Having more data generated in the last two years than in the history of mankind is an opportunity to recognise how analytics is a source of competitive advantage. Sammeli Sammalkorpi, Co-founder of procurement analytics solutions provider Sievo, shares some key points from a lecture presented at the London Business School.
Talking about procurement analytics is something that definitely makes my heart beat faster. As a co-founder of Sievo, with years of experience and expertise in this domain, I had the privilege of sharing some of my insights in a lecture at the London Business School’s course on Data Science. Engaging in great dialogues with the audience, the discussion sparked a lot of interest among the students, exposing them to a combination of theory and hands-on practice.
Here are some of the key points mentioned:
Analytics is not valuable unless it yields action
As the world becomes more and more data-driven, many organisations rely on hard numbers to justify a decision or drive a strategy. It doesn’t really matter what type of company, nor what type of function, as everyone is doing it. Like the rest of the world, procurement has gone digital too, with the ultimate goal of unlocking savings opportunities that can lead an organisation to endless possibilities in terms of unleashing data value.
But this data value remains untapped if it does not yield any action. Capturing data from transactional sources is a key foundation as well as translating this into actionable insights. Integrating data-driven analytics effectively into procurement processes can defend decisions with greater precision. From forecasting consumption patterns to inbound logistics, applying analytics drives sustainable procurement value in the long term, streamlines purchasing operations and refines procurement strategies and processes.
Combining internal and external data
Most organisations have insufficient and inaccurate information about their spending patterns and supplier data. There is an overwhelming large global supply base and scattered data on supplier information, in addition to the disparate nature of systems and data sources. The challenge is to find a way to combine the vast volumes of internal and external supplier information and use both to uncover more savings opportunities. Utilising spend information along with market prices and supplier risk information will pave the way to unlocking new insights. Combining internal and external data in an automated, structured fashion provides radical new sources of procurement value.
Human input will gradually decrease
With machine learning and artificial intelligence (AI) working hand in hand, more organisations embrace insight-driven actions rather than pure human decisions based on gut, emotion and self-interest. Procurement analytics provides the fuel for an organisation to drive strategic and better sourcing decisions faster. Its future, with the effective collaboration of machine learning and predictive analytics, provides opportunities of amplified visibility and agility. The days when the whole spend analytics engine was only in the able hands of human experts will soon be gone. Closing the data-to-action gap through decision automation means that less analytical capabilities are required from users.
It’s not just one method
Any business problem worth solving requires a combination of methods, some very traditional (ETL) and some just emerging (ML). Reaching effective, automated classification processes requires a combination of approaches. Analytics will move to the cloud: an increasing number of domain-specific analytics solutions providing out-of-box integration to external data sources will emerge. This combination will be the secret weapons in the future. Technology is important but, more than that, the ability to use it in more innovative and collaborative ways.
Any team looking to unlock potential needs to possess three competences: rich data, domain expertise and advanced analytics. With the world going digital, new opportunities and digital technologies are sprouting for quicker wins and more efficient, smarter ways of operating. Procurement professionals are more empowered to deliver more business value. This is the future of procurement analytics. This is where the world of procurement is heading.