By Dennis Bouley
Times are changing in the procurement business. The proliferation of big data, one important driver of this change, presents procurement departments with both issues and opportunities. On the positive side, decision-support systems aren’t just for corporate executives anymore. Practical, easy-to-use platforms are now available to support decision-making in the areas of spend analysis, risk management, and contract management. On the negative side, the huge increase in available data presents a process-based challenge, especially in cases where data is highly fragmented and poorly classified.
The ability of procurement to add value to a business in this new big data environment requires having the appropriate processes and tools in place. Big data isn’t just there for the taking. Procurement professionals need to figure out where that data needs to come from, and how to interpret that data to create value for the business. And that requires tools that are designed to both extract data from existing systems and making that data available to both suppliers and procurement professionals. These stakeholders need to work in closer collaboration in order to help their companies gain competitive advantage.
Why does procurement need to concern itself with this obsession for data? Moving forward it will be the most effective way to impact corporate bottom lines through the reduction of unnecessary or irrelevant expenditure. Better data access will also be the key to ensuring that procurement is able to efficiently fulfill its core function: supplying the direct and indirect products and services needed to keep the business motor running.
Modern tools enable the leveraging of big data
In such an environment, a key competitive differentiator becomes implementing the appropriate tool-based process for collecting, analyzing and acting upon that data. Modern tools, for example, will allow procurement professionals within a given company to take advantage of marketplace pricing situations that normally wouldn’t be available. The procurement teams with the best data available to make the appropriate timely purchases are the ones that will come out the winners.
David Khuat-Duy, CEO of Ivalua (www.ivalua.com), a Silicon Valley-based provider of enterprise spend management platforms, sees it as his company’s mission to grow the influence and efficiency of procurement departments across manufacturing and e-commerce industries, through better management of data.
“A key critical success factor for procurement departments is a fundamental understanding of how budget money is spent. That means knowing where you spend your money, on what categories of goods, within which particular geographical regions and, finally, the identification of the main suppliers of those goods within that region,” says Khuat-Duy.
“You can assume this work is easy because it’s just aggregating data, defining a few KPIs and setting up some pivot tables. But, even though automation of these processes has been around for 20 years, there are still issues trying to accomplish this. The reason for the issues is that the volume of data for big companies is very big, and is being sourced from very different ERP systems. And in some cases, data is not even in ERP systems,” he said.
According to Khuat-Duy, the cleansing and classification of all that data can be tricky. “It seems simple when you’re dealing with a low volume of data, but when it’s performed on big volumes it’s difficult.”
To help address this issue, new cloud-based procurement platforms are coming on line that are introducing Artificial Intelligence (AI) approaches that step in and add more value. “You are able to train your system with previous categorized data and apply that to all uncategorized data. As a result, you gain additional insights to spend data much more easily and with more accuracy. For a procurement department, this makes a big difference.”
Spend analysis is just one example where the new platforms can use AI to help increase productivity. Other areas include risk management, contract management, and predictive analytics.
For procurement teams just getting started in the adoption of a platform approach, Khuat-Duy had some simple advice, “Find a business process where there is some repeatability in the work that is being performed, and where you have a big quantity of data that has been treated in the past. Such an approach will provide you with an early win. This will then help justify investment in the broader application of the platform across disciplines where the real data integration cost savings begin to amplify.”
Ivalua (www.ivalua.com) is a market-leading Spend Management software as a service (SaaS) provider, headquartered in Redwood City, California and Paris, France. Ivalua has recently raised $70M in growth equity minority funding from KKR, a leading global investor. Ivalua's Source-to-Pay (S2P) platform supports over 250 blue chip customers globally, including Honeywell, the City of New York, Veolia, Thales, Orange, Michelin, and Deutsche Telekom.
Dennis Bouley is Editorial Director of MyPurchasingCenter.com and special advisor to MediaSolve Group, a strategic B2B marketing services firm focused on helping companies and institutions leverage the web and social media to achieve business goals. He spent 18 years at Schneider Electric as Managing Editor of Global Publications, and was responsible for cross-division management of the corporation’s white paper and customer success story processes. Prior to that, he spent 10 years working for IBM managing both small and large accounts. He holds a Bachelor of Arts in Journalism from the University of Rhode Island and holds a Certificat Annuel from the Sorbonne in Paris, France.
George E. Krauter
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