Advancing Procurement Analytics

Chapter 1. Advancing Procurement Analytics

Introduction

The explosive growth of data is enabling managers to make decisions that can give companies a competitive advantage. At the same time, making sense of this influx depends on the ability to analyze data at a speed, volume, and complexity that is too vast for humans, or for previous technical solutions. Organizations are challenged with not only surpassing their competitors, but making decisions to optimize their own business activities and workflows. Yielding insights from data has the potential to transform companies’ internal processes and reduce costs.

An important area where this transformation has a huge business impact is the optimization of procurement processes. During the procurement process, some companies may spend more than two thirds of revenue buying goods and services, which means that even a modest reduction in purchasing costs can have a significant effect on profit. From this perspective, procurement—out of all business activities—is the key element in achieving cost reduction.

In a nutshell, procurement is about planning the buying process in a proactive and strategic approach. The process includes preparation and processing of a company’s demand, as well as the end receipt and approval of payments. The process can begin by issuing a purchase order, and end when the order is shipped; or, it can cover a broader scope, which includes demand planning and inventory optimization. Demand planning and inventory ...