BY HUGO FUENTES DIAZ
A CLEAR VIEW HOW PEOPLE, THE PLANET AND BUSINESSES WIN WITH PROCUREMENT ANALYTICS The procurement analytics market is projected to reach $8 billion by 2026 (Marketandmarkets, 2022). Why is it growing so rapidly? Amidst the global pandemic, companies are turning to supply chain analytics to increase their end-to-end supply chain visibility to make more informed decisions that increase their bottom line, mitigate operational risks and diversify their supplier base. Analytics is the process of collecting, modeling and analyzing data, along with being able to turn it into actionable insights. Over time, the role of the procurement professional has evolved, transitioning from a transactional buying role into a strategic decision maker. The objective for any procurement professional today should be to procure materials or products that prioritize the most convenient combination of quality, cost, timing and environmental impact. As such, suppliers and vendors should be assessed on all four aspects. For example, procuring a product from China will have different repercussions from a cost, time, quality and environmental-impact 16 APRIL 2022
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perspective than it would from a product arriving from Europe. Analytics help procurement professionals make the best decision when balancing all four critical aspects. In addition, our global trading environment today is characterized by higher complexity, amidst changing regulations, new supplier options, rising pressures for full transparency coming from consumers and company shareholders and so on. The modern procurement professional is now confronted with a reality that demands deeper and faster understanding of what is going on within the supply chain. This new reality challenges the conventional toolbox used to monitor our supply chains. Methods such as Excel spreadsheets are no longer sufficient to deal with the level of effectiveness and timeliness that’s required. While spreadsheets can house data, they do not have the ability to create an accurate, clear and insightful view of the procurement process performance in a timely manner. It’s becoming increasingly important for companies to establish a centralized data hub or con-
trol tower that provides visibility and guides decisions across the organization. Analytics can act as a central hub with concrete and measurable elements that help drive future decisions. ANALYTICS STREAMLINES REPORTING Spend analytics allows procurement professionals to understand, in detail, how they are spending and investing money from the organization in the most effective way possible. Sourcing risk analytics allows users to evaluate their suppliers and create a diversification strategy that is connected to risk. If too many materials are being sourced from one supplier and there is a disruption in their supply chain, analytics can help you determine the best alternative strategy. In addition, supplier performance is measured through analytics tools, allowing organizations to access real time information surrounding reliability. This allows companies to make imperative decisions around continued work or proactive conversations with their suppliers.
WHICH KPIS ARE IMPORTANT? The metrics to be measured will always depend on the company’s goals and strategic priorities. Typically, however, there are six KPIs that procurement professionals should prioritize. First, reviewing the total cost of ownership (TCO) to ensure alignment with your company’s financial strategy. Second is supplier in-full on-time (SIFOT) for supply planning and supplier relationship management. Third is supply variability and lead time adherence. Fourth is inventory turnover for packaging and raw materials, as individuals need analytics to tell a story around asset management and the level of inventory carried. Fifth is inventory write offs that are driven by the expiration of materials. Lastly is plastic emissions, because as a procurement professional, you have direct access to decision making that affects plastic waste and equivalent carbon emissions. KEY IMPLEMENTATION CHALLENGES Having a solid data foundation is the most prominent challenge. This can be overcome by developing a supply chain data management strategy upon which companies can build a solid analytics infrastructure. This is critical for starting the analytics journey and gradually increasing the value added to the organization. Data integration is a common challenge we are seeing amongst businesses. Supply chain data is typically being stored in different systems, making manual reporting extremely inefficient. Often, companies make use of data generated from internal and external sources. Leveraging external data from suppliers and internal data from transactional activities can contribute to increased end-to-end visibility. Although your organization might have an ERP system in place, there is relevant data that exists in other systems of record that could enrich the procurement analysis, but it is not easy to access, validate and SUPPLY PROFESSIONAL
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