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Using Data to Optimize Procurement

A look at the role that data-driven procurement can play in the streamlining of today’s global supply chains.

Data-driven procurement is a term that we’ve been hearing a lot about lately, but that so far hasn’t been fully adopted by companies or realized its full potential. A recent LevaData study, for example, found that 82% of senior executives are not prepared for data-driven procurement—a term used to describe an organization that puts data at the center of its operations and then utilizes insights derived from data to drive its strategies and decision making.  

According to LevaData, 97% of the senior executives surveyed believe that a procurement process that is data-driven is “vital to achieving long-term value, cost reductions, and efficiency gains,” yet 49% expressed concern that their in-house talent is not ready to leverage the competitive benefits of a digital transformation.

“People know that digital disruption in the supply chain is already underway,” LevaData’s CEO Rajesh Kalidindi said in a press release. “Given this, we were greatly surprised to learn how many procurement managers are still using outmoded management tools.

“Access to transformative, actionable information is deeply fragmented,” Kalidindi added. “But the window of opportunity for competitive advantage will only be available to early adopters.”

Case in Point: Healthcare

The medical field is one area that’s particularly ripe for data-driven transformation, with procurement in a good position to lead that charge. With supply chain expenses representing 30% of the typical hospital’s operations costs, for example, the push to save money, improve spend visibility, and increase supply chain standardization and optimization is particularly high in healthcare, GHX reports in its latest supply chain leaders survey.  

When asked to identify supply chain outcomes needed in 2018, respondents said data and analytics for better decision making; standardization of data and business processes across the organization; contract optimization; and integration across supply chain business and clinical processes topped their lists. Healthcare organizations are using these initiatives to help them achieve these goals:

Procurement. Increased procurement and inventory controls; implement innovation in procurement strategies; cross collaboration in strategic sourcing; punch-out; and category buying.

Product Standardization and Utilization. Major category Physician Preference Item (PPI) standardization across systems; implement product standardization strategies; utilization of value analysis teams to drive standardization and cost/quality improvements; perfect order processing.

Clinical system integration. 2D/3D barcoding and bill-only workflow to EMRs; supply spend and cost reporting in the OR and other procedural areas; point of use automation; demand pull inventory management to clinical point of use/care.

Contracting. Implement new contract management systems; decrease off-contract spend; new committed compliance contract models.

System Integration for M&A. Integrate newly-acquired or affiliated health systems and clinics.

Turning Intelligence into Strategies

As more organizations strive for a more streamlined, predictable, accountable supply chain, expect procurement to continue to play an important role in these improvements. As Ardent Partners pointed out in its Next-Gen Spend white paper, for the modern procurement function, the most prudent path forward is one that incorporates procurement’s big data and the associated business intelligence-driven concepts.

Using automated spend analysis, for example, procurement can drive visibility into various critical areas related to enterprise spend, including an ability to analyze historical spend by supplier, category, region, and so forth. “The power of spend analysis is quite tangible, with many procurement departments leveraging [spend analysis tools] to achieve a deeper understanding of enterprise spend in a scalable and repeatable way,” Ardent reports, “transforming spend data into intelligence, and that intelligence into strategies.”

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