Tips for Building an Effective Procurement Data Strategy
By Hugo Britt | June 2, 2022
There’s a river of procurement data constantly flowing through your business. But are you doing anything to capture and use the information streaming in and out?
If you fail to develop an effective procurement data strategy , the business will not reap the benefits of doing so such as better supplier relationships, more negotiation leverage, increased efficiency, higher performance, and cost savings.
What's holding your procurement data strategy back?
Below, we share some of the common hurdles that prevent procurement teams from leveraging the power of their data, and offer solutions for how these challenges can be overcome.
Lack of data
Every day, humanity creates around 2.5 quintillion bytes of data. This figure is expected to skyrocket as businesses of all sizes race to digitize.
It’s understandable that the average employee would feel overwhelmed at the thought of trying to track procurement data. At a glance, it seems too difficult, too time-consuming, and expensive to attempt to track inventory, contracts, spend data, and supplier performance.
Luckily, procurement technology is up to the challenge. By funneling all procurement activity through a centralized database and automating jobs like spend categorization and analytics, data can be collected, managed, and leveraged with minimal human intervention.
Contracts on auto-renew
Most of us are familiar with the problem of auto-renewals in our personal lives. Phone contracts, internet service, paid apps, and more are set up in a way where they quietly auto-renew with barely any warning. For some, this is a convenience. But auto-renewals can be an expensive problem in a corporate procurement setting.
The issue lies with legacy pricing. You may have negotiated a good deal with a particular provider back in 2016 when they were the only player in the market, but things have changed since then. Now, there’s more competition and prices have dropped across the board. An expiring contract should be an opportunity to reduce costs by negotiating a deal that reflects the current environment, but auto-renewals mean this chance is missed.
The answer is to fight automation with automation. Use a centralized tool that alerts the procurement team to expiring contracts to allow plenty of time to act when necessary.
Lack of resources
In the past, IT teams were usually so busy supporting the business that they did not have enough resources and time to manage procurement data.
Luckily, the days of having to send data-related requests to the centralized IT team and waiting a week for a response are fast receding.
Intuitive and user-friendly procurement software can be managed by anyone, including even the least technology-savvy member of your team, and can generate reports and insights at the touch of a button.
Nearly half of organizations still use spreadsheets for their procurement data. Unfortunately, this is just raw data and makes it very difficult in terms of analytics or proactive insights. In addition, having data siloed in spreadsheets or email attachments means it is invisible and prohibits the flow of information from one system to another.
Using a centralized procurement system that captures every purchase in the business creates a “single source of truth,” an essential foundation that enables everything from analytics to AI.
No crystal ball
Leveraged intelligently, procurement data can be shaped into something resembling a crystal ball. Gained by sifting through different sources of intelligence, powerful procurement data insights can be used to make better decisions, cut costs, gain first-mover advantage, anticipate the likelihood of disruptions, and maintain business continuity.
Supplier performance and leverage
Finally, procurement data provides a true picture of how your suppliers have performed. This means you can track supplier KPIs such as defect rates, lead times, contract compliance, customer service, and more.
Tracking supplier performance removes any vagueness or guesswork when it comes to performance appraisals or negotiations. Being able to point to the data will help you hold suppliers accountable. It also removes the need to ask an underperforming supplier for data about their own performance, which can take a long time.
Get in touch with Una to discuss how we can help you centralize and digitize your data into a single dashboard that will drive powerful procurement insights.
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