Use big data to help procurement 'make a real difference'

Milan Panchmatia
23 March 2015

Big data has been touted as the solution to almost every business problem in existence, but how can procurement take advantage of this wealth of information? 

Big data, or at least the idea of big data, is nothing new. The concept dates back at least 70 years, to when researchers first attempted to qualify the rapid growth of available data. In fact, the popular term "information explosion" was first coined back in 1941.

On top of this, the term big data is extremely broad and refers to a collection of data so large and complex that it cannot effectively be processed using traditional means. Given this expansive definition, it is not immediately apparent how it can help procurement functions.

In this piece, I will put forward a few examples of big data being used to benefit procurement.

Big data and procurement

One of the most obvious areas where big data can create a positive impact is spend analysis. Using the data available, procurement functions are able to predict elements such as spending patterns, supply chain risk and supplier performance with an accuracy never seen before.

This type of insight should be used when designing future business strategies and informing decisions. In terms of marketing spend, for example, big data can enable procurement and marketing to more accurately determine the ROI of any investment.

One of the key areas where big data can have an impact is supplier management. Suppliers are crucial to most leading businesses and as such the in-depth analysis made possible by big data can lead to significant gains.

Relationships with suppliers are often complex and as a result deliver huge amounts of data for procurement to analyse. The first step in extracting benefits is to consolidate and clean this information and create a process for collecting data.

Keeping focused
Big data comes with huge possibilities and the ability to drill down and identify areas for optimisation is incredible. However, there is also a very danger of losing focus. Avoid getting lost in your data and focus on one area at a time.

There is no point collecting all the data in the world if you have no plan to take advantage of it. Always keep your focus.

Talk about success

A trick that marketers have been pulling off for years is using data to tell stories. People are more likely to remember and recognise your success if you link it to something tangible. Whereas it is all well and good to present a series of charts explaining how an SRM programme led to a 31 per cent reduction in inventory stock, it is unlikely to stick in people’s minds. Use big data to explain how the initiative developed over time. From conception to culmination.

As I’ve mentioned in previous posts, it is imperative to publicise any success and to so in a way that resonates with your audience. Internal or external.

Big data provides ample opportunities to do this. In this context, regardless of whether procurement is carrying out spend analysis, measuring supplier performance or presenting to senior stakeholders, big data can be an invaluable instrument. The correct use of this vast resource equips procurement with the tools to make a real difference within a business.

☛ Milan Panchmatia is a director at 4C Associates.

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