Data is the new oil, but how will it fuel procurement in the future? One way is for data to predict the future. Currently, the focus of data analysis is to examine the past. Spend analysis and management involve processing and analysing data to decrease procurement costs, improve efficiency and monitor compliance. It’s about the studying the past to improve processes in the present. Procurement is not dissimilar to other industries in this regard. Almost all organisations have used data analysis to make current processes efficient. Predictive analysis is about using data to look into the future and forecast – or reasonably predict – probabilities, based on patterns. Organisations can be proactive about the value management of their supply chain, instead of reacting to events after the fact.
Forward-looking predictive systems have featured heavily on the sell-side of the equation. It is routine to use data analysis to create better products and sell them more efficiently. But the same forward-looking predictive systems have not played as large a role in the buying side of the equation. Procurement departments generate a lot of data and can potentially get a hold of lot more. So, the opportunity to unlock predictive analytics for procurement, supply chain and strategic sourcing to enhance the value they add to the organisation, is there. Unfortunately, many organisations simply lack the capability to harness the potential of this data.
What skills are necessary for predictive analysis? Put simply, predicting the future is largely about identifying patterns. Predictive analysis tools use a blend of statistics and advanced mathematical models, coupled with pattern recognition algorithms to analyse large quantities of current data, and past events to identify patterns in business operation, and thus build forecasts about future events.
An organisation must acquire the right tools and services to harness the power of prediction. Then it must incorporate the predictions into decision-making, with due fail-safes in place. One of the great dangers of predictive analytics is that errors in the system can go undetected if people put blind faith in the prediction model. The machine is not infallible. Procurement agents must have enough of an understanding of the tools they are using so they can recognise when the prediction should be adhered to – and when it should be taken with a grain of salt.
Predictive analysis is a powerful tool that procurement departments would do well to add to their arsenal. Predictive analytics can allow strategic sourcing and enable procurement departments to better manage supplier relationships and support sourcing activities. Predictive analysis is the year 2025 capability towards which organisations should start working now. Predictive analysis is the future. You don’t want to fall behind others in your field and become less efficient in your procurement process.
Data is the new oil, and it is oil that you own. Don’t waste the fuel you already have. Instead, harness it – not only to gain insights into the present – but to predict the future so that you won’t be caught off-guard.