In procurement, data overload is a common problem. The fact that it’s fragmented keeps procurement professionals from creating value in an organization. A data lake, however, can turn things around. Here is how.
Procurement data – the status quo
Procurement data. It’s everywhere. On your computer, on every colleague’s computer in the procurement department, in spreadsheets and on printed documents. Over years of supplier relationships, procurement teams rigorously collect endless amounts of data in excel documents or in countless different tools. Good for them, one might think. Data is information, and it’s no secret that information is a valuable currency for any business.
However, it’s just unordered procurement data. You can’t draw conclusions from it, let alone benefit from the information. Another issue is: all data is not centralized. It’s spread over a multitude of tools, often unused. And even if you do want to make use of some supplier data, where do you find it? If you’re lucky, you have a list of logins and passwords for all the tools in an outrageously huge spreadsheet. If not, you’ll find yourself searching for the right data all day instead of using it to make better decisions.
That scenario is all too familiar to a lot of purchasers and supply chain managers. According to OliverWyman’s study on big data in procurement, the majority of procurement professionals agree that big data management is crucial to their success. However, only 4% of all respondents think they are in a good position to even start using big data to their advantage. This is mainly due to not having clear goals, an implementation plan or financial resources. Looking at procurement’s digital progress in the last couple of years, this is not surprising. Digital readiness is just one of 3 Procurement Challenges Facing Digital Transformation, and it’s not overcome just yet.
What does big data in procurement mean?
Calling procurement data simply “big data” is a common misconception in the industry. Big data is usually is
- conducted from multiple, incompatible sources
- extensive in volume.
In procurement, lots of data sources fall into these categories. All data from ERP systems, transaction data, competitor pricing, invoices, emails and spreadsheets to name just a few. What makes it so difficult, however, is that all systems containing data are rarely in sync. The data is not centralized, which means, it can’t be collected at one point and made into actual useful analytics.
Centralizing procurement data – data lakes
What can we do about it? One solution is to use a data lake.
A data lake is a central system that stores all sorts of data you need. Your internal data and any sort of third-party data you like, accessible for everyone in charge. With all the data sources coming together, a data lake eventually creates holistic supplier profiles. It establishes one single point of truth for all relevant information.
How does it work in reality? Take, for instance, supplier scouting: You need to scout a new supplier and want to be in the best possible negotiating position. To achieve that, you need a certain amount of information: What’s a supplier’s yearly revenue? Are there connections to competing organizations or OEMs? Which certificates does a vendor have?
The more information, the more likely is a procurement department to close the best possible deals. But without a data lake (or any other system combining data sources and making it into actual analytics), procurement is stuck with the status quo – a confusing maze of data.
Use big data, make it smart data
Procurement professionals agree that this decentralized information overload needs to be tackled. The survey shows that 84% of respondents are seeing a data lake as one of the most important levers to gain a competitive edge.
However, to stay ahead of the curve, a data lake always has to be up to date. It’s not enough to collect all supplier data in a central system, when parts of that data are not accurate or outdated. That’s where smart data comes into play.
A smart data lake is a central system for data storage that is usually driven by an artificial intelligence. AI enriches internal supplier data with accurate and up to date information and streamlines all data sources in the data lake to form an always curated data pool.
With a smart data lake, you can
- establish a single point of truth
- enrich your supplier data with any third-party data source
- get holistic supplier insights
- screen your existing suppliers and create lists of potential new ones.
Want to find out more about smart data lakes? Read about Scoutbee’s data lake DeepSee!
Data lakes – securing volatile supply chains
Smart data lakes keep your supplier information up to date, which is more important today than ever before. In times of NAFTA, changing tariffs and the trade war between China and the US, supply chains become more and more volatile. As The One Brief mentions in an article about the Chinese-American trade war, “market uncertainty is a concern, and business leaders might be shopping for new trading partners that offer more stability”. To gain that stability, suppliers are best screened 24/7 in order to have an always up to date overview of your supplier portfolio. With a smart data lake and its combination of multiple data sources, this is only one of the functions you can take advantage of.
Impacts of volatile supply chains can also be seen in the global economy. Macy’s and Walmart are already bracing for new tariffs by adjusting supply chain strategies. Smaller businesses, however, will be impacted by tariff changes even more, as the article states: “Small businesses are particularly vulnerable, since they don’t have the resources and flexibility to quickly switch suppliers”. While in general this is a fair assumption, data lakes give procurement departments of any size the possibility to find new suppliers in a fraction of the time it usually takes: The artificial intelligence behind a smart data lake always screens your existing suppliers and finds potential new ones in case of an emergency. That way, you always have potential new suppliers in reserve and are therefore able to mitigate risk.
Procurement produces vast amounts of data that need to be structured. With a data lake, you consolidate all your relevant data, centralize it, and enrich it with deeper insights. What comes out of it, is not only a more structured process to reaching your objectives. With a massive gain of information about your suppliers, you’ll find yourself in the best possible negotiating position and are able to foresee potential changes in your supplier relationships much earlier, which is especially important in times of volatile supply chains.