Just like any vendor can claim to have a digital procurement solution because, as we clearly explained last week, email and spreadsheets technically count, any vendor can claim to have analytics. Consider the definition:
the analysis of data, typically large sets of business data, by the use of mathematics, statistics, and computer software
And then consider the common definition of analysis:
a presentation, usually in writing, of the results of this process
This means that any software that provides a canned report summarizing a data set (average, mean, etc.) qualifies. MRP software from four decades ago had canned reports that did this and qualify. Thus, since computers are modern in the grand scheme of human history, any vendor can tell you with a straight faced that they have a modern platform with a modern analytics solution if it runs on a computer, supports bid collection in a spreadsheet, and contains a canned report summary — especially if they were an English or Arts Major (especially since we are in the post-modern phase in their worldview).
DO YOU REALLY WANT TWO-PLUS DECADES OLD TECHNOLOGY?
Think carefully about this — because if you don’t ask the right questions and use the right measuring stick, that’s precisely what you might get if you don’t get beyond this “digital” and baseline “analytics” crap.
What you have to know is that there are levels to analysis. And while the number of levels might very depending on how granular you want to get, there are at least five in today’s technology platforms, and these are the seven levels the doctor likes to use.
At this level, data is classified into buckets for the purpose of basic analytics.
At this level, basic statistics are run to compute summary, typically canned, reports on the data.
For decades, this is all you got, and many vendors still try to pass this off as sufficient.
At this level, the user is either given the ability to define their own reports to drill in and find the potential root causes of issues identified in the reports or to run more advanced statistics (beyond just average and mean) to identify correlations between data to find potential root causes of issues.
Most platforms developed or upgraded in the last five years in S2P, Sourcing, and Spend Analysis have this capability. But this is not enough any more, especially when there are do-it-yourself software packages for under 1K that can allow you to get to the next level, which has been around in specialized demand planning and analytics for decades.
At this level, the platform employs statistical trend analysis, advanced clustering, and/or machine learning to identify trends and predict future costs, risks, performance, etc.
A few platforms are starting to incorporate this, but this should be a baseline requirement considering ERPs, demand planning, and advanced BI tools have had at least some capability here for close to 2 decades
At this level, the platform is not just identifying and computing future trends, but providing advice on what to do as a result of those trends.
Leading platforms are starting down this path, but given that the foundations of prescriptive analytics have been around for over two decades and that best practices in sourcing and procurement have been around almost as long, if a platform can’t provide not only insight and recommendations what to do with that insight, it will never even achieve 3.0 objectives … meaning 4.0 will never be a reality.
In other words, any platform without some prescriptive capability is behind and not one you should be investing in.
At this level, the prescriptive analytics is used to power automatic actions based on embedded rules. If the platform determines a commodity that is typically on a one year contract is at an all time low, it might initiate the renewal event two months early to lock a rate in if a rule is defined that says events can be initiated up to three months early if prices drop below contracted rates and are projected to be within 2% of the projected low.
Few platforms are here, but you should be looking for a configurable platform with rules that permit simple automation based on both entered and derived data values from the application and the data it contains. Permissive analytics is a cornerstone of the Procurement 4.0 promise so make sure your chosen vendor is building in permissive analytic capability. It can be fledgeling to start, but something needs to be there or it won’t be there when you need it.
At this level, the platform embeds machine learning and advanced AI techniques to not only make good predictions but choose the right actions to take on those predictions without any user intervention for run-of-the-mill sourcing and procurement processes and events. When we reach Procurement 4.0, such systems will not only eliminate 98% of tactical work to allow buyers to focus on the strategic, but eliminate 90%+ of strategic work identified as relatively low value (at the time) and allow buyers to focus on strategic efforts that present the greatest opportunity to provide value … truly optimizing the limited Procurement resources available.