The Role of Data Analytics in Procurement

In today’s day and age, data plays a crucial role in business success. More and more analytic tools enter the market every day, offering actionable insights into the performance of business processes. 

In this article, we will explore everything regarding the role of data analytics in procurement. It will cover aspects from the importance and benefits of data analytics to the best procurement analytics software. So, if you are ready, let’s start!  

What is Procurement Analytics? 

Procurement analytics is the gathering of data regarding the procurement process. For instance, data on business spending, budgets, supplier performance, etc. 

The main aim of procurement analytics is to identify trends, track the performance of different processes, and gain useful insights to make improvements for the future. 

Benefits of Data Analytics in Procurement 

Procurement analytics will equip your organization with a variety of benefits, from cost savings to better risk management. So, let’s take a look at each of these in more detail. 

Cost Savings 

One of the most prominent benefits of procurement analytics is cost-saving possibilities. Data analytics allows you to 

• Optimize prices by analyzing purchasing data and market trends. It will allow you to identify cost-saving opportunities and negotiate better deals with the suppliers. 
• Forecast demand with predictive analytics and optimize inventory levels, reducing storage fees. 
• Avoid overcharges, double payments, or fraud. Comprehensive data analytics allows you to analyze and identify instances of unauthorized purchases. 

Promote Better Supplier Relationships 

Data insights will help you improve supplier relationships. First of all, you will get insightful data on supplier performance. It will help you identify top-performing and worst-performing ones. Then, based on that data, you can identify suppliers for long-term partnerships and categorize those with whom you want to terminate contracts. 

Besides, allowing you to categorize best ones and worst ones, you gain a comprehensive overview of everything in between. Thus, data analytics enables timely issue resolution, offering opportunities for proactive engagement with suppliers. You can share the data insights with your vendors and collaborate for mutually beneficial outcomes. 

Improved Data-Driven Decision Making: 

If you want to make informed decisions, you must have up-to-date data regarding your business procurement processes. 

Data analytics tools allow you to gain real-time insights and utilize the full power of predictive analytics. With these, you can forecast future trends, efficiently mitigate risks, and use cost-saving opportunities. 

Better Risk Management 

When you have the necessary data at your fingertips, it becomes far easier to mitigate risks. 

First, you can easily identify risks associated with supplier performance and changing market trends. It will help you anticipate potential supply chain disruptions and create effective risk mitigation strategies. 

Even if your business ends up facing certain challenges or risks, with insightful data you can address those efficiently. 

Strategic Sourcing 

When you have the necessary data regarding supplier performance and market prices, you can optimize sourcing processes strategically. So, instead of playing a guessing game or relying on assumptions, you can take a look at the data and pick reliable vendors. 

Transparency 

Another reason data analytics is essential for procurement is that it provides higher transparency and visibility levels. 

The procurement team can easily access spending and budget data to gain a comprehensive overview of finances. This reduces fraud risks while increasing opportunities for identifying certain trends and patterns for further analysis.

Manual Data Analytics Challenges 

Data analytics is crucial, but if you rely on manual effort, then your organization will face a variety of challenges ranging from errors to inefficient decision-making. So, let’s briefly overview the main difficulties of manual data analytics. 

Time-Consuming 

One of the main challenges of manual data analytics is its time-consuming nature. If a software solution can provide you with instant comprehensive reports, manual analytics requires lots of effort. 

First, the employees must gather the necessary data, sort it out, and then start the evaluation. All of it takes time, which delays updated and insightful reports. Eventually, it can lead to the inability of businesses to take timely actions and effectively address changing market trends and demands. 

Data Accuracy and Reliability 

Another challenge of manual data analytics is unreliable data. Minor errors are almost unavoidable when the employees manually fill in all the data reading POs, invoices, and other documents. These errors have several consequences ranging from negative impacts on decision-making to adverse effects on strategic planning. 

For instance, let’s say we have two teams. Team X uses a software solution for data analytics, and Team Y uses manual efforts. The second team will be able to make more informed business decisions due to the higher accuracy and reliability of the data. Meanwhile, team X will continuously struggle to identify data patterns for informed decision-making due to unreliable data. 

Difficulties in Real-time Analysis 

When it comes to real-time analysis, it is impossible to do so with manual effort. Data analysis takes time as the process involves gathering, organizing, and evaluating the sorted data. Thus, it becomes increasingly difficult for procurement teams to respond to different events promptly. 

For instance, the inability to track and analyze data in real-time can cause disruptions to your business supply chain and unexpected expenses. By the time the team finds the pattern or data indicating a disruption, it can be quite late. 

Data Standardization Challenges

Team members can use different methods that are optimal for them to track and monitor the data. Well, in this case, data standardization becomes increasingly tricky. Without standardized data tracking formats, analysis and comparison become more time-consuming and challenging, leading to inefficient resource allocation. 

Challenging to Identify Trends and Patterns 

Manual analysis does not provide sufficient insights for the team to identify trends and patterns within the dataset. Analytical capabilities are extremely limited, which results in inefficiency. Procurement teams can easily miss vital trends or shifts that could have helped with cost optimization and business growth. 

High Operational Costs 

If you think that data analytics tools are expensive and you would rather save money by not incorporating one, then you should know that your plan is not working. 

Even though software solutions require an initial investment, these bring higher returns on investment. 

On the other hand, if you rely on employees for data analysis, you end up facing higher operational costs. First, as your business grows, you will need to hire more personnel who are responsible for data analytics. Secondly, manual data analytics is labor intensive and can result in inefficient time allocation of your employees. 

There are two ways to go. With manual data analytics, your team will keep spending time finding, sorting, and organizing data for further evaluation. So, more time is spent on research and administrative tasks. Or, your team can generate instant comprehensive reports and real-time data overviews with good software. It will allow them to spend time on actual evaluation and analysis. 

So, we recommend implementing an appropriate technology if you want to lower operational costs and get better data insights.

Procurement Data Analytics Software 

If you want to optimize procurement processes within your organization efficiently, then think about switching from manual analytics to a dedicated software solution. 

It is crucial to choose the right software for optimal results. How to do it? You must take into consideration several aspects and features. So, let’s briefly overview what features it has to offer. 

Customizable Reporting 

When it comes to analytics software, always make sure it offers customizable reporting capabilities. Customizable reports allow the generation of business reports tailored to the organization’s needs, further contributing to precise data analysis. 

Also, you can look into Tradogram, which, besides customizable reports, offers automated spend report compilation. This feature streamlines report compilation, saving time on auditing and tracking. 

Budget Tracking Features 

Business budgets are continually affected by different factors ranging from discounts to refunds. So, it is vital to always have a comprehensive and updated overview of your budget. 

It will allow you to gather relevant data insights into the procurement process and make better business decisions. 

Spend Analysis Tools 

Data analytics tools for procurement must have a dedicated and advanced Spend Analysis Feature. Spend analysis tools will provide in-depth spending insights, allowing for a detailed overview and analysis of business spending. 

The business “spend data” and identified spending patterns will enable decision-makers to pinpoint areas for cost savings to optimize the procurement process even further. 

Improve Procurement Processes with Powerful Data Insights 

To improve your procurement processes, you need actionable data insights. Well, luckily, you are in the right place. Tradogram is an all-in-one procurement software that comes in handy with potent analytics tools. 

With this tool, you can analyze everything from your business spending patterns to budget performance. These insights will help you make informed business decisions for higher ROI and more cost savings. 

Check our full list of features and contact us to find out more about how we can help your business thrive.