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Focus: Sourcing/Procurement: Feature Article from Our Sourcing and Procurement Subject Area - See All

From SCDigest's On-Target e-Magazine

- Oct. 28, 2015 -

Supply Chain News: Leveraging Big Data and Advanced Analytics in Procurement

Opportunities are Substantial, but will Require Lots of New Talent, Hackett Group Says

SDigest Editorial Staff

So called "big data" and advanced analytics are unquestionably hot technologies right now, even if most supply chain managers aren't exactly sure what either term means.

SCDigest Says:

"The road to improving procurement's performance and business value contribution runs directly through big data," Connaughton and Sawchuk conclude.

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The general agreement seems to be that many areas for improvement from both technologies not only across the supply chain but of course the entire enterprise, especially in regard to better understanding customer behaviors.

With that backdrop, Patrick Connaughton and Chris Sawchuk from The Hackett Group have recently authored a new research note on "What Chief Procurement Officers Need to Know About Big Data to Become a Valued Business Partner," an interesting look at how both big data and analytics can be leveraged in supply management.

Connaughton and Sawchuk see four primary opportunities for procurement to benefit from big data and procurement.

Become proactive by forecasting demand based on identified patterns: Big data can allow procurement to become proactive rather than traditionally reactive by forecasting demand based on identified patterns, widening purchasing's traditional scope of action.

Gain a more detailed understanding of suppliers' performance: This can be achieved by detailed root-cause analysis based, for example, on data about delivery performance, quality and other supply chain attributes.

Provide faster access to relevant data and trends in formats that are easier to interpret: Hackett says many procurement organizations are already employing analytics in areas such as spend analysis, cost modeling and supplier performance tracking, but the approach can be expanded from there.

Evaluate commodity price volatility: Hackett believes using predictive analytics to evaluate commodity price volatility and model its potential impact on their cost structure and profitability is the next frontier for procurement's analytics capabilities.

Connaughton and Sawchuk then nicely sum up the opportunities for big data and analytics in procurement across several areas in the table SCDigest republishes below. The right hand column provides the best insight:

Applying Big Data to Procurement

Source: The Hackett Group

(Sourcing and Procurement Article Continues Below)

CATEGORY SPONSOR: SOFTEON

Interestingly, to get the most out of big data and analytics, Hackett says chief procurement officers must work closely with the HR organization across a couple of key topics:

(1) Creating new technology roles that do not reside within the organization today, and balancing between what roles and responsibilities should be housed in IT and which on the procurement organization. "Advanced data modeling skills increasingly reside within procurement," Hackett says.

(2) Cultivate and mobilize technology talent: Procurement must take responsibility for setting its own strategy for developing talent around big data and analytics, Hackett says. Such staff members will be working in teams that are increasingly global and virtual and that must deal with constant change

"The road to improving procurement's performance and business value contribution runs directly through big data," Connaughton and Sawchuk conclude. "It's a substantial investment of time and resources. But considering all the potential benefits, it's an investment worth making. And here's perhaps the most important benefit of all: Advanced analytics are at the heart of the agile enterprise."

What do you see as the opportunities for big data and analytics in procurement? Let us know your thoughts at the Feedback button (email) or section (web form) below.

Recent Feedback

Big Data is changing the game. Lots of new and interesting applications are making their way towards Industries. You can read this article here as well, talking about how Industries are being driven by Big Data.

Albert Joseph
Marketing
Freelancer
Oct, 28 2015

"Become proactive by forecasting demand based on identified patterns" - by this statement are the authors suggesting that Procurement or Operations in general play a larger role in Demand planning? I would be interested to see the organizational model that would be used to support the high end data modeling & tools as I suspect many firms do not have resources aligned appropriately.

Kurt Alger
Director Product Supply
RSCS
Oct, 28 2015