In this guest post, Procurement Leaders invites Doede van Haperen to look at big data and how it might change the very nature of procurement by 2025.
In my previous post I imagined a day in the life of a category manager in 2025 and claimed that there would be an important change in their daily lives as agility evolves in procurement. The most important driver for this change is, without doubt, technological capability.
One of the buzzwords in technology over the past few years has been big data. Behind these two simple words hide two technological capabilities of game-changing capacity.
On the one hand it is a term that stands for large volumes of data, which can be processed almost immediately. It also stands for the ability to collect, manage and utilise that data which can be unstructured and in the past almost impossible to use.
The game changer in this for procurement? Big data allows for a much more dynamic pricing concept then we have ever seen in the past.
Dynamic pricing is a marketing concept within retail sales. The internet is used as a source of information in which a shop assortment is continuously compared with others. When a company finds out that competitors are pricing the same or comparable items at a lower price, it can decide from that whether to update product information, stipulating the differences between products, or follow with the discount.
It is anticipated that in larger B2B transactions, dynamic pricing by suppliers will follow before 2020 and become part of our purchase-to-pay environment. With the availability of big data technology, a purchasing function is able to control the dynamic pricing used by its suppliers by executing automated comparison checks.
But an expectation for 2020 is no vision for 2025. So what could happen in a further five years?
The potential exists for this information to be used to transform dynamic pricing into dynamic supplier selection due to the fact that purchasing gets the ability to leverage the open market based on automated real-time price comparison.
Imagine what you could do to optimise total cost of ownership when you contract on a short-term basis, but your sourcing and operations processes become one?
Every request from the business gets spot purchased based on what are essentially big data engines, continuously monitoring the internet for deals around your approved category and product lists. Fully automated, quick and as effective as a traditional catalogue buy, every purchase is optimised.
Compliance is also improved because your big data engines can manage as well as monitor the decision-making while corporate social responsibility also receives a boost through the fact that your environmental and socially responsible buying settings can be automatically taken into account.
Of course this is debatable over all or just certain categories. Plotting the concept to Kraljic places it within either the 'leverage' or 'routine' quadrant, where the latter should at least be combined with a trading house to limit the transactional workload. But in any category, to be able to leverage this to its full extent, offers the purchaser or category manager untold advantages.
No one can hide from these technological advancements and nor should they. Being able to understand the basics today will allow you to begin to capture its full potential in the future but you have to continue building on this knowledge.
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.