All posts by Chris Sawchuk

Why Predictive Analytics is Changing Procurement’s Future

The opportunity for predictive analytics and Big Data in procurement goes well beyond spend.

Predictive Analytics in Procurement

Hackett’s 2016 Procurement Key Issues Study shows that increasing agility is a critical development area for organisations. It also shows that predictive analytics and forecasting tools are identified as having the greatest transformational impact on procurement in the future.

A confluence of high volatility, technology-led innovation, and hyper-competitive market conditions, has accelerated the rate of change in business to unprecedented levels. Agility is the key to success in this environment. In a procurement context this has four attributes:

  • Proactive Decision Making: Leveraging information and predictive analytics to improve the quality and timeliness of decision-making.
  • Value Chain: Industry leadership in digitising their value chain, including supply and demand chains, as well as internal operations.
  • Planning: Customer-centric planning processes and day-to-day business decisions.
  • Operational responsiveness: Permitting swift response to changes in the supply chain, customer preferences, the competitive landscape, and business strategy.

Overcoming Obstacles

However, accessing this data, information and market intelligence is a significant obstacle that must be overcome.

Becoming information-driven should be a primary focus area for procurement. The function must develop the tools and skills that will allow staff to apply market data and intelligence to decisions on spending and sourcing strategies. Creating deep, consultative working relationships with business leaders, demands that procurement bring this valuable expertise to the table.

This level of insight requires high-quality, real-time market intelligence. However, over half of the Key Issues Study respondents lack a formal market intelligence program or are in the very earliest stages of adoption. At the same time, establishing data governance and building a continuous improvement culture for data management and quality, are also tactics increasingly adopted by organisations.

Access to market intelligence, and ensuring that sourcing and supplier relationship management teams are using high-quality category and supplier intelligence, are prerequisites for agility.

Transformative Impact of Predictive Analytics

As procurement’s role matures from transactional facilitator to trusted business advisor, proficiency with the next generation of analytics – a.k.a. “big data” – will be a key enabler. Big data has been a game changer when it comes to customer analytics, offering an unprecedented ability to quickly model massive volumes of structured and unstructured data from multiple sources.

Good examples from the digital world include Google’s insight into customer behaviours and preferences, and Amazon’s ability to anticipate orders and ensure on hand stock to meet demand.

Source: The Hackett Group Key Issues Study 2016
Source: The Hackett Group Key Issues Study 2016

Predictive analytics refers to the use of statistical and mathematical techniques to predict the probability of future events occurring.

The predictive analytics and forecasting use case for procurement can be an increased focus on business outcomes, through greatly enhanced forward looking decision support capability; and automated and real-time information and analysis availability. Both of these are underpinned by greatly improved data quality.

Combining predictive analytics with cognitive tools will allow, for example, upgraded end-user buying experiences and automated sourcing actions to anticipate supplier and market events. It will also allow for forecasting of and acting to mitigate the impact of supply chain disruptions, and reduction of the severity of supplier risk events.

How do we respond?

As procurement leaders this situation poses challenging questions:

  1. What are the business outcomes and specific use cases for predictive analytics?
  2. How can we accelerate the organisation towards a single view of data and segmentation?
  3. Do we need to access new sources of meta and domain data?
  4. What is the value from faster, more frequent and higher quality information and insight?

Taking advantage of advanced analytical tools and methods requires appropriate staff with the skills to use them, as well as new technology roles, aligning business agendas, and elevating the overall level of technology knowledge. Future talent management plans should reflect the importance of training and hiring staff to handle the sophisticated analytical tools and methods, to deliver the full potential of Big Data.

Analytical projects are not without challenges. Procurement leaders who have not already started down this path should use the high-stakes competitive environment of 2016 as a burning platform.

About Hackett’s Procurement Key Issues Study

The results of this annual study are gathered from executives from over 180 large and global companies operating in the US, Europe and rest of the world, with annual revenue of $1 billion or greater. Find out more at the Hackett Group website.

Chris Sawchuk will discuss why procurement needs to be more agile during his keynote address at the Big Ideas Summit on April 21st.

If you’re interested in finding out more, visit www.bigideassummit.com, join our Procurious group, and Tweet your thoughts and Big Ideas to us using #BigIdeas2016.

Don’t miss out on this truly excellent event and the chance to participate in discussions that will shape the future of the procurement profession. Get Involved, register today.

Planning Procurement’s Response To The Millennial Generation

Understanding how procurement can cope with, and ultimately benefit from, the disruption brought into talent management by the Millennial Generation.

Millennial Generation

Hackett’s 2016 Procurement Key Issues Study shows that talent management remains one of the top 3 of objectives as a critical or major area of focus for virtually all procurement organisations.

Looking deeper, organisations are targeting three specific areas to transform talent: improving leadership skills, honing business acumen, and building specialist procurement skills. The two perennial favourites, category management and strategic sourcing, make up the other top reported objectives.

The research also showed that the Millennial Generation represents one of the greatest potential impacts and challenges to managing talent in the next year or two. Additionally, most procurement organisations (especially those in Europe) continue to experience higher levels of staff churn and difficulty attracting great talent.

What do we mean by Millennials?

When we refer to the Millennial Generation, we are referring to those born in the 80s and now moving into management positions, or early 90s who are leaving graduate school to join the workforce. This workforce demographic is characterised by different attitudes, desires and motivations than earlier generations. Generations X and Y came to be known for their independence, interest in work/life balance, technical proficiency, and measuring success in both financial and social terms.

Millennials, on the other hand, are the first generation of digital natives – i.e. they’ve truly grown up with the internet and social consciousness.  They have high career expectations, desiring both immediate and high impact opportunities, flexibility in terms of schedules, embracing remote working and diversity in assignments (e.g. culture, fun and collaboration).

They plan for rapid advancement as well as frequent job changes. Case in point: 90 per cent of Millennials plan to stay in their job for less than 3 years. They are high touch, and expect frequent feedback. In summary, the millennial generation wants more from work than just a career at a good company.

How can procurement address the critical skills gaps?

Research conducted by the Hackett Group in the past on procurement talent management, has shown clear gaps in the essential business skills required for most procurement jobs. These are: strategic thinking and analysis, group facilitation, and relationship management skills.

When considering specialist skills, enhanced SRM and market intelligence expertise were identified in need of development for most roles, with supply risk, innovation and SCM expertise needed for specialist roles.

How do we respond?

As procurement leaders this situation poses challenging questions:

  1. What procurement value proposition will be the most appealing?
  2. Will higher attrition become the new normal for procurement?
  3. Is now the time to invest in knowledge capture and transfer?
  4. How can we create flexible work schedules and collaborative environments?
  5. Do we need to rethink the importance and type of training we provide?

In all cases, training strategies need to be modernised to reflect this accelerated reality, as well as changing learning styles and preferences. Strategies that get people up to speed faster, use more interactive, workshop and team based formats should be preferred. The 70-20-10 approach to learning is based around the idea that 70 per cent of learning comes through experience, 20 per cent from social learning with colleagues, and just 10 per cent through formal learning involving training or online courses.

This framework will see larger elements of learning being on-the-job, collaborative and workshop based, action orientated to better align to leaders and manager day jobs and current issues, and complemented with self-directed learning elements and social learning (e.g. LinkedIn, Yammer).

Hackett's Framework for Training to Integrate Millennials into the Workforce
Hackett’s Framework for Training to Integrate Millennials into the Workforce

Course materials need to be user friendly, but at the same time to support multi-tasking and access to on-demand, on-line tutorial content. Course design should incorporate the themes seen as important to younger generations – how procurement connects into CSR and sustainability, work/life balance, and career advancement.

The older generations of Baby Boomers and Gen X will need support and even training to adapt to this shift in to mentality and culture.

About Hackett’s Procurement Key Issues Study

The results of this annual study are gathered from executives from over 180 large and global companies operating in the US, Europe and rest of the world, with annual revenue of $1 billion or greater.

Find out more by visiting the Hackett website.

Chris Sawchuk is a keynote speaker at the Big Ideas Summit on April 21st. Chris will be talking about how procurement is applying key agile capabilities in the areas of leadership, talent, service placement and information-driven performance.

If you’re interested in finding out more, visit www.bigideassummit.com, join our Procurious group, and Tweet your thoughts and Big Ideas to us using #BigIdeas2016.

Don’t miss out on this truly excellent event and the chance to participate in discussions that will shape the future of the procurement profession. Get Involved, register today.