By Pedro Paulo, CEO, Gatewit

Big data has been big news for businesses for some time now and, with analyst reports forecasting that social media and the Internet of Things will lead to a 40% growth in the amount of data generated globally each year, it’s a phenomenon that can’t easily be ignored.

Harnessing and analysing this wealth of information could lead to predicted savings of almost £200 billion in efficiencies for the US healthcare industry according to these reports, while government administrators in Europe could save £100 billion. Retailers using big data to its full extent could see their margins increase by up to 60%.

One way in which a business can enjoy the cost savings and efficiencies offered by big data is by applying it to its procurement function.

Sophisticated analytics can substantially improve decision-making within the procurement department, minimising risks, and unearthing valuable hidden insights.

Greater insight into their own organisation’s end-user and customer behaviour will allow procurement teams to more accurately forecast the levels of demand for a particular product or service, thus improving the efficiency of the purchasing process by avoiding purchasing excess stock.

Conversely, analysis of a supplier’s past behaviour will allow the procurement team to better anticipate responses to any given negotiation strategy, enabling them to tailor that strategy accordingly.

At the same time, the procurement team would have a more accurate idea of a particular supplier’s capability and optimum capacity in delivering a desired outcome. Knowing this would allow for more effective and efficient planning, reducing the chance of paying for over-capacity.

Similarly, savings could be made by identifying any specific costs that could be removed from a given situation whilst still allowing the desired outcome to be delivered.

Further efficiencies could be achieved by analysing all available pertinent data to predict the ideal period to solicit the best bid, the optimum term of a contract, the most appropriate budget and lifecycle costs, and the most advantageous time to “go to market”.

In addition, exposure can be minimised by using big data to predict risk profiles and implement the appropriate mitigation strategies wherever necessary.

A business will often measure the success of its procurement department against KPIs such as its rate of spend, and the percentage of identified and negotiated savings that are actually realised and implemented.

The collection, analysis, and subsequent interpretation of the data that flows through a business is a significant means of meeting these targets; improving efficiencies, saving costs, and creating a more effective, insightful procurement function.