Optimising financial processes

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Is NOW the time for Data Driven Procurement Transformation?

Two related articles caught my eye recently. One from Supply Management (CIPS) and one from McKinsey.

Their specific focus is on the procurement function and the source/purchase to pay process, but the lessons are clear across all business and data demands.

The need to control costs and cash, manage supply shortages, develop a more resilient supply chain and meet demand for increased sustainability are all key priorities. The pandemic and all the associated challenges have intensified focus on these issues.

At the same time, procurement functions are being asked to do more, with fewer people.

Some are overcoming this challenge by harnessing the power of data. We all know about its potential to transform processes and performance.

But they are in a minority. 86 percent of CPOs say they lack access to good quality data, and the related business insights.

Despite this evidence, we are seeing ever increasing volumes of raw data, but only 10 or 20 percent of this data is currently leveraged to drive decision-making and action.

With so much potential, why has it been so difficult to capture this value?

In the drive for action, many organizations are getting stuck in “technology pilot purgatory”. Procurement, GBS, Finance and IT teams are getting distracted by the number of solutions and technologies available, engage in costly trials without a clear ROI, and fail to scale.

Firstly, and contrary to the consensus of the combined marketing budgets of all the technology vendors, this is NOT technical problem.

Whilst we need the business relevant data, actionable insights must be drawn from it.

This is not as easy as it sounds and relates to one of my recent articles about the idea of “analytics translators”. From my experience, this is not the most effective strategy for core business processes such as the Source or Purchase to Pay process. 

There are smarter approaches that echo the way in which Uber has simplified a cumbersome process and brought simplicity and immediate value to our hands as consumers.

Knowing the right questions to ask does NOT need a large scale investment in technology or “analytics translators”.

An understanding of your own business priorities will ensure that crowd-sourced best practice insights can deliver impact, operational efficiencies and enhanced decision making in very short cycle times.

Days not Months or Years.

The data provides one part of the story but the chemistry of real value comes from procurement and end -to-end process teams that understand the business narrative around it.

Business process specific “analytics lighthouses” have started to emerge. This a powerful concept when focused on the data insights required by the business process, rather than on the mechanics of delivery. They can showcase the potential speed and size of gains that can be achieved at scale. 

But it requires us to change our mental model. We should NOT be taking a “brick by brick” building approach to business process analytics, but sourcing pre-packaged process intelligence, in a Pareto style, where we can deliver 80% or more of what is possible and desirable with less than 20% of the effort, cost and cycle time.

Data Insights are the future. Analytics is the mechanism. Process Intelligence and knowledge the critical enabler.

Those who harness the power of business insights today will become the procurement leaders of tomorrow.

Transforming the function, and the end-to-end Source to Pay process with a source of data insights driving value across the whole enterprise.

Is it the time to act now?

The catalysts for this stream of consciousness are “Perfecting data-driven procurement transformations” from Supply Management here . . .  and “Disrupting procurement through analytics” from McKinsey here . . .

Enjoy the read. They are less than 5 minutes each, perfect for your commute or the walk to the kitchen to get a coffee!

Thanks for reading . . .