Big Data Analytics in Procurement
In recent years, big data has become one of the most frequently used buzzwords across the business world. However, despite the hype provided by business journal headlines and technology consultants, there is a tremendous amount of value to be gained by businesses that can collect and analyze newly available data. There are several new sources of data that can be leveraged by procurement:
- Internet of Things (IoT)
- Should-cost models
- e-commerce and social media
Internet of Things (IoT)
Data collected from Internet of Things (IoT) devices has the ability to transform many different procurement functions. For compliance, IoT devices included with shipments can track when and where specific shipments are delivered. If a supplier consistently delivers products late or to the wrong location, procurement would have real-time indisputable data to bring to suppliers. Another application of IoT devices for procurement is to use them to gather data from Industrial IoT devices within a manufacturing or warehousing environment. Utilizing IoT devices, Procurement is able to gather real-time data about how often or for how long a piece of equipment is down and then use that information to have discussions with the equipment supplier, the company that is responsible for servicing the equipment, or with internal teams about purchasing new equipment.
Another important innovation for the procurement space is the ability to obtain huge amounts real-time data, feed that data into previously built models, and understand the impact of the data. For many years, companies have been using product/service should-cost models during price negotiations. However, utilizing real time data and software programs that can pull that data into the original cost model, procurement can track true product/service costs throughout the term of a contract. For example, feeding real-time data about raw material prices, labor rates, shipping rates, and tariff increases/decreases for a manufactured product, companies can understand the true costs of manufacturing the product and negotiate with the supplier accordingly.
e-commerce and social media
The rise of e-commerce and social media have disrupted multiple business functions and created an opportunity for Procurement. Immediate feedback on product and service quality has changed the way we shop and track product effectiveness. Online stores make it easy to leave reviews and Social Media provides a platform to praise or complain about a new purchase. Procurement can utilize this information to determine product quality issues and immediately address these issues with suppliers.
These are just a few examples of the impact that new technologies and data sources can have on the procurement space. Stay tuned for an upcoming white paper where we will go into more detail about the new sources of data available to procurement, how this data can be utilized for practical applications, and how your procurement group can make sure you have the skills and infrastructure to drive the most value for your business.
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