Data has an impact on almost every element of our lives, and professional procurement is no exception. As organizational cultures and tools advance, unlocking the potential of data and analytics will yield novel insights, enhanced ability to manage the complete procurement lifecycles and ultimately improve the customer experience.
Todd Heimes, director of Amazon Business Worldwide, leads teams helping businesses of all sizes streamline purchasing operations while saving on everyday supplies. He recently discussed the four most important ways that the procurement function can benefit from ongoing and increased data analysis, with market analysis topping the list. “Here, data can be used to look at fluctuations in prices,” he says. “It means procurement professionals can find the most cost-effective options and use that to drive suppliers to offer better deals.”
A second area is supplier evaluation, where current and previous supplier performance levels can be assessed and used to predict future performance. This can help procurement teams make decisions about whether to stick with existing suppliers or seek out new ones. Data can also be used to forecast demand, helping organizations work out their future needs, buy in the right quantities and at the right time, when prices may be lower.
“A final, and often most important, area is spend analysis,” says Heimes. “By looking at historical data and the performance of your team, it’s possible to get a better idea of what you’re spending. When you combine all these elements together to look at both past conditions and future demand, you can significantly reduce risk and improve the performance of the procurement function, as well as build better relationships with suppliers.”
Taken a step further, the use of data can deliver unexpected benefits. “If you know you have accurate demand forecasting, it can help you establish better inventory levels,” points out Heimes. “Many of our customers bring supplies into different locations. Being able to understand to which locations your suppliers can deliver, and in what timeframe, means you can have just-in-time inventory, even for your indirect supplies.”
“Many of our customers bring supplies into different locations. Being able to understand to which locations your suppliers can deliver, and in what timeframe, means you can have just-in-time inventory, even for your indirect supplies.”
— Todd Heimes, Director of Amazon Business Worldwide
Data can also help organizations meet sustainability and diversity targets. “We talk to customers every day who tell us that they’re trying to make their procurement function more sustainable, and more diverse and responsible,” he says. “We encourage our customers to consider using big data to help them get there. They can assess each of their suppliers around these different dimensions and can decide who to buy from based on their different compliance requirements.”
One challenge in procurement is identifying the right metrics to focus on, given the vast amount of data being captured every day. Heimes believes there are a number of steps which can help procurement professionals ensure they are directing their efforts to the right areas:
Alongside this data improvement and digitization process, it’s important that the procurement function and other business areas are able to embrace digital transformation. “Adopting a data-driven approach to procurement can be a significant challenge,” says Heimes. “There are often resource constraints so it’s important to create the right expectations and push to invest resources in the use of data.” This could include funding staff training and also ensuring data security and privacy measures are put in place to prevent any breaches, which could cause significant issues for the business.
With tools such as Amazon Business Analytics and Spend Visibility (a Business Prime feature), Amazon Business allows procurement professionals to draw on the power of data by providing analytics around their purchase history, orders, reconciliation, and more in one easy-to-access location. This includes tools to manage cash flow, such as 3-Way Match, Pay by Invoice, or the Amazon Tax Exemption Program. Amazon Business allows organizations to direct company buyers to selected products or sellers based on certain criteria – for instance, small, diverse, or local businesses, as well as products with sustainability certifications – and to monitor improvements.
Effective use of data can ultimately help businesses create their own customer-focused culture, Heimes believes. “By bringing these two things together, you can have the right supplier base with the right inventory levels and the best supplier efficiency, and you can then bring that to bear on your customer experience,” he says. This, in turn, can lead to what he calls a “culture of experimentation and innovation,” where businesses are better able to try out new products, services or ways of working.
“The ability to better forecast demand or the use of predictive analytics means better decision-making processes and a greater understanding of where to deploy resources. It’s an exciting time to be working in procurement.”
— Todd Heimes, Director of Amazon Business Worldwide
For the procurement function itself, a data-driven culture means more efficient internal processes and the opportunity to drive additional value for the business. “Processes often become inefficient over time,” says Heimes. “The ability to better forecast demand or the use of predictive analytics means better decision-making processes and a greater understanding of where to deploy resources. It’s an exciting time to be working in procurement.”
This article originally appeared in USA Today.
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