Profitability in Procurement? Allow Data the Driver’s seat!

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Profitability in Procurement

Profitability in Procurement


We know how data both internal (spend, contract & supplier relationship management) and external (supplier database) are crucial to providing information that helps drive sustainable procurement-value. In this space today, we’ll see how many sourcing and procurement organizations can actually be bucketed basis their behavior toward data followed by discussing areas that are directly impacted by data.

  • Data Underestimation: It is pretty strange how some organizations either overlook it or just undervalue the spend data residing in their systems. Could this be owing to improper or non-existent spend classification systems, legacy systems used for sourcing, contract management, procurement and accounts payable due to which it becomes difficult for the organization to arrive at the true category spend? Well, yes. Collation of spend data, cleansing and classification are often long drawn and time-consuming which lead to decisions of ignoring its potential altogether.
  • Data Manipulation: Sir Arthur Conan Doyle said, “Data! Data! Data! I can’t make bricks without clay!” Absolutely. Like you cannot make bricks without clay, you cannot make decisions without verifiable data or data that’s deliberately misrepresented to suit a certain. A fact that needs to be acknowledged as their are organizations that are affected by this.
  • Data Driven: In this category, are organizations that respect data and ensure such data is acquired from sources that are not prone to any kind of  manipulation. These organizations allow real-time data to take charge of decisions made for their category management, sourcing and procurement.

Having discussed the above three, which one do you think should be an organizations data mentality? To help you better, we have listed a few areas where comprehensive and reliable data analytics is a great influencer.

  • Power to Purchase: For buyers, data analytics helps buyers make informed purchase through insights into historical spend patterns, forecasting, opportunity assessment, supplier profiling and competitiveness, conditional discounts and alternate bid comparisons.
  • Better Spend Management: Through credible spend data analytics, one learns about suitable procurement mode, item, nature, quantity and pricing of the item and from where and whom the item (service/material) has to be procured. This data substantially improves your purchasing insight and improves process efficiencies along with ensuring adherence to one’s procurement policies.
  • Cost Effectiveness: With the help of data analytics,  buyer can decide the best combination of material/service-supplier which would ensure cost effectiveness. To run this analysis, there’s a need for spend analysis, standardization of specifics and appropriate categorization of suppliers at both strategic and tactical levels. It can then proceed to discovering opportunities from the insights produced.
  • Risk Reduction: No buying is completely immune to fraud. Any abnormality in the purchase pattern is an opportunity for fraud that can be countered by smarter sourcing strategies backed by analytics

Profitability in Procurement? Now you know who you have to allow in the driver’s seat! be assured that only data driven decisions can drive you safely to exploring newer opportunities and efficiencies thereby making way for desirable profitability within your procurement practices. Wait, what about the data-sediment in your purchasing systems, what is your plan with it?

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