Need to know: procurement analytics

Procurement analytics is the process of collecting and analysing procurement data. This process is undertaken to gain insights and improve decision-making. Applications may involve analysis of all historical procurement spent or the forecasting of future expenditure, but there are many more use cases.

Why are procurement analytics becoming more widespread?

Procurement analytics are increasingly being used to gain a competitive edge in the sourcing industry. The use of analytics often involves collecting data through a variety of systems, including ERPs, supply chain management systems and stock management solutions. Organisations are now turning to procurement analytics to get a consolidated overview of their procurement spending in order to improve their sourcing strategy.

Data is often called ‘the new oil’ these days and you could think of procurement analytics as an oil refinery. It will collect data from sources such as invoices, payments and external data and then process that to create business value. This value could take the form of more timely and actionable insights, data visualisation and measuring the impact of procurement on a company’s profitability.

Practical applications

With such a broad concept, it is perhaps not surprising that there is a wide range of examples of how organisations are benefitting from procurement analytics. Some used cases are as follows:

- Companies are always looking to improve operational efficiencies. While the main goal of a procurement strategy is to minimise costs, these days companies are turning to analytics to find out how procurement can create value in other areas such as speed to market and enabling innovation.

- Businesses want to make improvements to the ‘procure to pay’ cycle as this can impact how quickly it can meet demand at peak times or capture market share from competitors. An efficiency dashboard could be used to uncover what aspects of procurement are holding up the production of certain product lines that are in high demand.

- Supply chain disruption is perhaps the defining theme of 2021. Procurement analytics could actually be used to minimise this by performing analytics on supplier performance. Users are able to see when items were ordered and when they were delivered at a specific location, allowing them to accurately review the performance of downstream partners and improve performance going forward.

- Large organisations will have countless contracts that all have different contract expirations. It has become very time-consuming to monitor all of these contracts – particularly when dealing with different contracts from the same supplier. Procurement analytics is able to make this process easier by setting up alerts a certain number of days before contract expiration, thus avoiding the risk of having contracts automatically renewed or forgetting to secure a new supplier.

Why is procurement analytics a must?

Procurement is an ongoing process at all organisations and its complexity is only increasing as datasets are growing. Companies want to gain insights from all of that procurement data and then use that to make strategies and guide future decision-making. Procurement analytics is the infrastructure that can make all of that happen and at the same time, it is allowing the procurement department to be seen as a source of competitive advantage rather than just a cost centre.