Organizations really need procurement in their corner these days. As companies strive to be as competitive as possible, leadership is turning to procurement to generate additional value beyond cost. In turn, procurement is evolving to contribute to strategic differentiation in various ways, from supporting innovation, risk management, and sustainability, to collaborating with other functions by meeting very specific needs.
This added complexity complicates award decisions. Data must be reliable, yet many procurement groups still rely on qualitative information and outdated forecasts.
Analytics can fill the gap. Spend analytics vastly improves visibility on purchased goods, services, and opportunity identification. Advanced bid analysis can help sourcing experts juggle conditional discounts and alternative bids. And cost regression analysis pinpoints unusually high vendor pricing for a negotiating advantage.
A growing number of organizations know this and are adopting analytics at a rapid rate. Others face hurdles to acquiring these valuable capabilities. Leadership may not yet see analytics’ value to procurement. Staff may not have the resources to produce reliable data or may worry about lacking analytics knowledge. Finally, the path to developing analytical capability may be unclear.
Overcoming these hurdles involves understanding how analytics can meet the procurement needs unique to a company. The key is to complement sourcing with tools that identify strategies to squeeze out savings, inform category sourcing, and build strategic supplier management.
There are several ways to achieve these goals. Hiring an analyst brings instant skills. That analyst and the procurement staff, however, may not know how to combine one another’s strengths to best advantage. Alternatively, procurement staff could be trained in analytics, but some members may not have the acumen to adopt advanced analytic capabilities.
Instead, consider the one-two punch of combining the hiring of new analytics talent with active training of procurement and analytics staff (see figure). In a matter of months, an organization can effectively introduce analytics for immediate results while learning to collaborate and leverage both groups’ skills for long-term strategic advantage.
Get Started with the Hire and Train Strategy
This strategy includes several phases, from defining current analytics needs, to finding the right talent, and then developing an active training program. At some point, it may be helpful to work with a consultant to hone job descriptions, develop side-by-side training, and guide procurement and analytics staff in the best methods for their organization.
The process should be strategic, managed, and highly achievable. For example, a global beverage manufacturer recently came to us to help embed analytics into procurement to quickly drive efficiencies. While the client had in-house analytics, it was not being leveraged by the procurement team. Rather than hiring outside talent, we identified qualified staff within the analytics team to support sourcing. In conjunction with classroom training with both staffs and additional strategic training with procurement executives, we guided them all through the application of analytical sourcing in two five-month waves. Across packaging categories, staff successfully applied cost regression analysis to negotiations and collaborative optimization to alternative bids and conditional discounts. For ingredients sourcing, we helped them leverage dynamic decision modeling to adjust their strategy to the constantly changing commodity market.
To decide what you need in analytics capabilities, establish a baseline. Among the questions to ask are:
What analytics is your team already doing?
Which team members have basic or intermediate analytical skills?
Which members may be averse to learning analytics or using new technology?
How will category teams leverage advanced analytics?
Is current spend information accurate?
Are you using the appropriate technology?
Then identify the requirements for the new analyst’s role and the job description.
What will be the general responsibilities?
Where will analysts fit into the organization? Will they report directly to a category manager or be leveraged across categories?
What skills must they offer up front?
What skills can you teach them?
Seasoned analysts are in high demand, so they can be hard to find and expensive. While organizations looking to build an analytics group may need experienced professionals, oftentimes a procurement background is unnecessary. Your procurement staff can teach analysts what they need to know during active training. Consequently, some of the most promising candidates could be recent college graduates. Target those with quantitative backgrounds and experience in using analytics in projects or internships. Realize as well that young analysts typically stay in the position for just two or three years, so anticipate the lifecycle and use these analysts to train the next set.
When analysts are in place, provide workshop and active training to the entire procurement and analytics team. Using your baseline, conduct classroom training geared to the organization’s needs while communicating how analytics will fit into the procurement structure.
The crux of this strategy occurs with active training while the team is executing actual procurement projects. So, identify in advance the categories that will serve as the training ground.
Active training offers many benefits:
Team members apply their new analytical knowledge to their daily job, reinforcing those skills for the long term.
Analytics experts support team members by guiding them through the process.
The team sees the immediate benefit of leveraging new techniques.
Ultimately, active training helps procurement and analytics staffs learn one another’s strengths, integrate their skills, and collaborate more effectively for a procurement function that produces and uses reliable data during the sourcing process. As icing on the cake, it also realizes additional cost savings during project execution.
Adopt the Right Mindset
Understanding that analytics is essential for not only generating reliable data, but also driving insights from that data, is key for fulfilling procurement’s evolving role today. The combined approach of hiring analytics talent and actively training the entire procurement and analytics group is the fastest way to incorporate the new skill set and build an independently functioning team. It is a process that mirrors the months-long activities of requesting proposals, analyzing bids, and other projects that the group undertakes. Follow it, and analytics can bring procurement – and the company – long-term savings that lead to that much sought-after competitive advantage.