The concept of organizational maturity has various frameworks and is widely recognized. Similar to overall organizational maturity, procurement maturity also presents both challenges and opportunities.
Procurement maturity models primarily emphasize processes and capabilities. Well-executed processes establish a framework for progress and moving up the maturity scale. Since capability needs shift in tandem with market changes, they require ongoing adaptability.
But how can data be seen through this lens? To answer this, we present the procurement data maturity curve.
In its early stages, a procurement function may lack structure and coordination, particularly in data management. Procurement organizations that are still maturing may struggle to keep up with data using tools such as Excel, Sharepoint, and Email.
As procurement becomes more established, the emphasis shifts to delivering value through the mastery of data management and analytics. As organizations progress along the path to data maturity, they discover that business value grows through the insights gained from procurement and the strategic actions that result.
In this blog, we’ll discuss the 4 stages of procurement data maturity and how you can move up the curve.
The procurement data maturity curve
The maturity of procurement data corresponds to the quality and overall strength of the data. This encompasses capabilities for analytics, integration with external sources, and agility.
As an organization progresses up the maturity curve, the business value increases. Procurement gains a more strategic and innovative role as a leader.
Here’s a more detailed breakdown of what each stage means:
Stage 1: Emerging
During this initial stage, procurement data is used on an ad-hoc basis and in a reactive manner. Functional areas are not well-aligned, and many activities are conducted in silos. The focus is primarily on cost control and obtaining the best price in the short term.
Data access is complex, and only a few procurement software solutions exist beyond the enterprise resource planning (ERP) system. Heavy reliance on spreadsheets and manual processes persists.
Stage 2: Establishing
At this stage, procure-to-pay (P2P) solutions automate routine financial processes such as order, invoice, and account management. Software solutions are utilized to gain visibility into external spend, sourcing, and contract management.
The organization begins to prioritize operational and organizational alignment. Strategic sourcing initiatives are launched, backed by data insights. Establishing organizations can benefit from economies of scale, negotiated terms, and contract compliance, while risk management becomes a new focus.
Stage 3: Optimizing
At this stage, more advanced digitalization takes place, and supplier, marketplace, and trusted partner data is used to enrich procurement data.
Business models are redefined, and a shift towards category management is made. Category teams apply their strategic sourcing skills to establish strong supplier relationships that enhance value, driving innovation and continuous improvement.
Advanced analytics support decision-making, and category plans deliver results to users on networked platforms.
Stage 4: Advanced
This final stage describes a best-in-class procurement organization. Procurement data is integrated across systems, timely, and enriched with external data. Procurement data is assembled and enriched from numerous internal and external sources and presented in a user-friendly manner.
Value-adding projects like supplier development and risk mitigation can coexist with operational tasks seamlessly. Procurement, supply chain, and finance work seamlessly to support corporate strategy. Key suppliers are treated as true partners, and operational processes are continually optimized to meet stated financial and non-financial goals.
From emerging to advanced - tips for advancement
Increasing maturity in your procurement organization doesn’t happen overnight. Focusing on specific areas of improvement can make the transformation much more rewarding.
With that being said, here are 6 areas you can move the needle:
Spend cleansing is the first step
Organizations with clear spend visibility use the information and insights to make more informed business decisions.
Lower-maturity organizations often struggle to make sense of their spending, usually because of poor data quality. By implementing your own spend cleansing program or working with a partner like Sievo, you can improve visibility into your spend.
Widen your range of saving methods
In most organizations, procurement teams prioritize cost reduction as their top goal. However, the approach to achieving savings can vary based on the level of data maturity.
In low-maturity organizations, savings mostly come through traditional tendering, negotiation, or bulk purchasing methods. With increased maturity, savings methods can come more from a holistic perspective, such as leveraging cross business unit volumes.
Optimize your procurement cycle
Optimizing procurement cycle times can help organizations become more mature and efficient. A streamlined process reduces administrative errors, shortens turnaround time, and lightens workloads. This enables procurement teams to do more with their time and resources, resulting in improved ROI.
Mature organizations utilize Procure-to-Pay (P2P) solutions to automate routine tasks, including order processing, and supplier payments.
Capture strategic sourcing opportunities
Strategic sourcing relies extensively on data like historical spend and market intelligence to segment suppliers by category and identify sourcing opportunities. With high data maturity, you will continually tweak your segmentation and category strategies. Mature teams seek opportunities via leveraging market data, such as indices, to track their organization's performance in relation to the overall market.
Supplier development starts with data
Suppliers touch every part of a business and are central to its success. Low-maturity organizations struggle to manage supplier data in contracts, purchase history, and performance, leading to rampant maverick spending or disrupted relationships. In contrast, mature organizations prioritize maintaining visibility into strategic supplier information to drive strategic decisions and foster strong partnerships. Mature procurement organizations track their suppliers' performance against agreed contracts.
Focus on core activities for more value
As procurement data maturity increases, so does the business value. Low-maturity organizations may struggle to move beyond manual, operational tasks, while best-in-class procurement collaborates across the organization. Alignment of people, processes, and technology is key to achieving greater value.
Your partner in data maturity
Moving up the procurement data maturity curve is a holistic process. You’ll need people, processes, and technology to achieve results.
Delayed or complex data should not dictate critical business decisions. Overcoming time constraints, incomplete processes, and a disorganized data landscape is possible with spend analysis tools.
At Sievo, we're all about helping you achieve peak data maturity. Picture this: more savings opportunities than ever before, less time spent grinding away at manual reporting, and smoother processes
But that's not all! You'll also get to keep a close eye on your supplier performance, with crystal-clear visibility into your spend. Plus, you'll have all the data you need to develop your strategic suppliers and take your procurement game to the next level. Are you ready to reach for the stars? Let us be your partner on the journey to procurement excellence.
Book a demo to discuss how we can help you increase procurement data maturity.
Header photo credit: Will van Wingerden