4 reasons businesses can’t afford to ignore data-driven procurement

The way that IT services are procured is transforming at lightning speed. Research shows that:

Outdated procurement processes costs the telecoms industry $1 billion per year
82% of senior executives are not prepared for data-driven procurement
According to Deloitte, CPOs spend 74% of their time on transactional and operational activities, but high performers spent approximately 63% (~15% less) of their time on these types of activities
High performing CPOs are 4-5 times more likely to have fully deployed advanced analytics/visualization

In an increasingly digitized world, information is an organization’s most valuable asset. From a procurement perspective, reliable, comprehensive, and up-to-date data, especially when selecting and onboarding suppliers, often forms the backbone of every decision procurement professionals make, and increasingly will in the future. But procurement’s thirst for – and soon, dependence on – data is much more far-reaching than that.

Here are four reasons why businesses can’t afford to ignore data-driven procurement:

Never in the history of the procurement profession has there been so much pressure on procurement to step up and help drive strategy within their organizations. In a world that is still devastated by COVID, but also catapulting towards Industry 4.0 at lightning speeds, everyone from the Harvard Business Review to Forbes are talking about the criticality of procurement. Yet still, procurement functions as a whole are constantly criticised for not being strategic enough. Why? Is it because those within procurement teams simply have too much else to do? Or perhaps it could be because they are too operationally focused?

Whatever the reason, the answer is data. When the average source-to-pay process nowadays involving at least eight steps (and often many more), procurement professionals desperately need data to help them become more efficient and effective, and to help them make quicker and more accurate decisions.

The reason for this is because ultimately, time is money. And procurement is only going to be able to free up more time to help businesses save (or make) money strategically if they do what they do, faster and better.

Show us a leading CPO who doesn’t believe that procurement processes need a rethink, and we’ll show you a liar. One of the big reasons that data-driven procurement is the future is because procurement processes are already under intense scrutiny. Seriously, some experts are already calling them slow, boring and self-centred – and that’s just the tip of the iceberg when it comes to criticisms.

One of the core promises procurement makes to their organisations is that their processes will save money for their organisations, and also (obviously) help them secure the best supplier. But one recent investigation of government ICT procurement found that almost the opposite was true. The investigation revealed that the processes used to negotiate contracts needed to be ‘more robust’ and that they failed in ‘identifying and managing key risks.’ Alarmingly, though, the investigation revealed that procurement fundamentally ‘could not demonstrate … value for money outcomes.’

Even more concerning is the fact that the criticism of IT procurement processes is not contained to the government sector. TMForum’s research report into the broader IT procurement sector, aptly named Time to kill the RFP? IT Procurement for the 2020s, delivers the following scathing assessment of the state of procurement’s processes:

‘The costs of bad IT procurement range from overspending on procurement projects (where contracts do not meet business requirements), to abandoned and reworked contracts, and even to severe impacts on customer experience or delays in rolling out new lines of business.’

And the cause of these issues? Purchasing using the same processes and procedures that have been in place since the 1980s.

Not a single IT procurement professional wants to work in an industry where processes are holding them back. And it’s for this very reason that procurement needs data, so they can quickly, accurately and efficiently discover, identify and onboard suppliers.

From an ethics perspective, transparency in procurement has always been important. Given the high stakes involved in awarding contracts, procurement professionals have always had to ensure they have a strong moral compass, and an even stronger adherence to company policy.

However, now sustainability is not just a ‘nice to have’ but a ‘need to have’ for organizations globally, transparency is even more important. Given the fact that ninety percent of consumers now want sustainable products and services, organizations – and by association, procurement teams – are now under increasing pressure to deliver the most sustainable outcomes, and to be able to back up their sustainability claims. .

Fortunately, data enables procurement to do both. With more data on suppliers, procurement can access deeper and richer insights into not only first category suppliers, but second and third. And with that data, procurement teams everywhere can prove, not just assume, that their supply chain is as sustainable as possible.
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In a recent KPMG report that makes for a chilling read for any procurement professional who still wants to be working in the function into the next decade, it seems that data-driven procurement is not just the future, but the only future procurement has. That is to say, procurement can either embrace data or it may be no more, Literally.

Gone are the days where procurement was simply a cost-saving function. Why are they gone? Because, according to the report, if that’s all procurement does, soon there won’t be any procuring to do. AI is already considerably powerful when it comes to delivering basic savings, and soon, algorithms and networked machines will be able to deliver better results entirely.

But fortunately, there’s an alternate future for procurement that isn’t too bleak. In fact, it’s quite the opposite. According to the report:

‘The procurement function is under powerful pressure to transform. [But if it does], it could be elevated to the veritable ruler of operational functions, if it continues to have access to key supply chain data.’

So there you have it. Data is not just the future, but the only future procurement might have.

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References:
https://www.tmforum.org/press-and-news/outdated-procurement-processes-cost-telecoms-industry-1-billion-per-year/
https://www2.deloitte.com/us/en/insights/topics/operations/chief-procurement-officer-cpo-survey.html
https://www.sourcetoday.com/supply-chain/article/21867031/using-data-to-optimize-procurement