Predictive analytics is one form of analysis to come out of the rise of Big Data. While there's so much information gathered, predictive analytics emphasizes using data to make predictions to inform business decisions and strategies. The practice of e-procurement is already tied in closely with technological improvements and efficiency with supply management. Put these two technologies together and you can bring about a new level of efficiency and predictability with e-procurement efforts.
Through predictive analytics in e-procurement, professionals can:
- Increase capacity and speed
- More easily introduce new suppliers
- Gain a better understanding of market needs
- Minimize risks involving fulfillment and supply
- Maintain trust by reducing human error
- Manage compliance efforts
All of these opportunities are made possible with information, that is, data that can by analyzed, modeled and understood at greater lengths than what was previously possible. As noted in this Accenture study, supply analytics is expected to become a more routine part of the overall procurement process. It covers the concept of a virtually integrated enterprise, tapping into the insights from data analytics and harnessing this data for a sleek and carefully managed procurement system. There’s also a mini-summary of these findings on SpendMatters.com, as it highlights the Internet of Things (IoT) and the growing connection between spend analytics and supplier management.
Let’s also look at risk, as companies can use historical data and previous trend information to make predictions about potential issues and determine risk management strategies. SourceOne’s paper noted:
“[Predictive analytics] allows businesses to take a multifaceted approach to risk management, considering the likelihood (probability) of occurrences and cost incurred from exposure to a catastrophic event (such as a system failure).”
By knowing the probabilities of certain events, procurement professionals can plan accordingly. It allows a better understanding of possible risks and ways to manage them.
Back in spring of 2016, SpendMatters.com provided predictions of how analytics will inform and support procurement practices. The predictions included a possible rise of predictive spend analytics, greater incident prediction and preventive measures to manage risks, and also having corporate social responsibility integrate with sourcing practices and risk management. The predictions also included use of models from data analytics to inform and manage supply chain requirements.
Of the procurement decision-makers surveyed for Xchanging’s 2015 global procurement study, more than half already had predictive analytics technologies in place. Capturing data is just the start, as the real work is in analyzing the data to help with the decision-making process.
In just a short amount of time, the ideas from the 2015 study have already become reality. There certainly is a closer tie between analytics and spend analytics. There are new ways built into processes for managing risks and potential threats to the business, as well as provide access to new models based on the available data. Also, corporate social responsibility has indeed been connected more closely with predictive analytics for the supply chain.
So what does this mean for the future? Well, Ernst & Young (EY) released a white paper on what analytics and procurement will look like in 2025. It highlighted many of the same predictions noted above, however it also delved into just how disruptive predictive analytics will be as new technology available for procurement. It may mean greater integration of the supply chain for meeting the demands of both the company’s resources and the output necessary for customers. They anticipate that data analytics will change how procurement teams work, such as having virtual supplier rooms, new digital dashboards for monitoring inventory, and much more.
For instance, the EY paper noted how predictive analytics with e-procurement will elevate the role of procurement professionals in terms of strategic decision-making.
"Analytics will enable procurement leaders to be even better at their jobs: planning purchase timing and inventories to meet manufacturing and/or consumer demand schedules, identifying cost savings, and predicting future risks. And this will also mean that procurement leaders become indispensable for strategic planning."
While 2025 seems a ways out, several of these ideas are already being tested, meaning today's efforts in predictive analytics for e-procurement are even more important and timely. By having predictive data analytics, professionals can have deeper analysis and understanding of trend patterns, possible challenges and more.
Remember, there is far too much to gain through predictive analytics for e-procurement processes to not pursue it today. The real value gained from it will continue to refine and grow over time. That’s why waiting is no longer an option, so consider ramping up efforts and harnessing predictive data to its fullest.
Grainger Online Purchasing Solutions