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Applying data analytics logic to supplier management

Value creationSupplier relationship managementprocurement technology

In this guest blog post, Procurement Leaders invites 360 Supplier View’s Declan Kearney to report back from a workshop on data analytics.

 

I recently attended a ’Big Data & Analytics’ workshop hosted by SAS, EMC, the IMI and UCC. The keynote speaker was Tom Davenport, world-renowned data analytics pioneer and author of 15 best-selling books, who offered a thought-provoking insight into this particular area.

 

One of his books, Competing on Analytics, illustrates how the most competitive and successful companies embrace analytics. The key goal of data analytics is to gain sufficient intelligence and forward-looking insight to enable decisions that will minimise risk and increase competitiveness. Supplier management strategy requires alignment with the core components of data analytics from understanding the present (’descriptive’) to predicting future events and prescribing actions based on forecast future events.

 

Step-by-step

 

According to Davenport, the starting point is to "frame the problem". The most common supplier management problem is the presence of disparate supplier-related data, systems, processes and activities involving interactions across multiple functions and suppliers.

 

Next, the problem must be solved. Supplier management strategy execution starts with introduction of a central supplier information management and communications platform that enables an integrated approach covering every element of supplier management.

 

The third step involves communicating or acting on results. The strategy, objectives and long term vision for supplier management must be clearly communicated and understood by all stakeholders, including your supply base.

 

The ultimate profile of staff sought by progressive ’analytical’ companies is analytically literate ’PhDs with personality’. Strategy will fail unless data analysts have the ability to communicate output and recommendations. To succeed in Supplier Relationship Management (SRM), commercial skills (and personality!) are essential and not necessarily possessed by all buyers and category managers assigned with SRM responsibilities.


Self-service business intelligencewas discussed as a practical but broadly un-proven practice. Supplier self-administration is sound but its application for transactional vendor data management purposes is a massive challenge and can stifle strategic supplier management initiatives.

 

Airlines and telecoms providers have been early innovators in data analytics – however, not unlike SRM within the automotive industry, competitive advantage through analytics within these industries, according to Davenport, has plateaued.

 

Multiple versions of the truth

 

A successful platform is based not about purely delivering complete, clean, dynamically maintained information – but on leveraging what is unique about the information. In industries where customer buying trends are driven by sustainability/CSR and ethical sourcing considerations, transparency relating to supplier diversity profiles and standards inevitably impacts buying behaviours.

 

There is typically a relatively high cost associated with execution of a data analytics strategy. If treated as a tactical silo of procurement strategy, supplier management data analytics will be limited to addressing individual requirements and will deliver less tangible results compared to a strategy that considers all elements from the outset.

 

Data analytics requires an ’enterprise perspective’. It is no use addressing procurement-based supplier risk management in isolation of your company’s enterprise risk management initiatives.

 

The principles of real-time optimisation and integration with decision-making were core to Davenport’s presentation of a compelling Procter & Gamble case study. In the case of P&G, the Global Business Services organisation created an Information and Decision Solutions (’IDS’) unit focused on internal IT innovation, systems design, architecture and other decision-making support capabilities. IDS employs analysts who report to IT but operate at a cross-functional level within P&G business units. This is a similar principle to the supplier management organisation that, in my opinion, should operate at a cross-functional level with clear goals to create strategic value beyond ’savings’.

 

The ultimate future supplier management organisation will leverage comprehensive, real-time information and leading analytics-enabled processes across transactional to strategic activities in a way that enables actionable supply base decisions.

 

Declan Kearney is founder of 360° Supplier View.

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