There is a seismic shift happening in the procurement landscape currently, and that’s largely resulting from the integration of predictive analytics into the function.
Companies are adopting more data-driven approaches to increased efficiency and cost savings, so knowing how to interpret data you already own is becoming a key driver of strategic value.
Because of that, predictive analytics will play a crucial role in shaping procurement into a value-generating function in the coming decade.
In this article, we will look into the concept of predictive analytics, and how it is driving strategic change to the procurement function, helping the business make more informed decisions and maximize operational and cost efficiencies.
The concept of Predictive Analytics
The concept of predictive analytics in procurement began gaining traction around the early 2010s, as organizations increasingly realized the potential of big data and advanced analytics in improving procurement processes.
As businesses accumulated more data through digital tools like enterprise resource planning (ERP) systems and cloud-based procurement platforms, the use of predictive analytics became feasible.
So, what does it do effectively?
Predictive analytics transforms vast amounts of data into actionable insights, enabling procurement professionals to anticipate market trends, optimize supply chains, and enhance decision-making processes.
Let’s get into that in a little more detail below.
Turning Data into Actionable Insights
Predictive analytics transforms raw data into valuable insights that allow procurement professionals to forecast trends, manage risks, and optimize supply chains. Since these predictive models are able leverage historical data, they can provide accurate forecasts for future spending patterns and market fluctuations.
The insights found can be aligned with business needs and translate into better decision-making processes for the organization.
McKinsey’s research highlights that companies using predictive analytics have seen faster tender evaluations and improved negotiations, directly contributing to procurement efficiency.
Enhancing Spend Analysis and Enforcing Compliance
An essential application of predictive analytics in procurement is its ability to optimize spend management.
Advanced analytics tools analyze spend patterns across categories, helping organizations detect maverick spending and enforce compliance with procurement policies.
This leads not only to cost savings but also to improved governance. Companies that adopt these practices can create a single source of truth for procurement data, resulting in significant efficiency gains, and a 360° visibility of supplier spend.
You’ll be amazed how you can optimize your budget by several million by simply reducing supplier count and indirect spend.
Improving Supplier Negotiations and Risk Management
Predictive analytics also enhances supplier negotiations by offering detailed insights into past negotiations, supplier performance and market dynamics.
With predictive data, procurement teams can anticipate price fluctuations and better prepare for negotiations.
Companies that integrate analytics in procurement have been able to ensure more favourable terms in both their renewal contracts and new supplier deals as well as increase cost efficiencies.
Strategic Value and Future Outlook
As predictive analytics becomes more integrated into procurement, its impact on long-term strategy grows.
Gartner ran a survey with CPOs this year where the vast majority of them believe that by 2030, procurement will be deeply embedded in organizational decision-making, and that will undoubtedly be driven by data analytics and predictive tools.
Those procurement functions that are using these tools will be better positioned to manage risks, optimize costs, and improve supplier performance.
If your aim is to create long-term value for your procurement function and drive organizational success to your business, consider researching some tools in the market that support predictive analytics features.
If what you’re read resonates with you—if you see the potential for what procurement could be, rather than just what it is—we invite you to book a strategy call with us. Let’s discus how Thinking Machine can provide the insights and efficiencies you’ve been seeking to supercharge your procurement function. It’s time to turn data into one of your most strategic assets and allow the advanced analytics of our platform to reveal opportunities that have been hidden in plain sight.
To start your journey with Thinking Machine, please reach out to us at sales@thinkingmachine.co. Together, we can build a legacy of efficiency, savings and strategic success in your procurement operations.
