What is Procurement Analytics? Why and how it is implemented?
What is Procurement Analytics?
[Procurement analytics](/content/procurement/procurement-analytics/ "Procurement Analytics"/index.html) is the process of using quantitative methods to derive actionable insights and outcomes from data. It involves the capture and use of data to support fact-based decision making and gaining competitive advantage. It reports typically on what has happened in the past and creates estimates, using predictive analytics based on historical data to guess what will happen in the future.
Procurement analytics provide organizations and firms with better visualization into their procurement spend using quantitative methods to derive actionable insights and outcomes from data. Predictive analytics software collects data, internal and external, from various sources and compiles it in procurement dashboards. They allow companies and organizations to leverage procurement data to support fact-based decision making and gain strategic, competitive advantages.
Simfoni’s AI-Powered Procurement Analytics provides data-driven insight that procurement professionals can leverage to make impactful business decisions.
Research on the use of procurement analytics tools reveals they increase demand forecast accuracy by 55%, granting companies stronger contract negotiation power and decreasing the odds of stock-outs. Successful firms increasingly rely on procurement analytics data to gain actionable insights into various procurement functions such as [procure-to-pay](/content/procure-to-pay/ "Procure to Pay"/index.html) processes, supplier performance, and [category management](/content/category-management/what-is-category-management-how-and-why-is-it-important/ "Category Management"/index.html).
Why is Procurement Analytics Important to My Business?
Procurement analytics is key to improving the functionality of company-wide business operations and provides valuable market intelligence to support business decisions. Without it, companies often miss [cost reduction](/content/cost-reduction/ "Cost Reduction"/index.html) opportunities, fall short of achieving KPIs, experience disrupted supply chains, and incur greater costs. Procurement teams can leverage the power of procurement analytics to:
- Manage contracts to optimize discount levels and forecast the liabilities in finance terms.
- Evaluate vendor delivery timeliness, quality of materials, and time to resolve problematic orders.
- Review vendor scores, purchase order values, and PO volume to successfully manage supplier relationships.
- Reduce risk, manage resources, and improve compliance.
- Produce and examine multiple datasets like tax information and invoice reports in dashboards to identify savings and cost reduction opportunities.
- Forecast the average of whole cycle demand volume.
Procurement analytics enables procurement processes and teams to operate at best-in-class levels. It supports multiple stakeholders, within and outside of procurement, including:
- CPOs
- Procurement analysts
- Purchasing managers
- Category managers
- Material Quality Control/Assurance (QC/QA)
- Manufacturing Stakeholders
Procurement analysis or Purchase Analytics frees data analysts from focusing on data extraction and processing. Analysts are given more agency to review compiled analytics via procurement dashboards to identify cost-effective solutions, discover better purchasing options and improve reporting accuracy. Procurement Analytics Software automates the spend analysis and purchase analysis, and manages all activities related to an organization’s expenditures in an easy to understand insightful dashboard. Learn more about what is procurement.
How Procurement Analytics Works
Many organizations already have some spend data to work with, but it can prove time-consuming for procurement analysts. Predictive analytics software powered by artificial intelligence quickly analyzes a company’s procurement data, performing deep drill-downs into datasets to present real-time data. Procurement technology can receive data from multiple sources, including Excel spreadsheets and ERP systems.
The procurement analysis process begins with data extraction:
- Data extraction – Predictive analytics software extracts structured and unstructured data from every potential source, like data mining, and compiles it in one database. Once extracted, artificial intelligence algorithms cleanse and normalize the data. This process ensures information from data sources is accurate.
- Data categorization and enrichment – Cleansed data is then classified into defined categories. Exact data classification is required to ensure users can easily review analysis data and manage it. Information is presented using a clear, deep taxonomy, enabling customers to gain complete global spending insights.
- Analysis and reporting – Once information is fully classified, analysis begins and its benefits can be fully realized. [Spend analysis](/content/spend-analysis-guide/ "Spend Analysis"/index.html) shows purchasing KPIs, metrics, and trends via dashboards, allowing organizations to make better supplier sourcing decisions, ensure on-time delivery, and identify cost savings opportunities.
What Value Does Procurement Analytics Hold for My Business?
Simfoni’s advanced Procurement dashboards & Procurement Analytics Software monitor relevant procurement KPI’s for effective [strategic sourcing](/content/strategic-sourcing/ "Strategic Sourcing"/index.html).
The Procurement Dashboard provides company-wide spend information and analysis using easy-to-interpret data visuals.
Regardless of your industry, applying procurement analytics is key to gaining a strategic, competitive edge and complete oversight into buyer and supplier functions. When applied correctly in your organization, it can help you achieve key KPIs and exceed optimal business operation metrics. Your organization can expect better material management, diverse supplier portfolios, more purchasing options, and greater agency in procurement efforts.
Procurement analytics or Purchase Analytics is also invaluable during volatile times, such as the COVID-19 pandemic. Various industries rely on procurement data and analysis to guarantee supply and inventory during shortages. Costs and suppliers are easily tracked, helping organizations keep their supply bases secure and incoming orders flowing while managing unexpected costs.
Contact us today to know more about how Simfoni’s Procurement Analytics Software and processes that can help your organization achieve world-class Spend Analytics