Market analytics is the process of collecting, analyzing, and interpreting data about the market in order to make informed decisions. It can be used to improve the procurement process in a number of ways, including:
- Identifying new suppliers and products
- Comparing prices and quality
- Negotiating better contracts
- Managing risk
- Making better forecasting decisions
This article will provide a comprehensive overview of how to use market analytics to improve your procurement process, including:
- What is market analytics and how can it be used in procurement?
- The different types of market data that can be used in procurement
- How to collect and analyze market data
- How to use market analytics to improve specific stages of the procurement process
- Case studies of organizations that are successfully using market analytics to improve their procurement process
Market analytics, the analysis of market-related data, can play an enormous role in enhancing the procurement process. Not only does it aid informed decision-making, but it can also provide essential information regarding supplier risk and tender management that keeps public sector tenders and awards compliant with regulations and takes the risk out of awarding bids to new suppliers.
In this article, we’re going to look at how market analytics benefits the procurement cycle, as well as how to use the different types of market data to improve public sector purchasing. As you’ll see, procurement analytics often need proper attention from professional data scientists to unlock success.
What Is Market Analytics In Procurement?
Market or procurement analytics entails the collection and analysis of all procurement-related data, including data up and down the supply chain. The aim is to reveal patterns or trends in purchasing and supply to make informed decisions that reduce risk, save costs, enhance supply chain performance, and increase profits.
Types of Procurement Analytics
There are four primary types of marketing analytics that provide different benefits across the purchasing process.
- Descriptive: Data is used to identify patterns and understand their impact in the past.
- Diagnostic: Data is used to understand why patterns or actions occurred in the past.
- Predictive: Data is used to identify trends and patterns that forecast what will happen in the future.
- Prescriptive: Predictive procurement data is used to facilitate future decision-making (what should the data be used for).
Market Analytics Tools
Analytics tools in the market have evolved significantly over the years. What started with Excel spreadsheets has advanced to AI-powered solutions.
These entail automated procurement analytics using data from various internal and external sources, which is encrypted and stored in cloud-based Software-as-a-Service (SaaS) systems.
That’s not to say that spreadsheets have no purpose, simply that they are one instrument in a comprehensive set of analytics tools, ideally located in a single procurement data hub.
The hub, platform, or portal is where all procurement data is stored and organised. Communication with suppliers is easy, and all communication is recorded so you have an audit trail that proves communication and approved action.
Furthermore, the hub ensures transparency throughout the purchase process and compliance with new public sector procurement regulations.
Using Market Data Analytics Software
Market analytics software enables public sector buyers to dig deeper into several aspects of procurement and sourcing, each creating the opportunity to improve your procurement process.
Some of the most important analytics include the following:
- Supplier analytics: Individual performance and comparisons, as well as risk analysis and the ‘greenness’ of their operations and procedures.
- Diversity analytics: Social value/responsibility of individual and supplier groups, including diversity in the workplace.
- Supplier risk analytics: External and internal risks that can negatively impact suppliers’ abilities to keep up their end of the contract agreement, including volatile exchange rates.
- Spend forecasting: All procurement-related spend data to identify and plan for future patterns and trends that will affect your bottom line.
The information gained from analysing aspects of procurement data can:
AI in the Data Analytics Market
AI (Artificial Intelligence) is hugely beneficial to procurement analytics, largely because it can process and sort vast amounts of data quickly. It stores data in preset categories, for instance, payments, performance, and productivity.
AI analytics can be set to locate specific information that other data analytics tools might not identify. For instance, the average volume of vaccines over winter so that buyers in healthcare can ensure they are fully stocked before the cold weather moves in.
This ability to identify precise information helps forecasting analytics to predict future patterns, market trends, and supplier risks more accurately. This makes it much easier to plan, optimise opportunities and avoid risks.
It’s also possible to set AI solutions to keep an eye on things like economic trends and real-time market intelligence, which you can use to make real-time decisions based on information that is as up-to-date as it’s possible to get.
AI and Market Risk Analytics for Supplier Selection
Supplier risk analysis is arguably the most important factor in a smooth-running, hiccup-free supply chain. AI-powered solutions and automation can deliver deep insights into each supplier’s financial reports, performance quality, and risks. Buyers can use this information to evaluate suppliers before sending out RFPs. Only suppliers that meet preset criteria are sent an RFP.
In addition to internal risks, like an unstable financial situation, AI can be used to identify and assess the probability of external risks, like geopolitical situations and international financial market changes. Buyers can decide if the overall benefits of a particular supplier are worth the risks. In this case, they develop a risk management strategy to proactively address risks to minimise their impact.
AI, Market Analytics, And Procurement Transformation
In a time when the government is implementing significant changes to public procurement, AI’s role in market analytics and the insights they provide are critical to enable buyers to stay on top of transformation and adjust their procurement policy as and when necessary.
AI-powered procurement analytics can be used to improve efficiency thanks to the automation of previously time-consuming manual tasks, which also happens to remove human error from the system, making it far more accurate.
The speed and efficiency of data collection and analysis and on-the-spot decision-making contribute to buyers’ flexibility and adaptability in the changing public procurement sector. They also ensure compliance with new regulations that emphasise transparency in the supply chain.
As we’ve seen, market data analytics is essential to drive procurement forward, but getting and interpreting relevant information can be tricky, which is why the above reference to data scientists.
However, the right platform with user-friendly analytics features can spare buyers the expense of third-party assistance. Delta eSourcing offers a data analytics solution that provides essential information, like current market data and custom dashboards for insightful decision-making. You can book a free personalised demo of Delta Market Analytics to see what we can do for your business.
