Digital Procurement Report: Zooming in on Data
After looking at some of the general takeaways from our online survey “Digital Procurement: Just Hype Or The New Standard?” regarding the current level of digitalization and the priorities for investments, we now want to dig into one of the key value propositions of Digital Procurement: integration.
Data is more important than ever
As we mentioned in the first part of this series, technologies related to data analysis (big data, predictive analytics) are:
- the most valued/desired pieces of technology according to respondents.
- where organizations consider to invest in the first place.
The reason for this is that business decisions now have more far-reaching consequences than ever. It is important, therefore, to make the right ones and data plays a vital role in that process. Procurement professionals know too well the effort associated with collecting and analyzing data. The access to data, the quality of data, and the mass of data are challenges that hinder any analytical effort. For a long time, Procurement teams had to manage trade-offs between “effort to get more data” and “risk of taking a decision without holding all the cards.”
“Actionable Intelligence is any intelligence that can be used to boost a company’s strategic position against industry peers. The acquired intelligence must be transferred into real actions.” – Business Dictionary
In the last years, technology has made tremendous progress in that area. Cloud solutions, inter-operability of systems, smart analytics, the push for digitization, among other factors are enabling teams to collect more data (structured and unstructured) and to develop insights and actionable intelligence. Also, we are at the beginning of the artificial intelligence revolution that will push even further the boundaries of what technology is capable of.
However, to get there, there are a couple of challenges that organizations need to tackle: process silos. Even if the words “Source-to-Pay” (S2P) or “Purchase-to-Pay” (P2P) gives the image of end-to-end processes that are smooth and integrated, the reality is often far from that. Information generated at one step and that would be very valuable at another one often gets lost on the way. This disconnect is well known and can have dramatic impacts when, for example, strategy and execution are not connected and hence, not informing each other.
What do predictive analytics do?
Integration is a reality, but still very manual and incomplete
To understand the reality of the silo effect, we asked respondents of our survey what information and data they use for critical processes like:
- Category management
- Supplier management
- Sourcing decisions (TCO / TVO)
- Supplier evaluations
- Supplier collaboration
We also asked them if the integration of such information was:
- a manual process to “pull” the information that is needed (e.g. get data from a system, integrate into another one or in Excel)
- an automated one that “pushes” the information where and when needed (data generated as output of one process and stored in a system is available in subsequent process steps, if needed, and in the system used to run that process)
The first picture that emerges is that more than three quarters of organizations (78%), do integrate data. However, they do it mostly manually (77% of those who integrate data do it manually by using Excel or downloading / uploading files into systems):
When looking at the details, an interesting picture emerges. Processes and data that most organizations integrate are:
- Actual supplier performance into sourcing decisions (TCO/TVO)
- Actual supplier performance into category management
- Logistics / landed costs into sourcing decisions (TCO/TVO)
- Electronic transmission of PO/confirmations in supplier collaboration
- Material and process costs into sourcing decisions (TCO/TVO)
Process and data that most organizations DO NOT integrate are:
- Digital competence of suppliers in supplier management
- Internal costs into sourcing decisions (TCO/TVO)
- Supplier footprint vs. own footprint in supplier management
- Supplier information management in supplier collaboration
- Innovation capabilities of suppliers in supplier management
There is a need to connect more dots…
Organizations have digitized information and digitalized processes, so they have much more data available than before. On top of that, there is more and more information available externally:
- Public information available on the Internet, e.g. OECD and other national statistics bureau for demographics, industry, labor statistics by country, LME (and others) for raw material prices, professional associations…
- 3rd party providers specialized on certain types of data, e.g. D&B, LexisNexis, Riskmethods, Ecovadis, RapidRatings, etc.
Therefore, integration is broader than just an internal topic and relates to integrating any source of information that is relevant to a process and that can influence its outcome. The more dots a team connects, the better informed they are to anticipate and take action.
Big Data alone brings nothing. Value comes from what you do with the data.
Smart technology is needed to transform vast amounts of raw data into better actionable intelligence. Any digitalization initiative should be validated from the perspective of which (additional) data and insights you can gain from it, instead of only calculating the efficiency savings brought by process automation.