7 Benefits of a Data-Driven Sourcing and Procurement Strategy

Procurement management is in a state of rapid change. This is due to several factors. Key among them are the rise of big data and rapid technological progress. To keep up with this trend, you must leverage data and supply chain analytics to form your sourcing and procurement strategy.

In an increasingly data-driven marketplace, a procurement team needs actionable data and insights to remain competitive.

As the old saying goes, "knowledge is power." That is undeniably true for today's procurement leaders. Access to actionable data empowers them to maintain extensive insight into performance results. It also provides transparency into each stage of the supply chain.

As a result, procurement managers make more informed decisions, cut costs, increase efficiency, and more easily adapt to unpredictable market conditions.

There are too many benefits involved in leveraging procurement data and supply chain analysis to explain in this piece. We've narrowed them down to the seven most important factors that drive ROI in your procurement and sourcing strategies.

1. Overall Cost Savings
2. Stronger Vendor Relationships
3. Better Internal and External Collaboration
4. More Accurate Demand Forecasting
5. Increased Efficiency
6. Safer Risk and Compliance Management
7. Supply Chain Transparency and Visibility

Below, we elaborate on each of these benefits. First, however, it's essential to understand why we should be using data to drive our sourcing and procurement strategy in the first place.

WHY RELY ON DATA TO FORM STRATEGY?

Today's technology can process massive amounts of data. Analyzing this data results in actionable insights procurement specialists can use to make more informed growth decisions.

Despite having this actionable data, many business leaders don't rely on data to make critical decisions. This is likely because many still haven't transitioned to a digital business model. Regardless, the benefits of leveraging data to form procurement strategy are indisputable.

7 REASONS TO USE DATA ANALYSIS IN STRATEGY FORMATION

Now, let's dive into the benefits gained from leveraging digital procurement methods and supply chain analysis and to improve results. This procurement data is automatically collected and analyzed by modern e-procurement software systems.

1.    Overall Cost Savings

A solid procurement software solution should provide automated spend analysis reporting. These reports provide insight into various metrics that let you see where your money is going. They also tell you how much return you're receiving on your investment.

You can leverage a host of e-sourcing software tools to ensure you're buying from the best vendors at the most affordable prices. You should also be able to set up intelligent approval workflows in your system of choice.

These automated workflows require purchase orders (POs) to be authorized by procurement officers or managers before they are submitted. This helps eliminate maverick spending and ensures you receive the most significant cost savings possible. Learn more about reducing costs with spend analytics.

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The savings are right in front of you. You just have to grab them.

2.    Supply Chain Transparency and Visibility

Cost reduction is among the top benefits organizations receive from utilizing supply chain analysis. However, the rest of the benefits on the list indirectly save your business money as well.

For example, advanced delivery management and tracking provide visibility into every stage along the supply chain. Supply chain visibility helps you ensure every link in the chain remains strong.

You should be able to track every touchpoint along the supply chain. If something goes awry, you'll know how to resolve it immediately.

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Data gives you a crystal clear view of your entire supply chain.

3.    Improved Internal and External Collaboration

Procurement collaboration is made easy by systems that provide instant, confidential messaging between colleagues. Plus, as a purchase order passes through the supply chain, staff can add notes to it at each step of the journey.

Both office workers and the team in the field maintain maximum visibility into everything taking place around any specific order. Everyone is on the same page, avoiding mix-ups and accidental revenue loss.

More powerful systems give your suppliers access to the portal via closed chat rooms. These allow you to communicate directly with vendors in real-time, facilitating sealed bid transactions and seamless communication.

The result is a streamlined, end-to-end process that maximizes productivity, from purchase requisition to invoicing and accounts payable.

4.    Increased Operational Efficiency

Ever get that feeling that some unknown variable is slowing down your procurement process? You feel the lag time, but you can't pinpoint the cause.

With the deep insight gained from supply chain analytics, you can quickly identify areas needing operational improvement. No matter how pristine your procurement process seems, odds are there will always be room for improvement.

Use procurement data analysis to inform your strategy. Maybe you need to speed up purchase order processing. Perhaps your contract management process is a bit chaotic and is slowing everything else down.

It may seem obvious where inefficiencies lie. But when you have cold, hard data and analysis to go on, it immediately becomes clear where improvement is needed. And increasing efficiency should make a significant impact on your bottom line.

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Data-driven procurement increases operational efficiency across the board.

5.    More Accurate Demand Forecasting

If you select the right system, you'll have the features to generate accurate forecasting for demand and spending. This will make budget management and forecasting easier and more reliable.

If your procurement software solution includes robust inventory control capabilities, you should see patterns over time. You can use these patterns to make accurate blanket purchase orders, ensuring you never run out of vital stock.

6.    Safer Risk and Compliance Management

Modern systems' workflows guide users through built-in procurement best practices and sourcing strategies that minimize risk and maximize gain. More robust systems include supplier management capabilities that allow you to constantly evaluate supplier performance based on numerous variables.

Moreover, some systems include supplier evaluation scorecards that automatically capture and collate data over time. They provide an at-a-glance view into how your vendors are performing. This enables you to minimize risk by doing business with those that don't miss shipments, are never late, etc.

Moreover, by identifying the most reliable vendors, you can avoid non-compliance by avoiding unreliable suppliers. With so many procurement regulations, it's essential to remain compliant in all your efforts. When your system does it for you, you have one less thing to worry about.

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There's no need for a hardhat when you use data to create procurement strategy.

7.    Better Record Keeping

Accurate, consistent data drives successful digital-based business models. Maintaining accurate data is key to strategic sourcing and procurement processes. Yet, it's nearly impossible to sustain a clean database if procurement data is stored on paper or in spreadsheets.

Why? Because humans aren't perfect. There will always be a slight risk of human error when data is entered manually. When you're working with inaccurate data, the risk of non-compliance and excess spending is always looming.

However, when a business learns how to use procurement software, data flows into the system automatically. This makes an array of procurement processes faster and more reliable. These include accounting, ordering inventory, and even supplier relationship management.

Final Thoughts on procurement strategy

Procurement officers and leaders should embrace the use of data and analytics when forming their procurement plan. The insight is there for the taking, so why wouldn't you use it?

Forming sourcing and procurement strategy without leveraging all the tools at your disposal just isn't logical. It would be like trying to pull a nail out of a board with your fingernails when there's a claw hammer next to you.

fingernails when there’s a claw hammer next to you. In the era of big data and machine learning, we have access to intelligent procurement software that provides actionable insight. Therefore, we must use that insight to make informed decisions and form a highly effective strategy.

Using data to form a strategy is as simple as checking the weather forecast. If today's forecast is snow and ice with temperatures below freezing, our clothing strategy won't include sandals and shorts.

Procurement data analytics provide the same type of insight. Our only job is to understand how to effectively use it to make the right decisions. If we do so, we'll almost certainly come out on top.

Eventually, every procurement team will have to make the shift to data-driven strategy formation. The longer you wait, the harder it will be to catch up to the competition. So why not start now?

See for yourself how easy it is to use the data in an intuitive procurement software solution—schedule a free demo today.