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Aligning Procurement Teams with Data
By Jeff Stites, CIO, Diamond Foods
There is no denying the steady march of improved analytics into the procurement process. The challenge with data has always been to ask the right questions to get the most insight. Is your business strategy depending on margin improvement, supply assurance, or the ability to estimate future input prices? How accessible is spend data and vendor performance data? Most procurement teams have a skill gap when it comes to linking the key elements of the business strategy to procurement metrics and then to transaction or external data. An investment in training and development (and outside help) is necessary to effectively navigate analytics-based applications and data options.
Technology will continue to reduce logistics information cycle times, but the benefit comes only to those who recognize the ability to reduce safety stock levels and buffer times.
Most companies don’t do a good job of understanding and challenging inventory decisions, especially around safety stock.
Most procurement teams have a skill gap when it comes to linking the key elements of the business strategy to procurement metrics and then to transaction or external data
Rules of thumb, tribal knowledge and “never run out” executive orders are still too prevalent. Part of the reason is that inventory goes dark in far too many supply chains at the hand-off points between vendor, manufacturer, distributor and customer. Technology is improving visibility, especially when external factors cause changes, and more is on the way, but the real benefit of that additional data is realized only by using it to challenge assumptions on safety stock and safety time in the supply chain. Can you explain all the components that makeup safety stock in your extended supply chain and what drives them?
Technology can make basic procurement tasks more efficient but the real value comes from a Procurement Team reinvesting that time into new, untapped spend categories within the business.
Procure to Pay, E-Invoicing, Contract Lifecycle Management, Strategic Sourcing applications, intelligent use of mobile–they’re all capable of bringing efficiency to basic procurement tasks. The variety of application deployment options has reduced the barriers of adoption significantly. So how are you reinvesting that time? Have you looked closely enough at the activities of your procurement team to find the available time? If not, you’re missing an opportunity to extend your buying expertise across the business. Look at any SG&A category on your P&L and I guarantee you there is an inefficient buy that is costing you more than it should. Use the recovered time to find those opportunities and partner with those teams to realize the benefit.
One of the best pieces of advice I picked up in the past year was “You don’t monetize data, you monetize insights.” Procurement teams that get that will outperform their peers and find themselves contributing significantly to their company’s success.