Business intelligence (BI) is a powerful tool that can support procurement operations and help businesses achieve their procurement key performance indicators (KPIs). Procurement is an essential function of any organization, and it involves the acquisition of goods and services from external vendors. BI capabilities can provide procurement professionals with the necessary insights and data to make informed decisions, manage supplier relationships, and achieve cost savings. In this blog post, we will explore how BI capabilities can support procurement and procurement KPIs.
Table of Contents
Business Intelligence (BI) refers to the technologies, processes, and practices used to collect, integrate, analyze, and present business information. The goal of BI is to support better decision-making within an organization. By transforming raw data into meaningful and useful insights, BI helps businesses understand their operations, improve efficiency, identify opportunities, and drive strategic initiatives.
Key components of BI include:
- Data Collection: Gathering data from various sources such as databases, ERP systems, financial systems, and external data providers.
- Data Integration: Combining data from different sources to create a comprehensive view of the business.
- Data Analysis: Using statistical and analytical tools to examine data, identify patterns, trends, and correlations.
- Reporting: Creating dashboards, reports, and visualizations to present data insights in an understandable and actionable format.
- Decision Support: Providing information that helps managers and executives make informed strategic, tactical, and operational decisions.
In essence, BI empowers organizations to make data-driven decisions.
Procurement BI applications
Spend Analysis:
One of the most important KPIs for procurement is the ability to manage spend. Spend analysis is the process of analyzing procurement data to gain insights into how money is being spent across the organization. BI capabilities can provide valuable insights into spend data, enabling procurement professionals to identify cost-saving opportunities, optimize procurement processes, and negotiate better contracts with suppliers.
Supplier Performance:
Managing supplier relationships is crucial for procurement professionals. Supplier performance is another essential KPI that can be supported by BI capabilities. BI tools can help procurement professionals monitor supplier performance, track delivery times, and identify any quality issues that may arise. This data can then be used to inform supplier selection decisions and to negotiate better contracts with suppliers.
Contract Management:
Contract management is a critical component of procurement operations. BI capabilities can provide procurement professionals with real-time visibility into contract performance, enabling them to identify any issues and take corrective action quickly. BI tools can also track contract renewals and ensure that procurement professionals are aware of upcoming contract expirations.
Inventory Management:
Inventory management is another area where BI capabilities can support procurement KPIs. BI tools can provide real-time insights into inventory levels, enabling procurement professionals to make informed decisions about when to order new supplies and how much to order. This can help reduce inventory costs, minimize stock-outs, and ensure that the organization has the necessary supplies to meet demand.
Cost Savings:
Cost savings are a crucial KPI for procurement professionals. BI capabilities can support cost-saving initiatives by providing real-time visibility into procurement data, enabling procurement professionals to identify cost-saving opportunities, negotiate better contracts with suppliers, and optimize procurement processes. This can help reduce costs and improve overall profitability for the organization.
Data quality in BI dB
Data quality is crucial for any business intelligence (BI) application, especially in the procurement function. Procurement involves a lot of data, such as supplier information, purchase orders, invoices, contracts, and more. This data needs to be accurate, complete, and timely to support informed decision-making.
Procurement business intelligence (BI) applications rely heavily on data to provide insights and support informed decision-making. In order to build a robust procurement BI application, it is essential to have access to various sources of data.
ERP Systems:
Enterprise resource planning (ERP) systems are a valuable source of procurement data. ERP systems are designed to integrate various business functions, including procurement, finance, and inventory management. This means that data related to procurement, such as purchase orders, invoices, contracts, and supplier information, can be easily accessed from an ERP system.
Supplier Portals:
Supplier portals are online platforms that allow suppliers to interact with procurement professionals. Suppliers can submit bids, invoices, and other information through the portal. This data can be used to track supplier performance, monitor delivery times, and identify cost-saving opportunities. Most of the data in Supplier Portals are transfered to the ERP-dB. But some data stays as unique in supplier portals, very much depended on the capability of the portal. Behind Supplier portal you got E-sourcing and other S2P applications. More on Supplier Portals.
Financial Systems:
Financial systems, such as accounts payable and accounts receivable, are another valuable source of procurement data. These systems can provide insights into payment terms, cash flow, and supplier relationships. By integrating financial data with procurement data, organizations can gain a holistic view of their procurement operations.
Market Intelligence:
Market intelligence refers to the collection and analysis of data related to market trends, competitor activity, and customer behavior. By leveraging market intelligence data, procurement professionals can gain insights into pricing trends, supplier performance, and market opportunities.
External Data Sources:
External data sources, such as D&B, industry reports, regulatory data, web crawlers and social media, can also provide valuable insights into procurement operations. For example, industry reports can provide insights into market trends and pricing, while social media can provide insights into supplier reputation and customer feedback.
Having a dedicated role or function for BI
The access to data is huge and, organizing the data in a relevant way (including data collection), and assure information support decision making is hard. Learn more at Procurement organization.
Conclusion: How BI capabilities can support procurement
In conclusion, BI capabilities can support procurement operations and help organizations achieve their procurement KPIs. From spend analysis to contract management and cost savings, BI tools provide procurement professionals with the necessary data and insights to make informed decisions and drive better outcomes. As such, organizations that invest in BI capabilities for procurement are likely to enjoy significant benefits and achieve their procurement goals more effectively.
There are various sources of data that can be used in a procurement BI application. ERP systems, supplier portals, financial systems, market intelligence, and external data sources are just a few examples. By leveraging these data sources, procurement professionals can gain insights into their operations, identify cost-saving opportunities, and optimize procurement processes. As such, organizations that invest in a robust procurement BI application are likely to achieve better outcomes and improve overall profitability.
Learn more about KPIs in EFFSOs course.
Note: Illustration to the blogpost “How BI capabilities can support procurement” created by DALL-E on March 14, 2023.