6 min read
As a modern day procurement professional, you need to have strong analytical skills and the ability to make data-informed decisions in your day-to-day work and across the different stages of your career.
Exceptional analytical skills will only get you so far. You also need the right tools for the job. Without a solid data and analytics foundation, you can’t prove your strategies are working. This is where procurement analytics methods and tools come to play.
In this article we go through key procurement analytics concepts and talking points every procurement professional needs to know. Skip ahead if you know what you’re looking for:
- What is procurement analytics?
- What does a procurement analyst do?
- Foundational analysis methods for procurement professionals
- Well-known procurement analytics software providers
- Types of procurement analytics from spend analysis to CO2 analytics
What is procurement analytics?
Procurement analytics is a set of methods or tools used to measure, analyze, and improve spending activity and supplier performance. The goal of procurement analytics is to help procurement professionals and teams to be more effective in their jobs using data-informed insights and to track the impact of sourcing and supplier management efforts.
Procurement analytics involves using data analysis techniques and/or software to gain insights into an organization’s procurement activities. It can help you optimize spending, improve supplier relationships, and build more effective sourcing strategies with actionable insights related to spend patterns, supplier performance, and market trends.
The four common types of analytics used in procurement are: descriptive, diagnostic, predictive, and prescriptive. Descriptive analytics looks at what happened in the past. Diagnostic analytics tries to explain why something happened. Predictive analytics forecasts what might happen next, and prescriptive analytics aims to give actionable recommendations about what to do next.
Why is procurement analytics important?
Procurement analytics is both important for you as a procurement professional and important for the effectiveness of your wider procurement team.
This is important to you personally because data analytics and business intelligence are among the six most valuable tech skills for procurement professionals according to Andrew Daley, Managing Director of Digital Procurement and Supply Chain at Edbury Daley.
Procurement analytics is also important for the success of your broader procurement organization. According to the 2023 Deloitte Global Chief Procurement Officer Survey, advanced analytics has become the most deployed and impactful technology implemented by procurement teams.
So, whether you’re a procurement professional looking to maintain relevant skills, or a procurement team leader looking to equip your team with strategic insights, you need to invest time and resources into data and analytics.
If you’re really enthusiastic about this challenge, you may even consider working as a procurement analyst or adding one to your team.
What exactly does a procurement analyst do?
Many modern-day procurement organizations have dedicated data analysts to support and lead the enablement of analytics across the procurement function. This role is often called a procurement analyst.
The primary focus of a procurement analyst is to enable better decision making by providing timely, high-quality data analytics and insights to procurement leadership and business stakeholders.
Every day in the life of a procurement analyst may be different. They gather and analyze data related to procurement activities to identify inefficiencies or process improvements. They create dashboards and reports for monthly reporting. They look for opportunities for cost savings. And they regularly respond to spot requests for information from sourcing leads and category managers.
Some of the key responsibilities of a procurement analyst can include:
- Data analysis: Collecting and interpreting spend data to inform strategic decisions
- Supplier evaluation: Assessing supplier performance and reliability to ensure quality and compliance
- Market research: Monitoring market trends to identify potential risks and opportunities in the supply chain
- Support negotiations: A Supporting strategic sourcing initiatives and even specific negotiations
- Reporting: Creating detailed reports and dashboards to communicate insights to stakeholders
- Process improvement: Recommending changes to procurement processes to enhance efficiency and reduce costs
You may find that each organization has their own description of what exactly a procurement aAnalyst does. The one common thread is that all analysts support the execution of business plans as a trusted expert and collaborator.
Let’s go through some common methods you can apply in procurement analytics.
Foundational analysis methods for procurement professionals
Procurement professionals need a diverse set of analytical skills in their day-to-day work. While your analytical approach always depends on your role or goals, there are a few evergreen analysis methods you should keep in mind.
Category profiling
Category profiling involves analyzing and understanding different product or service categories within procurement. This method helps in identifying specific needs, market trends, and supplier capabilities for each category. By developing detailed category profiles, you can tailor strategies for sourcing, pricing, and negotiation, ultimately leading to more effective category strategies and higher rate of responsiveness to business needs.
Pareto analysis
Pareto analysis, often referred to as the 80/20 rule, is used to identify the most significant factors in a dataset. In procurement, it can help determine which suppliers account for the majority of spend or which issues cause most delays. By focusing on critical elements you prioritize both your time and resources more effectively.
Spend cube analysis
A spend cube helps visualize spending data across different dimensions, such as time, category, and supplier. This method can help you identify spending patterns, uncover cost-saving opportunities, and make informed decisions about consolidating suppliers or renegotiating contracts.
Supplier segmentation (a.k.a. Kraljic matrix)
The Kraljic matrix is a strategic tool used to categorize suppliers based on risk and profitability. It can help you prioritize resources and strategies by classifying suppliers into four categories: strategic, bottleneck, leverage, and non-critical. This segmentation helps you focus on high-impact areas and manage supplier relationships more systematically.
Supplier preference modeling
Supplier preference modeling assesses how your suppliers perceive your importance as a buying organization. As the direct opposite of the Kraljic matrix, this analysis can help you understand your negotiation power in a competitive category or supply environment.
These are just a few of the common analysis methods used regularly by procurement professionals. Across your career you’re likely to come across many more methods, or even develop some of your own.
Procurement data analysis often requires significant effort, knowledge, and resources. It’s more than likely that you’ll also use different kinds of tools or software to perform your analysis. Let’s go through some of your options.
Key procurement analytics tools and providers
Depending on the way you look at it, there are tens or even hundreds of different procurement analytics tools or providers to choose from. You can break down your options into three main categories:
- Self-built analysis or tools: This usually covers custom built business intelligence (BI) dashboards or one-off analysis done in Excel by procurement analysts or consultants.
- Analytics modules within procurement suites: These are configurable spend or procurement analytics modules accessed via Source-to-Contract or Source-to-Pay suites.
- Procurement analytics point solutions: This includes automated software built to provide analytics across multiple data sources or IT systems.
There is no one-size-fits-all solution for procurement analytics. One solution may be suitable for a smaller procurement team or independent procurement analyst. Another could be a good fit for a large global procurement organization. You’re going to need to find a solution that fits your unique needs, maturity level, and resources.
Here is a list of some of the solution providers in the procurement analytics space:
| Provider name | Type |
| Anvil Analytical | Point solution |
| Calculum | Point solution |
| Creactives | Point solution |
| Coupa | Suite |
| GEP Smart | Suite |
| Ignite Procurement | Point solution |
| Ivalua | Suite |
| Jaggaer | Suite |
| Keelvar | Point solution |
| LevaData | Point solution |
| SAP Ariba | Suite |
| Sievo | Point solution |
| Simfoni | Point solution |
| SpendHQ | Point solution |
| Suplari | Point solution |
| Spendscape by McKinsey | Point solution |
| Synertrade | Suite |
| Rosslyn | Point solution |
| Zycus | Suite |
The procurement analytics software landscape is constantly evolving. The above list just gives you a narrow snapshot of your options. Many other modern procurement technology providers have analytics features and new providers and consultants enter the space each year.
With so many options you’re spoiled for choice with tools. The big question is what you do with all the data and insights. Let’s next go through some common use cases for analytics in procurement.
Types of Procurement Analytics Dimensions from Spend Analysis to CO2 Analytics
For many procurement professionals, spend analysis is the foundation for effective procurement analytics. Spend analysis is likely something you need to do at various stages of your career, whether you are a buyer, category manager or a procurement transformation consultant.
Spend analysis gives you the six key dimensions needed for procurement analytics:
-
- What was purchased? (Is it a commodity, product or service?)
- How much was purchased? (volume or quantity of goods or services bought)
- How much did we pay? (price of goods or services bought)
- Who made the purchase? (the department, cost center or business unit doing the buying.)
- Who did you purchase from? (is it a preferred supplier, one-off purchase or maverick spend?)
- When was the purchase made?
Example of a spend analysis dashboard. Source: microsoft.com
With these six dimensions covered, you’re likely to be able to perform many of the key analysis needs in a procurement role. Some of the additional dimensions your analysis can include:
- Spend forecasting: How do we expect spend or prices to change in the future?
- Supplier analysis: Evaluate supplier performance based on price, delivery times, quality, and overall reliability.
- Category analysis: Explore and summarize the performance and key trends of a specific category of goods or services bought.
- Contract analysis: Monitor contract compliance and avoid maverick spending.
- Payment term analysis: How effectively are you able to manage payment terms across different business units or procurement operations?
- Supplier diversity analysis: Segmentation and analysis of suppliers owned by minority groups, women, veterans, or LGBTQ+ individuals.
- CO2 analysis: The measurement of (scope 3) upstream carbon emissions made by suppliers during the production of goods or services.
Each type or dimension of analytics serves a unique purpose. Together, they can provide a comprehensive view of your procurement organization’s performance, improvement opportunities, and strategic supplier landscape.
Bottom line on Procurement Analytics
Procurement analytics helps companies understand their spending patterns. By gaining insights into where money goes, you can identify value-driving opportunities. This isn’t just about cutting costs—it’s about spending smarter.
With the right analytics and data-informed insights you can negotiate better contracts, build more valuable supplier relationships, and even develop more sustainable sourcing strategies.
Some of the core benefits of procurement analytics include:
- Cost savings: Analyzing spend data reveals inefficiencies. It helps companies consolidate suppliers and negotiate better deals.
- Improved decision-making: Data provides clarity. It allows businesses to forecast demand accurately and make strategic decisions with confidence.
- Data-informed supplier relationships: Understanding supplier performance builds stronger partnerships and ensures that suppliers meet quality and delivery standards.
- Mitigating risks. By identifying potential risks in the supply chain or within business processes you can develop strategies to mitigate them.
Whether you’re an aspiring procurement analyst or a future procurement leader, procurement analytics is likely to be a key skill to develop across your career. To deepen your understanding, explore some of the interviews with recognized thought leaders in the procurement analytics space, or subscribe to the Art of Procurement podcast.
