How to Define Procurement Intelligence and Put it to Work

It’s not just about IQ, but EQ (Effectiveness Quotient).

While intelligence is critical, a precise measure of procurement intelligence is less important than the performance it generates. In point of fact, as a department (and the entire profession) matures, the definition of procurement intelligence becomes a moving target; and it becomes relative to nearly all stakeholders in the source-to-pay.

After all, being “intelligent” means something slightly different to the CPO than it does the CFO, despite the fact that both business leaders, by definition, would embrace agility, collaboration, and efficiency, and value real-time data to make better informed decisions.

The impact of the age of intelligence can have a dramatic effect on operations and results, and extends across the different constituencies, some of which are noted below.

Decentralized intelligence.

For CPOs and members of the leadership team, it means developing a wider range of analytics to process and parse more data. It also means strategizing and abandoning rigid “command and control” management structures, and empowering trusted sourcing leaders and category managers to identify and respond autonomously to changing business needs and market conditions.

For sourcing professionals, this new definition means getting engaged sooner in sourcing events and collaborating more deeply with internal and external stakeholders. But it also means leveraging market insights, and taking a data-driven approach to evaluating suppliers and commodities. Rather than rely on “gut feel” or instinct, intelligent sourcing teams will rely on the data to illuminate suppliers with the highest potential to meet or exceed market performance levels.

Category managers need to be tied into market/price fluctuations, nimble in their contract terms and renewal options, and have backup commodities/products and suppliers in mind should supplies dry up, prices spike, or suppliers go offline. They effectively need to be able to substitute materials or suppliers in short order to respond to market conditions and keep their direct and indirect sourcing pipelines humming.

Working smarter, not harder.

Supply Management (risk/performance) teams need to collaborate with their suppliers in order to effectively manage each facet of the supplier base (information, performance, relationships, and supply risk). To do this intelligently, supplier managers need to adopt a “work smarter-not harder” approach, and leverage centralized dashboards that fuse each aspect of their supplier base into one platform, with header-level information, drilldown capability, and nifty visualization aids. Mobile applications and alerting features will keep supplier managers continuously informed with real-time data and intelligence and enable them to respond to sudden or emerging risk events 24 hours a day, seven days a week.

Modern operational procurement teams must do more than conduct “three bids and a buy” in order to be intelligent. They must collaborate across the enterprise to ensure that what they are doing aligns with the greater mission of the enterprise. They need to ask smart questions, of stakeholders and of themselves, like “Should this be competitively bid or strategically sourced? Do we have an existing contract vehicle or supplier optimized to fulfill the business need? Would this procurement violate internal policies?”

Intelligent operational procurement teams need to consider the broader ramifications of the request before taking action.