As Strategic Sourcing professionals we are constantly called upon to help solve problems for both our internal business partners as well as our external business partners (suppliers). A number of Procurement / Sourcing / Category Management organizations rely on Finance for those skills which I believe is a mistake. A true Category Management organization is staffed with internal consultants that have all the competencies and skills required to play that role and data analysis is among them.
Here is a definition of Data Analysis:
“Data analysis, is a process for obtaining raw data, and subsequently converting it into information useful for decision-making by users. Data is collected and analyzed to answer questions, test hypotheses, or disprove theories.” Remember that data is NOT JUST numbers it can be:
- Comments from an interview
- Process maps
- Internet research
- Observation from a site visit
- A general ledger entry
- Survey results
- Strategic plan
- Purchase order detail
so, you don’t need to be a math genius to do data analysis – you just need to follow a disciplined process.
Data analysis can be done Internally:
- Identify Business Needs
- Determine Usage
- Detail Spend
- Determine Future Requirements
- Perform Sensitivity Analysis
- Evaluate Opportunities
- Justify investments
- Call for action
or externally:
- Determine what the marketplace provides
- Identify feature and functions
- Screen potential suppliers
- Determine supplier advantages and disadvantages
- Help suppliers navigate you company
Why is Data Analysis so important? Here are a few reasons to do Data Analysis:
- Get you to the right answer
- Add credibility to decision-making
- Validate an existing decision
- Justify a new direction or recommendation
- See what’s changed over time
- Provide “numbers” to a gut decision
- Estimate effort, difficulty, risk, or savings magnitude
- Put alternatives in perspective
- Exploit Pareto’s Law (80/20)
and here are a few reasons that I have heard that frankly don’t make any sense BUT are often used: :
- Show how smart we are
- Keep you busy
- Drive to a particular desired outcome
- Second guess past decisions by playing “what if”
- Get caught in Pareto’s weeds (20/80)
- A known answer already exists
- Solve unsolvable problems
It does not matter what role you play within a Procurement / Sourcing / Category Management organization, analytical skills are critical. We are all called upon to solve problems on a daily basis whether it is running a major category of spend through the Category Management process or helping a requisitioner get a PO through the system or help a supplier figure out when their invoice will be paid. These are not problems you would hand off to Finance and therefore every professional in your organization needs these skills. Here is an illustration of a disciplined process:
We have talked about Data Gathering in the past and the planning required to get there. The analysis process is what you do with the data once you receive it. Data, in and of itself, is useless unless you turn it into information you can use to support decision making. We use the above “consulting process” every time we are asked to solve a problem – even if we haven’t thought about it as such. The process shown above is taught to ALL management consultants when they start their careers and should be a core competency for ANY professional.
So, when your Stakeholders reach out to you and EXPECT you to play the role of an internal consultant, please know that it will be impossible to play that role without analytical skills.
Let us know what you think and join in the conversation . . . . . . .
