In the procurement sector, successfully managing risks while achieving your other strategic objectives is what sets a successful procurement function apart from those that can expect to experience disruption. Today, however, procurement teams face greater risk than ever before as supply chains become more complex, ESG goals become more ambitious, and the parameters for compliance get narrower.
Technology—powered by artificial intelligence and big data analytics—is radically digitalising the procurement process. While this has the potential to increase efficiency, revenue, and accelerate the procure-to-pay process, it has also driven complexity. Luckily, digital transformation also holds the key to managing this complexity. Digital tools, powered by artificial intelligence and machine learning, can tackle larger and more complex amounts of information than ever before. These analytical tools and their more powerful capabilities in turn have seen viable data sets balloon to include vast quantities of structured and unstructured data from throughout the supply chain, gathered together under the umbrella of Big Data.
Data source
Big Data, in gathering together vast amounts of information about every aspect of the source-to-pay process, in addition to broader contextual information ranging from economic instability to weather patterns, can help procurement professionals build up a more comprehensive, nuanced understanding of their procurement process than ever before. The level of visibility is unprecedented, even in a sector where supply chains are more complex than they’ve ever been.
Complex supply chains are more prone to disruption. More moving parts and longer distances to travel mean higher likelihoods of things going wrong. Michael Higgins, founder and CEO of Clutch, wrote recently that “risk is inherent at every step of the supply chain, from moving raw materials to manufacturers and between manufacturers and the distributor,” adding that “The added value of big data analytics is predicting potential disruptions, giving procurement managers time to make intelligent decisions.”
Procurement transformation
Advanced analytical tools can be used to track the weather, potential disruptions to agricultural or construction operations, political unrest like demonstrations or riots, and changing legislature that may affect everything from compliance to price. Because Big Data analytics are increasingly capable of collecting and analysing all of these factors and more, procurement professionals have the capacity to counteract sources of risk that traditionally would have seemed as inevitable as an act of divine wrath.
The risks to a supply chain are really representative of risks to your suppliers and their networks. Big Data analytics is also granting insight into the workings of—allowing a huge number of variables tied to each supplier to be tracked and used to make decisions. The result is a more agile and reactive procurement process that can analyse and respond to data analytics in real time, as opposed to trying to make best guesses based on past results and limited human judgement.
Procurement is truly transforming from the back office to the boardroom—becoming more strategic, digitally empowered, and complex than ever before—and Big Data analytics are increasingly a vital part of the function within the modern source-to-pay process.
By Harry Menear
