McKinsey Models Procurement in Data-Driven World
The following is an excerpt from the book Procurement 20/20: Supply Entrepreneurship in a Changing World by a quartet of McKinsey & Company consultants—Peter Spiller, Nicolas Reinecke, Drew Ungerman and Henrique Teixera. Peter Spiller is an Expert Principal in McKinsey's Frankfurt office and leader of the firm's European, Middle East, and Africa Purchasing and Supply Management practice. Nicolas Reinecke Reinecke is an Expert Principal in McKinsey's Hamburg office.
Drew Ungerman is a Director in McKinsey's Dallas office and a leader of the firm's Americas Purchasing and Supply Management practice. Henrique Teixeira is an Expert Principal in McKinsey's São Paulo office. The book chronicles the evolution of the procurement function in business today. Companies are discovering procurement as a productivity driver. Today, with external spend at 85 percent of the total cost base of the average Fortune 500 company, Chief Procurement Officers and their organizations are more important than ever. The following except is taken from Chapter 5—Big Data and the Global Grid: Procurement's New Role in Data-Driven Decision making.
THE IMPORTANCE OF THE PROCUREMENT FUNCTION IN A WORLD OF DATA-DRIVEN DECISION-MAKING
For businesses, big data and the global grid will have profound implications: they are enabling companies both to generate new insights and to collaborate at scale—which in turn allows them to raise data-driven decision making to a new level.
NEW INSIGHTS
Huge amounts of data are being stored and made available in electronic format. Examples are proliferating: the geospatial and geoeconomic data in Google Maps and Google Earth; the extensive profiles of millions of companies, both public and private, maintained by information services such as Dun & Bradstreet; and the consumer data aggregated by firms such as Nielsen. What's more, vast amounts of personal information are being posted and digitized on social media platforms.
While much of this information was not intended for public dissemination, it too is snared in the web of big data and can be aggregated for commercial purposes. The enormous breadth, depth, and raw amount of data sets like these create opportunities to analyze multiple, dynamic variables. The ability to translate the trove of information into actionable insights will increasingly be a source of competitive advantage.
COLLABORATION AT SCALE
Information technology (IT)-enabled networking is rapidly increasing the speed of information flows, enabling the exchange of information around the globe at an ever-increasing pace.
This has allowed companies to benefit from new levels of digital collaboration and cocreation within their networks, both internally and externally.
The possibilities for collaboration have increased as the cost of bandwidth has declined; meanwhile, the overall capacity has increased and the evolution of mobile devices and network availability has improved the ease of connectivity.
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