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Disrupting procurement through analytics

With vast quantities of data at their disposal, and tools that can turn information into valuable insights, now is the time for procurement functions to harness analytics and exponentially increase the value they deliver to the business.

Organizations are facing continuous pressure to improve productivity, accelerate innovation, and drive ambitious ESG agendas. Winning in the current context requires predicting and reacting fast to changing conditions: hyper volatility, demand uncertainty, supply disruptions, and rapidly shifting consumer preferences, to name a few.

With typically >50 percent of a company’s value chain dependent on third parties, procurement has a unique role to play in navigating this complex set of drivers, and has the potential to do so by harnessing the power of analytics.

Thanks to rapid advances in data and analytics technology, procurement teams now have access to large volumes of data. With the help of advanced analytics they can now turn this data into powerful insights, at scale, and at speed, without relying on the capacity of individual buyers. Examples include using machine learning to predict trends with >90 percent accuracy for >200 ingredients and make the right hedging decisions, mitigating risks by automatically screening >30 risk drivers across thousands of suppliers, managing dynamically price and service level deviations across thousands of spend items globally.

With so much potential available, why has it been difficult to capture this value?

In a recent survey, 86 percent of CPOs told us that they lacked the platforms to access good quality data—both internal and external. Additionally, capacity constraints, as well as the low penetration of analytical skill in procurement teams, limit the amount of data that can be processed with traditional tools. As a result, as little as 10 or 20 percent of available procurement data is currently leveraged to drive decision-making and action.

Another typical challenge occurs when organizations become stuck in a state of pilot purgatory. Teams get distracted by the number of solutions available, engage in costly trials without a clear ROI, and fail to scale.

Analytics lighthouses have started to emerge in procurement. They showcase the potential gains that can be achieved when analytics are applied at scale. The impact they achieve is profound and holistic, boosting value delivery by 10-40 percent, accelerating the innovation and sustainability agendas, improving risk mitigation, and providing an overall uplift in organizational health, as the function starts to become a magnet for talent.

Five factors are helping these successful beacons stand out from the crowd:

  1. They define and ask precise questions they want to answer with advanced analytics, and have specific expectations about the level of impact they want to achieve.
  2. They invest in a robust data backbone, with clean, structured, and enriched data from within and outside the organization.
  3. They transform the organization, introducing specialist roles and redefining the role of the buyer.
  4. They build capabilities and change their organizational culture to maximize the adoption of analytics.
  5. They follow a systematic approach to architect, run pilots and scale up driven by a focus on ROI.

Analytics are the future of the function. Those who harness the power of analytics today will become the procurement leaders of tomorrow—transforming their function into a source of insights driving value across the whole enterprise. The time to act is now!

This post originally appeared on the author’s page on

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