With so much data available, it can be hard for supply management organizations to determine trends in the data and respond. But the purpose of gathering the data is to resolve issues or take strategic measures.
“When compiling data, procurement professionals need to ask: ‘That’s an interesting chart or report, but what are we supposed to do with it?’ That’s where you take the step from analytics to business intelligence,” says Erin McFarlane, head of strategy at Fairmarkit, a Boston-based software provider. “It’s not just, ‘That’s interesting information.’ It’s, ‘As a result of this information, this is the action we’re going to take.’ Or, ‘We’ve identified the problem, and here is how we’re going to resolve it.’ ”
In general, if a data report does not to spur action, it’s “useless,” she says. “Every report has to trigger action,” McFarlane adds. “It can’t just be analytics for the sake of knowing what the numbers are. The numbers have to have a result and an action.”
Do most companies realize this? McFarlane doesn’t believe so, because quarterly and annual reports don’t always trigger action. “I challenge anyone who participates in a monthly, quarterly or annual report presentation to ask themselves what action they want people in the room to take, or what they expect the audience to do with the information. The answer ‘I just want them to be aware of it’ isn’t good enough.”
Determining the action needed requires someone who does more than collect data, McFarlane says: “Analyzing the data isn’t the end of the process. You need someone who understands the business process behind data to provide context.” The analyst’s role is to put together the report, but interpreting requires someone to “understand the ‘why,’ ” she says. “That’s something that executives must become better at.”
Since many stakeholders are associated with the report, the necessary actions could affect several areas of the business — for example, spend data. “Where the data can become powerful is when you combine spend data with a list of expiring contracts,” McFarlane says. “It’s interesting to know (from a report) who your top 20 suppliers are. But what’s more important is to know that, of the top 20 suppliers, 10 have contracts expiring this year, and here are (potential) negotiation plans. That is a report with a call to action.”