to increase the reliability of budgets and forecasts will be key to buyers and their organizations.
We also predict a future in which advanced procurement tools will help organizations pinpoint the most relevant timing in order to renegotiate contract details. Moreover, by leveraging both internal and external data, we could anticipate that advanced tools will help organizations understand the cost-breakdown of each component they purchase by modeling the price/cost structure and perhaps propose different scenarios based on data gathered.
When it is possible, the integration of data from suppliers can also prove beneficial in your decision-making process. Procurement specialists leveraging the convergence of data will be in a strong position at the negotiation table with suppliers and will be equipped to address internal demand challenges.
Our solution is equipped with data visualization and advanced analytics that can make the best out of external data. Our latest example is in the healthcare industry where we created a personalized dashboard that can help Procurement specialists understand their performance compared with national indicators.
Limitations
The addition of external data in your procurement strategy sounds great but it comes with challenges too. First of all, you need to make sure you have the right to use external data (agreements, open data, GDPR, etc.). Secondly, you need to make sure that your data can be used by your decision-making tool.
Have you ever heard about data cleansing?
Well, we need to prepare your data in order for it to be used by your tool… and it takes time. Finally, some organizations might be tempted to gather as many external data as possible but this is the wrong approach. We recommend you to build your KPIs keeping in mind the type of information you want to see on your dashboard and what is technically feasible.
We build our solutions with the idea that Procurement organizations will have a 360-degree view of suppliers through internal data (spends, performance...), data from suppliers and market data.
One step further
With the rise of AI-powered solutions, we expect Procurement to leverage large masses of data thanks to the development of advanced machine learning/deep learning analytical models in order to uncover insights inaccessible using standard analyses (relations/correlations), and also make reliable predictions. For instance, we have seen several projects leveraging the power of NLP (Natural Language Processing) to go through an important number of written documents in order to highlight key opportunities that could be used for contract negotiation. Furthermore, some AI applications can help buyers predict the best suitable provider based on a combination of data.
The combination of advanced analytics, data visualization, natural language processing and machine/deep learning will unleash a new era of Smart Procurement. We envision algorithms that can cross-check with external data to interpret results and identify areas for improvement or learn from past experiences and predict the best possible outcome of each business decision. The future is definitely bright for Procurement organizations willing to start leveraging external data with advanced analytics decision-making tools. Many obstacles can appear along the way but the benefits far exceed them. We are committed to the advancement of data in the Procurement world.
Written by Alexandre Gonfalonieri
