Procurement data: the key to unlock strategic sourcing
Now more than ever, procurement is gaining recognition as a strategic contributor to the organization, rather than simply an administrative or support department. After all, procurement teams play a crucial role in ensuring that internal departments get the goods and services they need to put organizational plans in action.
Along with the shift in perception, the role of procurement teams is shifting. Technology is reducing the amount of transactional administrative tasks in a procurement manager’s day, providing more capacity for strategic sourcing.
Data collection and analysis is necessary to inform a strategic approach to sourcing. After all, in order to fuel continuous improvement, you need to understand where you are now, where you want to be, and how you are tracking against those goals over time.
“Procurement organizations need detailed data to fully understand their purchasing volumes, their expenditures, their spending histories, and the usage patterns of government departments,” explains Dugan Petty, Senior Fellow, Centre for Digital Government and former CIO and state purchasing officer for the state of Oregon. “Without these insights, it’s difficult to build a more effective sourcing strategy.”
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Using procurement data to achieve strategic goals
Given that half of every municipal tax dollar is spent on procurement of goods and services, prudent management of funding is a chief concern of procurement teams.
Data on cost savings (on an overall as well as per-project basis) makes it possible for procurement teams to identify and optimize cost savings opportunities. It can also give procurement teams a concrete measure of their impact on the organization.
“Once you do market research and analyze what you’re paying under your contracts, you can execute sourcing strategies that are based on what you’re seeing in the marketplace,” notes Petty. “If you find you’re paying three percent over market for an item, for example, you can set a goal of hitting prices two percent below market over the next year or two and track how well you’re moving to that target over time. That can result in hard dollar savings that you can use to demonstrate the value proposition that procurement achieves.”
Better outcomes for stakeholders
In the public sector, it’s not all about the bottom line.
“Purchasing is also a critical interface between municipal operations departments responsible for service and program delivery and their outside suppliers,” says government procurement expert Stephen Bauld. As such, procurement teams also consider internal customer service and contract outcomes as chief measures of success.
In order to be able to ensure that procurement outcomes are being delivered and priorities are aligned, procurement teams must stay engaged with their contracts and vendors even after the award is made.
By collecting data on supplier performance, contract term and change orders, and total contract value, procurement teams are able to close the loop on their bid and RFP decisions with clear visibility into how well suppliers are fulfilling their contract. They can also provide more proactive and insightful service to stakeholders by using supplier performance data to correct issues before they escalate, or even to inform future sourcing decisions.
Preparing for the procurement function of the future
Data is the new currency, and its impact on procurement teams will only grow in the future.
Fortunately, procurement technology is evolving to make it easier for procurement teams to capture and analyse their own data—without spending hours in Excel.
As Petty explains, “The data capture and data analysis capabilities are so much stronger than what we ever had in the past, and that is providing tremendous value.”
Digitizing your procurement function makes it possible to capture your procurement data for the benefits described above—while also preparing your procurement team to reap transformative benefits of ‘big data’ in the future. This will help teams provide even greater strategic insight to inform their organization’s spending decisions in the future.
“The power of cloud software and ‘big data’ will transform how public agencies buy,” notes Bonfire CEO Corry Flatt. “It’s an exciting time for public procurement technology.”
For more, read the GovTech Guide Understanding Procurement Technology and How to Use It.