From supplier information to transaction histories and everything in between, purchasing operations are highly tracked, regulated, and documented.
That’s why it’s not surprising that procurement functions are known to generate more data than any other group within a company. And as group procurement lead for a global organisation, I’ve experienced this firsthand – as I know my peers in similar roles across the globe have as well.
My organisation, Almac Group, is a global contract development and manufacturing organisation serving the pharmaceutical and biotechnology sectors. We have thousands of suppliers all around the globe, providing an extensive range of products and services to our six business units.
Almac suppliers play a critical part in ensuring our operations run smoothly. In just one month, we may process over 12,000 invoices from suppliers that support each of our incredibly unique, complex, and regulatory-heavy business units.
In other words, we certainly generate and process considerable amounts of procurement data on a regular basis. To make matters more complex, as a result of organic and acquisition growth activity, our data is both disperse and diverse – stemming from numerous financial systems and legacy applications that are crucial to our business. To put this into context, output data consists of >4m cells of data within the MS Excel application.
Procurement leaders know this dichotomy all too well – data abundance and trackable processes are a good thing, for certain, but how do you keep the data from becoming overwhelming? How do you manage it? And what are the benefits of spending the money and directing resources to do so?
At Almac, we were unwilling to succumb to the management challenges outlined above. Doing so would impede our organisation’s ability to analyse spend efficiently and preclude us from uncovering significant insights hidden in the depths of our data. In fact, according to projects from global consulting group McKinsey, implementing advanced analytics can help procurement groups achieve a cost savings of 3-8% when compared to traditional models.
That’s why it was crucial for us to proactively weave analytics into our processes that are effective even absent a software solution. With investment in quality, advanced data analytics, our procurement leadership can now analyse supplier relations across the globe and make data driven decisions with a lasting impact on our overall purchasing strategy.
For other organisations considering implementing a data driven approach to procurement, we’ve complied a number of major areas where leveraging data analytics may have the greatest impact:
1. Transforming data into robust management information
Doing so informs global procurement planning, and supports discussions and collaborations across business units with internal stakeholders.
2. Evaluating spend
Organisations can apply taxonomies (spend categorization) to inform operating models. This will output a clear picture of your spend landscape, via a ‘spend cube’ like data output. By using data algorithms to segment data, analysis can go deep as the line item detail to identify price vagrancies between suppliers, while trend analysis highlights any price variances over time. In our experience, at a global level, a deep data mining approach identifies synergy opportunities across the Almac Global Business Units, and makes lower cost or more efficient options more evident.
3. Optimising procurement strategy
By observing trends and changes in your spend landscape, you’ll be able to optimise your procurement strategy for the future, where same can evolve to support organizational development. That being said, if organisations are going to spend money and resources on adopting data analytics, they must also treat the data as live management information. Trusting the data is truly the only way to ensure that you’re getting the full return on any investment.
4. Supplier segmentation and positioning
Output management information provides the transparency necessary to complete supplier segmentation and positioning exercises across global business units and subsidiaries. This subsequently supports conversations with senior internal stakeholders and informs the prioritisation of activities.
5. Relationship management and development
Following on from previous, when strategic suppliers have been identified, organisations can focus on developing relationships accordingly. This helps drive innovation and can shape market demand at the front end. A relatively recent example in our experience resulted in the creation and development of the Almac POD solution, where delivery is supported by a number of Almac’s strategic suppliers in a partnership approach.
6. Eliminating bias
Oftentimes, a vendor relationship is built on long-term, trusted relationship. These relationships may cause purchasers to form a bias towards one vendor, and automatically assume that the vendor is providing the best value. But by using data analytics, this bias can be eliminated.
☛ Thomas Crawford is group procurement manager at pharma company Almac Group