In this guest post, Procurement Leaders invites Tamr’s Matt Holzapfel to make the case for why procurement needs to take a more deliberate, invested approach to data analytics.
Abraham Lincoln famously once said, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” Procurement “sharpens its axe” by using analytics to identify the biggest opportunities to improve performance before trying to execute. Unfortunately, most procurement teams only scratch the surface on analytics, hindered by a “just get it done” mindset.
Inventory management will likely come into focus at many organizations as economic uncertainty grows. This means:
- Procurement will be on the line for identifying duplicate and unnecessary parts that the company should stop purchasing to reduce inventory.
- Significant time will be spent sifting through troves of data to identify interchangeable parts where SKU variety can be reduced.
- Executives, anxious to reduce the company’s inventory risk, will set aggressive metrics without knowing what’s realistic.
- Managers will react by quickly getting to work and digging through spend categories one-by-one until they reach their goal.
The amount of effort and time required will be directly tied to the quality and disparity of the data, but everyone will be happy if the company hits its metrics, right?
The shortcoming of this approach is that it is purely focused on achieving a short-term target, with no regard for building the capabilities to routinely address the problem. Unfortunately, these two elements are regularly decoupled: “capability building,” such as analytics, is thought of as a long-term investment and not an immediate source of value.
Instead of being satisfied when metrics are achieved, executives should be asking how data was used to identify and prioritize opportunities. New technology is making it easier than ever to access and prepare spend data for analytics. But in order for companies to benefit the most from these tools, managers must begin to instinctively rely on data for decision making.
The analytics capabilities of an organization will improve only when executives demand that their team has a deep understanding of the data. Analytics must do more than measure outcomes, they must improve them.
When I have seen executives make these demands, they are often faced with resistance from frontline managers who are frustrated by poor data quality and a lack of tools to access information. This type of healthy tension is precisely what leads to improvements in analytics capabilities. The people who would benefit the most from improved analytics – the managers driving critical procurement initiatives – should be empowered to find new technologies and recommend investment in them.
Breakthroughs in technology are making it possible to automate much of the manual effort required to clean data and identify opportunities like SKU redundancies. Rather than wait for a broad analytics strategy to be cascaded down from IT or a Center of Excellence, procurement should get started on improving their analytics capabilities by using in-flight initiatives to bring on-board new technologies that help solve urgent business problems.
By the time they’ve done that, the axe should be well and truly sharpened.
Matt Holzapfel is product marketing lead at Tamr.
View the Procurement Leaders Webinar: Data for Analytics on-demand here.
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.