Why Data is Important to the Future of Procurement, Part 2

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The Costs of Making Decisions Without Seeing the Full Picture

“­­­Data-driven decision-making” is quite the buzzphrase. And it has been since the early-2000s. 

But it’s a buzz-worthy for a good reason. Making decisions based on complete and accurate data makes a lot more sense than making decisions based on gut feeling, intuition, or tradition.

And yet, 58% of respondents to the 2020 BI & Analytics Survey say their companies base at least half of their business decisions on gut feelings rather than data. 

That’s a problem.

Poor decisions can have massive repercussions. And making decisions without a full view of the situation can lead to poor choices, especially in procurement.

Costs of Poor Decisions

The problem with relying on gut feelings instead of on data is that the gut usually only works when the situation is something you have previous experience with and when things haven’t changed.

Unfortunately, this world and the world of procurement are always in flux. Your existing suppliers may alter their practices and change staff or prices, and political shifts or natural disasters can have ripple effects. Without a broader view, you can’t always see what’s really happening.

When you can’t see the whole picture, you may jump to conclusions, let your biases influence your decision, and open the door to unnecessary risk. All of this can:

  • lead to higher costs,
  • create longer turnaround times, and
  • have negative effects on supplier and customer relationships.

Supplier data, for example, is one of the most integral collections of information for procurement functions. Without having a complete picture of a supplier, you may inadvertently contract with someone who has a reputation for low quality, who sources from risky Tier 2 suppliers, or who has a track record—even within your own organization—of delivering late.

Making decisions based only on which supplier has offered the lowest cost rather than on the entire picture surrounding a supplier or a project can often lead to higher costs and lower value. But, having the full picture and using supplier information, past performance data, current market pricing from a range of suppliers, and complete risk assessments means you’ll get the best value overall, even if the base cost may appear higher.

The Why Behind Poor Decisions

The main reasons so many companies make decisions without relying on data is that they either don’t have all the data they need or don’t trust the data they do have.

When it comes to procurement, 81% of supply chain leaders don’t trust the quality of their data.

Fortunately, there are ways to get accurate, trusted data quickly and easily. And rather than drastically increase your costs, it will pay for itself almost immediately. Because that’s what good data does—it enables you to make great decisions, and those decisions end up saving you money and increasing your revenue.

With Tealbook, you can get accurate supplier data in a way that integrates with your legacy systems seamlessly, effectively giving you a complete picture on which to base your decisions. Contact us for a free demo of how Tealbook can help you optimize your decision-making and avoid costly decisions.

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