Chief procurement officers (CPOs) may have accepted business conditions of “disruption as the new normal,” but they are far from resigned. In our conversations with CPOs, they continue to search for solutions and approaches that will help them not only meet this year’s challenge, but also future-proof the business for as-yet-unseen developments. Predictive analytics is one of the most promising of these tools, an increasingly mission-critical enabler that will help procurement organizations more intelligently analyze spend, monitor supplier performance, and identify savings opportunities.
For CPOs, predictive analytics also looms as a competitive threat, one that will widen the gap between procurement organizations who’ve mastered the discipline and those that haven’t. CPOs we speak with see a three-to-five-year window of opportunity to lock in sustainable advantage, and many are already hard at work on the foundational steps of getting their data cleansed and into a usable state. We concur: our experience with technology adoption curves tells us predictive analytics—currently an advanced practice in procurement—will move from “like to have” to “must-have,” and become as common as spend analysis today.
Predictive analytics capabilities in procurement are built, not bought
KPMG’s perspective is that predictive analytics capabilities in procurement are built, not bought. They represent a strategic integration of data, process, technology, and organization, based on frank assessment of where the procurement organization is today, and a clear strategic view of where it wants to go. While CPOs feel the urgency to establish or perfect their predictive analytics capabilities, our conversations suggest that more would rather “build it right” than “build it first.” They want solutions that anticipate and can keep pace with rapid advancements in analytics, and they understand that getting there is more a journey than an event.
Practical solutions that produce tangible business results
As a firm, KPMG is organized around practical solutions that produce tangible business results. With that in mind, this paper reviews the promise of predictive analytics for procurement functions and examines the question of overall analytics maturity. It delves deeply into the all-important question of data: existing and prospective sources, quality and optimization, and ongoing governance. It also uncovers some operational building blocks—of technology and organization—that CPOs need to address in order to move their predictive analytics vision forward.
Benefits of predictive analytics
Predictive analytics will drive a mix of direct and ripple-effect benefits for procurement organizations that will vary by sector and enterprise, but typically include the following:
- Budget planning
- Negotiation and pricing leverage
- Identification of value opportunities
- Operational and financial transparency
- Proactive compliance
- Resourcing flexibility
- Category innovation
Read this paper to explore considerations for CPOs in establishing or refining their predictive analytics capabilities.