Procurement analytics is the process of collecting and analyzing procurement data to form meaningful insights and lead to effective business decision making. It ranges from historic procurement spend analysis reports to advanced analytics that help in predicting and budgeting future decisions.
The need for procurement analytics developed as organizations urged to get a consolidated view of their procurement spends. In procurement analytics, value comes from more timely, accurate and actionable insights, and the ability to measure procurement’s contribution to the bottom line. This is used to describe, predict or improve business performance. On being utilized effectively, it enables data-driven decision making, where purchasing decisions and supplier relationships are managed more effectively.
Let’s understand more about the need for procurement analysis and the solutions to gain insights over generations. Historically, procurement analytics focused on understanding past procurement spend and supplier performance, but now the focus is shifting towards automated and prescriptive decision making. Over time the functionality and service models of spend analysis solutions evolved to meet the growing needs of organizations that faced digital transformation.
With more and more organizations looking to analyze and manage their spends, a number of solutions emerged to cater to different needs and maturity levels from time to time. Between 1990-2000, this analysis was conducted in Microsoft Excel by consultants or business analysts who largely focused on past spend analysis. Then, between 2000-2010, came desktop spend analysis software which bought under license with data hosted on-premise or within the company firewall.
Following more innovation, between 2010-2015, browser-based spend analytics dashboards providing business intelligence level visualizations and usability came into the picture. These were licensed and bought as Software-as-a-Service and from thereon, we’re now aware of how AI-powered, automated procurement analytics solutions help in combining many data sources. They’re encrypted and hosted on the cloud and are bought as Saas (Software-as-a-Service).
In today’s world, analytics is widely regarded as one of the most important resources and disruptive forces in procurement. It’s a technology area with the most impact on businesses and is also identified analytics as the most disruptive force in procurement over the next decade by E&Y.
Analytics touches all activities from strategic sourcing to category management and procure-to-pay processes. On being used effectively, analytics give category managers the superpowers to identify savings opportunities, segment and prioritize suppliers, address supply risk opportunities and facilitate innovation. On the other hand, it also helps in identifying the best times and areas to run sourcing events and requests for proposal. Whether it is about identifying which suppliers to include in sourcing projects and provide rich information into supplier’s quality and risk positions, or any other such decision
Procurement analytics also provides value across contract lifecycle management where it can alert when contracts need to be renegotiated, or provide data for supplier negotiations. Similarly, when it comes to the procure-to-pay cycle, procurement analytics measures purchase order cycles and improves payment terms. You can even evaluate payment accuracy, discover rebate opportunities, identify mistaken payment and reduce fraud. That is what procurement analytics can help you with.
Conclusion: In a constantly-evolving technological business environment, any organization looking to make better procurement decisions will need to have access to a procurement solution like Supplymint that takes care of all their supply chain problems efficiently.
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