I’m about to throw you a curveball…
How does Procurement Analytics relate to the baseball-themed movie, Moneyball?
Well, if you haven’t seen the movie before, let’s recap the story. Brad Pitt stars as Billy Beane, General Manager for Oakland Athletics (A’s). Beane is faced with the challenge of assembling a winning team, but he is handicapped with the lowest salary constraint in baseball. If the Oakland A’s ever wanted to win the World Series, Beane knew he needed to find a competitive advantage.
Eventually, Beane meets and later hires Peter Brand, a recent Yale grad who evaluates players using Bill James’ statistical approach. After initial hesitation, Beane breaks away from the traditional recruiting methods and uses James’ approach to analyze and place value on the players he picks for the team. Rather than relying on the scouts’ experience and intuition, he selects players based almost exclusively on their on base percentage. As a result, he assembled a team of undervalued players with far more potential than the A’s constrained finances would otherwise support.
Early in the season, the A’s play poorly as a team, leading critics to dismiss the new method as a failure. But eventually the team’s record begins to improve and the A’s win twenty consecutive games, setting the American League record!
So, you might ask, “How can I use this approach in procurement?”
First, regardless of your company size, you want a competitive advantage in your industry. Obviously, a smaller company has stricter resource constraints than a larger corporation, but all organizations need insight into how they are spending their money while effectively utilizing their resources. How do you know where you are spending your money without gathering data? Using Procurement Analytics, you can gain visibility into your entire sourcing and spend management spectrum. You can mitigate risk, gain market knowledge, use benchmarking data, and better forecast for future success.
Second, you need to break free from traditional practices and implement new processes and solutions to drive change and make an impact in your organization. Stop relying on the past and living by the statement, “Because we’ve always done it that way…” Just as Beane used statistical data to analyze and place value on the players, you need data to analyze and place value on your suppliers. Beane was able to form a winning team by using Bill James’ statistical approach. Use SPM data to ensure you’re only working with top-performing suppliers that strive to outperform from both a cost and quality perspective.
Third, by using Procurement Analytics, you will have the visibility required to justify your business decisions. You will be making wise decisions about how, when, and who to spend money with to better allocate your company’s valuable resources. Not only did our client AOL do exactly that, but they were able to achieve incredible results such as working with nearly 9 NEW business units, performing 104 projects worth $204M in spend, and identified $43M in savings back in AOL’s pocket. You can listen to their success story here.
Are you ready to set a few records of your own? Click here to learn tips on how you can empower your CPO with Business Intelligence using Procurement Analytics.