Behind the concept of Business Intelligence (BI) lies a range of technologies that enable companies to collect and analyse their data from business operations. Thanks to this actionable insight, they can then inform their business decisions. As the amount of data increases exponentially, it is in the procurement function’s interest to learn how to use business intelligence tools to form its current and future strategy. This article offers to cover the related topics, give examples, and hopefully answer all your questions on Business Intelligence.
The definition of Business Intelligence
Sometimes confused with business analytics, the concept of business intelligence (BI) covers the processes, methods, and software collecting internal and external data, both structured and unstructured, and processing them for analytical purposes. Users can extrapolate various insights from this data through reports, dashboards, and data visualisation.
Previously reserved exclusively for data analysts, business intelligence software is becoming more widespread. Its use is opening up to include a wider audience. Businesses are becoming truly "data driven". This new widespread access to large amounts of data also enables companies to maximise the operational benefits of the digital transformation.
In addition to optimising processes and increasing productivity within the company, Business Intelligence and related concepts (machine learning, artificial intelligence…) help decision-makers to direct, accelerate and improve their decision-making based on real-time factual metrics.
These applications have now become essential to companies, helping them get an overview of their business, identify market trends and find patterns, track sales and financial performance, set up monitoring for key performance indicators, optimise performance, etc. In other words, using this data well is a key asset for increasing your competitiveness.
How does Business Intelligence work?
The concept of Business Intelligence operates based on four different stages: Data collection, storage, distribution, and use.
At the outset, ETL (Extract, Transform and Load) tools are used to retrieve, format, cleanse and consolidate all data, regardless of its format. This raw data comes from multiple sources such as the company’s information system (ERP), its customer relationship management (CRM) tool, marketing analysis, call centre data, etc.
Once structured, this data is then stored and centralised in a database which can be hosted on a server or in the cloud. This is called a data warehouse or a data mart.
The decision support platform is used to share information to all the company's internal partners. Second-generation BI, which uses web 2.0, provides even broader access to decision-making information.
Several types of tools are used depending on the needs. For example, OLAP (Online Analytical Processing) tools focus on multidimensional data analysis, data mining on correlation search, reporting on performance communication, dashboards on performance management, etc.
Business Intelligence technology to support procurement
By embracing Business Intelligence, procurement departments can access relevant and accurate summary data on both corporate spending and the supplier base. This includes, for example, actual and forecast turnover, contact and dispute history, negotiated prices, contract organisation, etc.
They can visualise and extract this raw data very quickly to make it understandable and accessible to all through key performance indicators, as well as using it to make informed business decisions as part of their procurement strategy to create better outcomes.
BI capabilities help them to provide supplier performance benchmarks, evaluate tenders, select suppliers based on multiple criteria in the application of the Lean Procurement approach, etc.
In addition to this decision support, procurement departments also see an increase in operational efficiency. However, buyers still spend almost three quarters of their time on purely transactional or operational activities. Such a solution, therefore, makes perfect sense.
For example, Itochu Corporation, a global trading company, claims to have reduced the time required for issuing its monthly reports by 92% using BI tools. That's a figure that should make today's buyers sit up...
In the end, software like this makes communication between procurement departments and the rest of the company much smoother and more efficient. With the help of facts and figures, they can better collaborate with other departments, especially finance, and also establish their strategic position in the organisation.
Resistance to BI
However, developing this type of technology is not without its challenges. There are two major obstacles.
Complexity of use
At first, the complexity of using Business Intelligence requires profiles with specific technical skills, such as analysts, architects or even developers specialised in BI.
However, current solutions are increasingly aimed at all employees in the company, at managers and operational staff. Easy to use and understand, they are designed so the management tools can be customised. Business users are now seeing the development of "self-service BI".
Quality, reliability, and usefulness of data
Secondly, the quality, reliability and usefulness of the data can be a new barrier. For example, this may be the case in companies where the supplier selection process is not centralised or validated by the procurement departments. It is, therefore, important to prepare the collection and organise the databases before issuing any queries.
Data has become the gold of the 21st century; in other words, one of the most strategic resources for a company. This is why the era of Big Data is giving way to the era of Smart Data. In fact, Business Intelligence programmes can take things even further by integrating predictive analytics, data or text mining tools, etc. Boosted by BI capabilities, it is up to the procurement function to set up a Purchasing Intelligence approach to improve the company's performance.
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