Understanding The Essential Role Data and Analytics Play In Procurement
There’s a wealth of important data flowing through procurement. The problem is, most procurement departments don’t have the tools to capture all this data, much less apply analytics and turn the data into something useful.
Traditionally, procurement systems only gather transaction information and sometimes line-item data. This method misses out on any data that gives context to purchasing decisions, such as information about suppliers and the review/approval process.
In the modern age of business, data is absolutely essential to success. Gathering accurate data in a usable form is key if you want to solve procurement problems, prevent issues from developing in the department, or simply realize more value from your procurement processes. Keep reading to learn more about the kind of data available from procurement, how to collect it, what benefits you can realize from data use and analysis, and how automation software is a vital part of this whole process.
What Kind of Data Can Procurement Supply?
Data collected from procurement gives you insight into spending patterns. Most departments are already collecting information about what your company purchases, how much, and when. The procurement process can also supply data that provides context for purchasing decisions. That includes information about the steps it takes to review and approve a requisition or to set up new contracts with suppliers.
You can also collect information about compliance and performance. That includes data related to the time it takes to generate purchase orders, whether or not your employees comply with purchasing regulations, and comparisons of planned and actual spend. Many companies don’t collect this information at all. If you do collect it, the data can give you important insight into how well your system works.
There’s also a lot of data to collect from and about your suppliers. Contact information, pricing quotes, and contracts are important to keeping your procurement department running smoothly. Product information is also useful. You’ll also want to keep track of performance data related to suppliers, such as how quickly they fill your orders and whether or not they’re responsive to questions.
How Do You Gather Clean, Accurate, Useful Data?
Just because data is available doesn’t mean it’s always simple to gather, especially in a useful form. You’ll need to make sure all your spend is categorized correctly, which means you need a standardized categorization system. Leaving spend categorization up to individual employees makes for inconsistent categories. You’ll also want to make sure the categories are not too broad.
When you have a detailed spend classification system in place, it’s easier to analyze the data you’re getting. It’s not enough to know how much you’re spending on office equipment, for example. You’ll want to break that down into equipment, marketing, and janitorial supplies, as well as other categories pertinent to your business. Then you’ll be able to analyze where your money is going more accurately.
Trying to collect clean, accurate, and useful data manually is a well-nigh impossible task. Software automation like NextProcess’ Purchase Order Module turns data collection tasks that would take a human team weeks or even months into a quick and efficient process. The system can automatically enforce compliance, track spend categories, and collect every piece of data related to procurement processing.
What Do You Do With Procurement Data?
When you’re working with an automated system, it collects all types of procurement data in a form that’s easy to access and use. The insights you gain from gathering all this data can help your company identify opportunities to save money, develop more effective purchasing strategies, enforce compliance, and create more accurate budgets. It can also give procurement managers the information they need to develop better relationships with suppliers.
This data is going to give you real spend visibility. Automated systems update in real-time, so you’ll always have up-to-date information about exactly where the money is going. You’ll also be able to look back on historical spend information so you can analyze procurement patterns.
Accurate data can also provide warning signs that something isn’t right in procurement. For example, it can let you recognize the signs that a key supplier is at risk of failing to deliver or that you’re at risk of losing a contract. That gives your procurement department a head-start on planning for the future.
How Can You Apply Analytics To Procurement?
Analytics help you take all the data you’ve gathered related to spend, contracts, suppliers, etc. and tie it together. If you’re just getting started with applying analytics to procurement, you’ll begin with descriptive analytics. This is an early stage of data processing that creates a summary of data and provides information about what happened.
From there, you can start doing diagnostic analytics. This stage of analytics runs statistical models to answer the question “Why did it happen?” Next, you’ll bring in predictive analytics to look at current and past data and forecast future trends. Finally, prescriptive analytics use predictive models to improve decision making and find the best course of action in any given situation.
When your procurement department can apply all these levels of analytics to data, you’ll be able to make transformative changes in procurement. Companies that effectively leverage procurement analytics decrease operating costs, reduce risks, and boost procurement’s strategic impact on the whole business.
Where Do You Find Quality Automation Software?
As procurement becomes more data-driven and less process driven, you can help your company stay on top of things by investing in a flexible software solution to streamline every aspect of procurement. A high-quality software system will make it easy for your procurement department to gather data and make it available for use. You just need to find one that offers customization and controls that will work for your company’s specific needs.
NextProcess’ Procurement and Purchase Order Software offers all the tools you need to successfully gather, store, and access procurement data. Our system is easy to customize for your business, makes the entire procurement process easier on employees, and gathers the data you need in a format that’s easy to use. Plus, we’ll help you get everything set up so you can realize processing improvement quickly. Contact us today to set up a demo and learn how our software can help you leverage procurement data to benefit your business.