In today’s competitive business landscape, data driven procurement is emerging as a game-changer. 

By ensuring transparency throughout the procurement department, improving spend management, and enabling demand forecasting, it offers tangible benefits that can elevate procurement processes. 

Dive into this topic with us as we unpack these advantages and more, illustrating why a data-centric approach might be the upgrade your procurement needs.

Ensures a Transparent Procurement Process

In the procurement arena, transparency and accountability are like guiding stars. 

They’re essential to ensure that everyone involved, both inside and outside the organization, understands how decisions are reached and where the funds are going.

Imagine having a tool that not only streamlines your procurement process but also creates a clear, traceable path for every procurement activity. 

That’s exactly what a data driven procurement does. It allows for an audit trail, leaving little room for ambiguity or mistakes.

Source: Veridion

Namely, the automated system provides a detailed record of all procurement activities—including sourcing, negotiating terms, procuring items, receiving and inspecting goods—meticulously documenting every stage of the process.

When data about each transaction is easily accessible, it naturally decreases the chances for deliberate fraud, and ensures that every action aligns perfectly with organizational policies.

But data needs to be understandable to all stakeholders. 

That’s easier today with proper tools.

Automated data analytics tools do more than just run analyses. They can distill and visually present the analyzed data visually in simple formats. 

For example, on a performance dashboard that gives users instant access to regularly refreshed data and insights into all procurement activities. 

This will make the procurement process highly transparent for all stakeholders. 

Source: Veridion

Moreover, the fact that all procurement-related data is readily available and can be presented visually, makes regular reporting seamless. 

By harnessing the power of data, you’ll be able to provide key stakeholders with real-time insights into the results of your efforts. 

Delivering accurate procurement reports—to both internal and external stakeholders—will help you keep them in the loop and further encourage an environment of data driven decision making and accountability. 

With all this in mind, it’s safe to assume that manual processes can hardly achieve the level of transparency needed to help move your organization forward.

So, by relying on tools that will supply you with a wealth of data, you can rest assured that the procurement process is conducted with utmost clarity and accountability. 

It’s the kind of transparency that not only fosters trust but also strengthens the procurement function, ensuring that every decision is a well-informed one.

Allows You to Create Strategic Value

By working in a data driven manner, procurement executives are given the unique opportunity to make the shift from simply cutting costs to creating strategic value.

That value is created through finding innovation opportunities to drive more revenue, by acting on available data and metrics, etc. 

Evidently, embracing technological advancements and tools enables procurement teams to take on a more critical role. 

This enhances their capabilities to not only drive value but to significantly contribute to revenue growth.

The abundance of data available through data analytics software and similar tools allows you to find new opportunities, foster innovation, and strengthen the relationships with your suppliers.

Source: Marijn Overvest on LinkedIn

Furthermore, data driven procurement fosters collaboration with suppliers, leveraging their expertise and creating prospects for co-developing new products and solutions.

By tapping into your suppliers’ knowledge, you can drive innovation⁠—one of the key components of strategic value.

This will undoubtedly push your organization ahead of the competition. Instead of just reacting to changes, you can now take a proactive approach and keep ahead of the game.  

Lastly, data driven procurement utilizes sophisticated data management tools to measure metrics that extend beyond the realm of finances. 

This includes tracking supplier innovation contributions, improvements in time-to-market, and the positive impacts on sustainability.

In essence, data driven procurement is about transforming procurement from a cost center into a strategic value driver. 

Enables Accurate Demand Forecasting

Being able to predict a company’s future needs is critically important amidst the ever-changing global markets. 

Fortunately, data driven procurement has unlocked the power of predictive analysis. 

By delving into historical purchasing patterns and procurement decisions and staying attuned to market trends, you can easily anticipate future demand.

In this context, accurate demand forecasting goes beyond merely predicting future needs.

It involves aligning procurement strategies with overarching business goals, optimizing resources, and enhancing cost-efficiency. 

Source: KPMG / Illustration: Veridion

The benefits are clear.

For starters, improved demand forecasting enables inventory optimization. 

Companies can fine-tune their inventory planning and say goodbye to excess stock or frustrating shortages.

Of course, optimized inventory levels translate to lower carrying costs. Money saved here can be reinvested in other areas of the business.

However, perhaps the most significant payoff of demand forecasting is customer satisfaction. 

Timely order fulfillment ensures that your buyers will receive what they need when they need it, leading to happier, more loyal customers.

Many companies that have embraced data driven procurement have already reaped the benefits in that regard. 

Consider this example: Walmart has implemented a data driven procurement approach, leveraging market data analysis to spot opportunities for enhanced inventory management. 

They used predictive analytics to foresee demand and fine-tune inventory levels, leading to heightened efficiency and reduced costs.

Ultimately, data driven demand forecasting will equip you with the tools to proactively address internal and external challenges, allocate resources efficiently, and uphold a reliable supply chain, even in the midst of unexpected disruptions.

Improves Your Spend Management

Data driven procurement strategies pave the way for more effective spend management. 

By diving into spend data, companies gain insights into areas where they might be overspending, allowing them to swiftly implement cost-saving measures. 

However, a data driven procurement strategy is more than just a map of your financial outflows. 

It’s a dynamic solution revealing how your spending patterns impact your entire business.

When organizations have a clear insight into their procurement data, they uncover inefficiencies that were once hidden. 

Source: Wallstreetmojo

With historical spend analysis, you’ll be able to better understand established spending habits and detect patterns of recurrent overspending—in particular categories or with specific suppliers. 

This will enable you to negotiate more favorable contracts with your suppliers and identify supplier consolidation opportunities. 

Leveraging predictive analytics will also empower you to anticipate future spending trends. 

By gaining insight into upcoming developments, you can enhance your preparedness, budgeting, and negotiation strategies.

This approach doesn’t just save you money; it also streamlines operations, leading to even more substantial cutting of costs.

Moreover, automated cost analysis provides immediate real-time cost assessment, spotlighting disparities and potential savings.

Source: Veridion

In essence, data driven procurement guides organizations toward optimized spend management, making every dollar count.

Forward-thinking companies embrace these emerging trends, transforming procurement from a cost-saving function into a key driver of strategic value. 

Empowers You to Manage Risk Better

In our interconnected world, steering a global supply chain without a data driven sourcing strategy is like sailing through a storm without a compass. 

From unpredicted supply chain disruptions to evolving compliance demands and geopolitical uncertainties, challenges loom large at every turn.

To navigate these treacherous waters, using the power of data to mitigate risks is not just beneficial—it’s essential. 

Data equips organizations with a proactive shield against potential threats, enabling them to spot impending problems before they escalate into significant crises. 

You can view some of the expert insights into this topic from our CEO Florin in this podcast: 

With early warnings and insights gleaned from data, you can take preemptive measures to safeguard your company’s operations and supply chains.

That’s where big data tools like Veridion become indispensable. 

Veridion gathers all fresh information about millions of suppliers worldwide, and enables procurement teams to:

• get real-time updates
• create dynamic watchlists
• automate their supplier monitoring

The software can alert you about changes in supplier location, and other business activities. 

For instance, whether they no longer comply with certain regulations. 

Source: Veridion

Additionally, employing advanced data analytics tools helps uncover hidden risks within your organization and your supply chain, including fraud and financial mismanagement attempts.

By cautiously tracking crucial indicators — like delivery punctuality, deviations in product quality, or ethical compliance concerns arising from suppliers—you will be well-prepared to proactively address these risks before they intensify into serious problems that could disrupt operations or harm your brand reputation.

In a world fraught with uncertainties, data driven procurement is the guiding light that can help your organization secure the global supply chain. 

It’s not just about making informed decisions—it’s about protecting the very foundation of your business operations.

Makes Sustainable Sourcing Possible

Ethical and environmental considerations are increasingly gaining momentum in the modern consumer landscape. 

Customers are more and more attuned to the impact of their purchases on the world around them. 

Sustainable sourcing is, therefore, becoming a crucial element in fortifying a company’s overall reputation.

Companies spotlighting sustainable sourcing aren’t just doing their part for environmental and social advancement. They’re also polishing their brand image. 

Guy Strafford, Executive Vice President at Proxima, points out that Environmental, Social, and Governance goals (ESG) are gradually rising among the top business priorities, whereas procurement is taking oversustainability in many companies.

Illustration: Veridion / Source: Future of Sourcing

However, as far as consumers are concerned, sustainability and brand reputation are intrinsically linked. 

A commitment to sustainable practices not only resonates with ethical consumers but with the majority of procurement buyers in senior roles, as well, with 63% setting sustainability as a top goal for 2023.

The same Amazon Business report reveals that achieving sustainability goals presents a particular challenge since 55% of procurement leaders say it’s difficult to source suppliers that follow sustainable practices.

The solution lies with an AI-powered data analytics platform that enables companies to search through sustainable suppliers that align with their ESG goals. 

For example, these are some of the sustainability data points provided by Veridion. 

Source: Veridion

By gaining access to countless suppliers on a global scale and the ability to filter them by various ESG criteria—such as diversified ownership, ESG policies, and ESG controversies—procurement executives can gain valuable sustainability insights.

Ultimately, by leveraging procurement data, you can make informed and sustainable sourcing decisions and drive your sustainability agenda forward.

Conclusion 

Data driven procurement teams can tap into the power of data to drive better business outcomes—from creating strategic value and forecasting demand to improving spend management and mitigating risks. 

Procurement data can also foster transparency and accountability, and showcase a company’s commitment to ethical sourcing.

With all the benefits of data we covered in this article, we can conclude that embracing a data driven approach might be the key to unlocking a more efficient and profitable procurement function.