“The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.” Peter Drucker
The world of business is changing. But the world of procurement isn’t keeping up.
Procurement, as a field has been around for centuries; but it’s never been more important than now. As ever, your company’s success depends on getting the right products at the right prices. If you don’t do this well, you’re going to lose customers—and that means you’ll lose money.
Luckily, there are plenty of tools out there to help procurement professionals make better decisions. Advanced analytics leads the pack. The quantum of data generated & captured, is growing at an unprecedented rate, and advanced analytics is a game-changer for procurement professionals. The insights it provides, are being used to make better decisions, improve processes, and drive business growth.
How do you, as a procurement professional, make sense of the dizzying arrays of data at your disposal? How do you derive the insights you need, to make informed decisions?
The new report from Gartner titled “Use advanced analytics to make better procurement decisions” provides procurement organizations with a list of 5 key areas to prioritize for deployment of advanced analytics, helping you make the most of your data and driving better efficiency across your processes.
While the advantages of deploying analytics are undebatable, it can be tricky to figure out which areas to target first and how best to implement them. The Gartner report referenced herein makes a compelling case about 5 top use cases where advanced analytics and here’s our top picks:
This is the highest use case of advanced analytics in the report “Gartner 2018 Future of Supply Chain Study” and is a primary goal for most procurement departments. A key benefit of advanced analytics is its ability to provide cost visibility across the entire organization. By understanding where costs are being incurred and identifying areas of wasteful spending, procurement professionals can drive higher business value through improved efficiency.
In addition, advanced analytics can also help procurement professionals improve their negotiation strategies with suppliers. By understanding the supplier’s cost structure and key drivers, procurement professionals can negotiate more effectively and arrive at favorable terms and conditions.
Advanced contract analytics is a powerful tool for uncovering savings and managing risk in supplier contracts. By combining Natural Language Processing with AI, enterprise CLM solutions like Zycus iContract are able to analyze the terms and conditions of multiple contracts in order to identify areas of exposure, ensure compliance with negotiated pricing, rebates, service levels, etc., manage risk and streamline processes.
In their latest report on advanced analytics, Gartner acknowledges “Only 5% of organizations use predictive and prescriptive analytics to help them identify potential supply disruptions before they happen, our 2018 research found. But by 2025, three-quarters of supply chain professionals expect to have this capability.”
The world is getting riskier, and it’s not just a matter of rhetoric. The supply chain has never been more complex and interconnected, and that means that the risks are more diffused and harder to manage.
For any organization, supplier issues can have a major impact on the bottom line. Delays in delivery, poor quality control, and unforeseen costs can all eat into profits. However, identifying (the impact of) these issues can be a challenge. That’s where advanced analytics comes in. Advanced analytics can help identify and quantify supplier risk by examining factors such as financial stability, quality of products or services, compliance history, and more. A sophisticated tool like Zycus’ Risk Radar provides 360° identification and mitigation of supplier risk by analyzing millions of reputable online sources, and provides timely risk alerts.
This information can then be used to make better decisions about which suppliers to work with and how best to manage those relationships. Armed with this information, they can then take steps to avoid or mitigate these issues in the future.
In today’s business world, data is becoming increasingly important, and forward-thinking CPOs are moving beyond routine spend analysis to incorporate predictive and prescriptive capabilities in their day-to-day operations. Gartner prescribes use case prioritization, as detailed above, as one of the first stages of devising the strategy for utilizing advanced analytics in decision making and generating more value from procurement processes.
To read more on subsequent steps of deploying advanced analytics in your procurement’s decision-making, click here.
Gartner, Use Advanced Analytics to Make Better Procurement Decisions, Geraint John, Miguel Cossio, Refreshed 13 April 2022, Published 18 September 2020
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