Ardent Partners’ recent research report, Sourcing and Procurement: The 2016-2017 Technology and Innovation Outlook Report, chronicles the evolution of sourcing and procurement technologies over the last two decades to where they are today and poised to go tomorrow. This report, which is chock full of great insights on many advanced, distinct sourcing and procurement technologies, has spawned a series here on CPO Rising that looks in depth at each of the innovative solutions coming onto the market today and in the near future. Today’s installment: advanced spend analysis.
Spend analysis, as a process and as a technology, is a foundational part of the modern procurement organization. In fact, it is one of the four pillars of the modern strategic sourcing program. Chief Procurement Officers (CPOs) and procurement teams have been using it to understand enterprise spend, consolidate more of it under procurement’s influence, and change buying and sourcing behaviors. These are pretty traditional uses for spend analysis and enterprise procurement teams ought to be mastering the process and technologies to optimize performance. However, in the near future, CPOs and their teams will be able to take spend analysis to the next level. Here’s how.
Like current spend analysis solutions, advanced tools will leverage process automation and data engines to pull reams of disparate spend data from across and outside of an organization into a central location where they will cleanse, categorize, enrich, analyze, visualize, and report spend data. Next-generation spend analysis tools will take the process several steps further by applying algorithms developed for Wall Street traders to millions of data points to “learn” from past buying and spending habits, derive predictive insights, and make automatic, computer-driven purchases.
Advanced / next-gen spend analysis tools will analyze historical enterprise spend data, supplier data, and third-party data to discern when it is advantageous for an organization to make future buys, along with the quantity and quality of goods and services purchased. Perhaps there is a commodity glut in a particular region – advanced spend analysis will take a holistic, big-picture view of the market; they will understand past / present commodity prices to know that now is the time to take advantage of high supply, low demand, and low prices for that commodity. It will be an agile, intelligent solution that can save the enterprise a lot of money.
Advanced / next-gen spend analysis tools will be similar to how Wall Street traders entrust buying decisions to their computers; and they are similar to another advanced sourcing and procurement technology previously covered in this series, “Moneyball for Procurement”. Advanced / next-gen spend analysis will allow CPOs and practitioners to relegate routine commodity purchases to systems enabled by a combination of advanced algorithms, artificial intelligence (AI), large, multi-source datasets, and machine learning – a new process that some solution providers and industry analysts have dubbed “cognitive procurement.”
In the future, spend analysis and predictive purchasing will be conducted in near real-time using preset parameters, but it will also reset those parameters based on external market conditions and third-party information. Although it will be a truly “intelligence” procurement technology, it will also allow for manual interfacing and spot buys. In this regard, advanced / next-gen spend analysis will present the best of both worlds to CPOs and their teams: next-level automation, analytics, and purchasing combined with the agility and control that business leaders and users need to have today in order to remain competitive and responsive tomorrow.
Free on Wednesday, December 14th at 2 PM EST? Want to learn about the future of sourcing and procurement technology and innovation, including advanced spend analysis? Join us for a complimentary webinar and learn directly from the authors! Register here.
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Announcing the Sourcing and Procurement: 2016-2017 Tech and Innovation Outlook Report!
Tagged in: Ardent Partners Research, Chief Procurement Officer, CPO, Innovation, Matthew York, Process, Sourcing, Spend Analysis, Technology