Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Procurement Analytics — 8 Things Every Procurement Manager Should Track

Key takeaways

  • Procurement analytics leverages data analysis techniques on procurement information to uncover trends, identify cost-saving opportunities, and optimize sourcing strategies.
  • It helps category management, contract handling, strategic sourcing, and procure-to-pay.
  • In contrast to traditional methods, procurement analytics now depends on AI and other software tools.

For the professional procurement manager, procurement analytics is a very important process that always seems taken for granted.  Today, that will change.

In this article, you are going to learn more about the importance of procurement analytics. You will understand how the whole process works and how each of its metrics will define how your procurement process will fare.

After reading this article, you will understand procurement analytics metrics, how to track procurement, and the different generations of procurement programs.

I created a free, downloadable Excel template for procurement professionals. This spreadsheet will help you analyze data to gain more insights regarding your procurement process. I also made a video tutorial, together with a PowerPoint presentation, explaining how to use the template.

Procurement Analytics– What is it?

Procurement analytics is the process of collecting and analyzing procurement data to aid important business decision-making.

It is also a process that gives you and your office important insights into the whole procurement process.

There are many forms of procurement analytics available; some may range from historical data from actual purchases while others are advanced programs that can predict and create budgets for future purchases.

In the past, procurement analytics meant documents upon documents of data, usually printed out in Microsoft Excel and they all bring in reports of past purchases done by the company in the past.

The newer form of procurement analytics is powered by AI that has automated procurement analytics that can combine many data sources.

What is Procurement Data?

Procurement data is defined as information regarding the goods or services procured by the company. Procurement data have two sources which are the following:

1. Internal data 

This data is hosted within corporate applications which include supplier data, transactional data, and data from the general ledger or other financial records of the company. 

Other examples of internal data include:

2. External data

From the word itself, these are data sources that come from outside of the company’s financial databases. This may include public systems such as the information of your suppliers and prices of commodities. 

Other examples of external data include:

  • Market reports
  • Bank information
  • Public financial statements
  • External analytics databases

Procurement Analytics – Why is it Important?

When you have multi-billion companies that invest in procurement spend analytics with millions of dollars, then you know that the process is serious business.

A procurement manager can sort and recognize data that is important for his/her company’s growth. Data such as supplier costs, analysis on past and present spending, and even forecasts for future procurements are a really big help for creating a smooth procurement process for the future. 

Here are other important reasons why procurement analytics is important:

  • Analytics help in contract management – Analytics provide the procurement manager with information on contracts that need renewal. Many procurement analytics tools help remind you what contracts need renewal and what contracts need ending. 
  • Analytics help in category management – Imagine having to go through each supply and then having to check each for inventory purposes. Procurement analytics can help in category management the software can categorize all supplies and information so that you or your category manager can check data with ease.
  • Analytics help in strategic sourcing – If you need to source for a new supplier, there are new procurement analytics tools that can help you with that. Because analytics data are stored online, the program itself can run a search for potential new suppliers for your company. Once you’ve picked a supplier, the analytics can also provide you with invaluable data, such as pricing, supply quality, and others.
  • Analytics help in the procure-to-pay system – On the transactional side of procurement, analytics can track how much each procurement spends. procurement management measures purchase order cycles and receipts. The tool can also help the procurement manager come up with better payment terms. 

Other uses also include checking payment accuracy, identifying mistaken payments, and reducing procurement fraud.

Types of Procurement Analytics

1. Diagnostic Analytics

This procurement data is analyzed to know why something has happened in the past.

2. Descriptive Analytics

This data describes what has happened in the past. 

3. Predictive Analytics

This is where trends and patterns in data are used to forecast the future performance of procurement

4. Prescriptive Analytics

This analytics shows actionable insights and possible future procurement performance scenarios. It can help you define specific steps to achieve purchasing goals and mitigate risks and disruptions.

Examples of Procurement Analytics

1. Spend analytics

Spend analytics is the analysis of procurement spending data taken from internal or external sources which include:

    • Invoice analytics – Analysis of invoice data and payment cycles from internal or external data sources.
    • Purchase order analytics  – The analysis of purchase orders, maverick spend, and purchase order cycle times.
    • Payment term analytics – Analytics on working capital improvement opportunities.

2. Supplier Analytics

Supplier analytics is the analysis and comparison of individual suppliers’ performance, analysis of supplier risks, analysis of sustainability, and analysis of supplier base. 

3. Contract analytics

Contract analytics is the analysis of suppliers’ contracts and their meta-data which include the payment terms and expiration dates. 

4. Spend forecasting

Spend forecasting is the analysis of future procurement spending data and its impact on profitability. 

5. Market benchmarking 

This analysis evaluates the risks and discovers opportunities by benchmarking your purchase prices against the market price development. 

Procurement Performance Analytics– How to Track Procurement

Before we talk about tracking procurement, it is only right that we start talking about the different generations of procurement analysis tools that are currently being used. By recognizing these tools, the procurement manager is also able to identify how to use each tool and when to use these tools.

  • Generation 1 (1990-2000) – These are procurement performance analytics done in Microsoft excel by business analysts and/or consultants. It largely focuses on past procurement spend analysis. While crude and often has less information, it is still reliable than simply counting fingers and basing each purchase order on memory.
  • Generation 2 (2000-2010) – These are procurement analysis software often installed on a desktop computer. Often paid for as legitimate software and with a license, procurement data is often stored inside an in-house data center or the company firewall. Often used by small or middle-sized businesses.
  • Generation 3 (2010-2015) – Browser-based analysis software often used and bought by start-ups. These are the type of tools that use analytics dashboards to provide business intelligence level visualizations and usability.
  • Generation 4 (2015-present) – The future of procurement performance analytics, this AI-driven software is often automated and combines many data sources. Sometimes used by start-ups to project future procurement insights.

Once we’ve already determined the different procurement performance analytics tools that one can use, then it’s time we talk about the actual process. 

How do you Track Procurement?

First, you’ll need to gain an understanding of how your procurement analytics tool works. It also depends on what type of company you have. While there are fewer companies that employ Generation 1 tools, the majority of middle-sized to enterprise-level companies often rely on Generation 2 or Generation 3 tools.

If you are working for a start-up company, then chances are, you will be working with a Generation 3 or Generation 4 analytics tool.

Once you’re familiar with your analytics tool, here are the three important steps used by the tool for tracking procurement:

  • Step 1 – Data Extraction – This is where your software shines. All data are extracted from all possible sources and are consolidated into one central database. Once extracted, all data is then enriched and cleaned. Simply put, data extraction is where all unneeded or irrelevant data are purged from the system. 
  • Step 2 – Data Cleansing, enrichment, and categorization – Once data extraction is done, the data is then classified into defined categories. This is because the software needs each data categorized to speed up its analysis. The process also combines all purchasing transactions into a single taxonomy so customers can gain visibility on their global spending.
  • Step 3 – Reporting and analysis – Once step 2 is done, data is finally ready for analysis. Procurement spends analysis gives you the needed spend visibility to deliver clear analysis for the user to spot smarter sourcing solutions, faster identification of business opportunities, and full control of your company’s spending.

Once data is analyzed and ready, it’s time for some human intervention.

Yes, despite having a multi-million software tool at your disposal, the procurement manager has to do the final check of data through procurement KPIs and metrics. Together with the analyzed data, you can check it with the following procurement metrics:

1. Key figures (Cost of Goods, Volume, etc)

Every analysis starts with the basics, so does the forming of a clear Procurement Plan. Total Cogs of Goods Sold (COGS) is the cumulative cost of all spend purchases. Make sure you take a decision whether to take or not take into account all cost that are incurred during the procurement phase and include all direct and indirect costs of a product or system. It’s not limited to just the purchase price but includes transaction fees, warehousing, and other incidental costs. Volume is the total amount of pieces that you are buying. If needed, make a clear distinction between cost of goods sold & volume bought against regular and promotional prices.

2. Spend under management

Spend under management is the total amount of spend that is actively managed by you as a procurement manager. This figure can include every product group, category, or supplier that you are working with, or can be divided into separate metrics that represent a specific region or category. Spend under management is an important metric for a procurement organization because it reflects maturity and controls overspending. For example: “as a procurement manager, I have increased my span of control over my spend from 70% to 80% over the past six months.”

3. Value chain analysis

A value chain is a concept describing the full chain of your business’s activities in the creation of a product or service — from the initial reception of materials all the way through its delivery to market, and everything in between. The value chain concept was first described in 1985 by Michael Porter, in his book Competitive Advantage: Creating and Sustaining Superior Performance. The value chain framework helps organizations understand and evaluate sources of positive and negative cost efficiency. Conducting a value chain analysis can help you to diagnose points of ineffectiveness for corrective action, understand linkages and dependencies between different activities and areas in your business and create a cost advantage over competitors.

4. Cost price breakdown

The cost price breakdown is the process of identifying the individual elements that comprise the total cost of your bought goods or services. It assigns a specific value to each element. Alternately, the value of the individual elements are expressed as a percentage of the total cost. A good cost breakdown structure provides insight on overspend, or underspend, against your original plan. Having a good structure makes it straightforward to understand deviations. When you see a deviation from the plan within a cost category early it is easier to make the right decisions for improvement

5. Number of suppliers

The number of suppliers tells you how many distinct suppliers are being used in your procurement organization, or in a specific category. Reducing the number of overlapping suppliers in a category can result in efficiencies or cost savings. Increasing the number of suppliers in key categories may be advantageous to reduce supply risk.

6. Cost Savings

Cost savings is measured by the cumulative amount of savings gained. You could break them down per category and/or supplier for focused measurement. They are followed over a time period to see how cost-saving targets are met. Cost savings could be achieved through aggregating spend, taking out longer-term contracts or introducing more competition, ordering in larger quantities, standardizing and rationalizing the spend, or using combinations of these different levers.

7. Payment terms

Average payment terms measure the average time (in days) invoices are paid by, calculated using every single instance of payment term information. Improving payment terms among suppliers is a perfect way of improving your company’s working capital. While the improvement in working capital will not be reflected in financial statements, you can calculate savings based on proxies such as the cost of borrowing. For example: by increasing average payment terms from 0 to 45 days across your supplier you are able to save 20.000 dollars in interest charges.

8. Contract coverage

Contract coverage measures the amount of spend that is covered by a contract. Increasing the amount of spend that is covered by contracts (or procurement approved purchase orders) can result in savings, while also reducing compliance risk.

9. Exchange rate

This only applies if you buy and sell goods or services outside of your own country. Exchange rate exposure measures the changes currency fluctuations and conversions have on the overall spend. The long-term impact of exchange rates can be measured and isolated from realized savings measurement. For example: Over the last financial term, the procurement team’s contribution of €3m euro spend reduction was offset by an increase of €900K euro costs from the increasing value of the US dollar.

10. Supplier Rating

The unhappier you are with the performance of your supplier, the higher the need to reduce dependency. Supplier accountability measures suppliers’ performance and how they are responsible for handling deliveries, quality issues, errors, and claims. The goal of vendor accountability is to ensure that the overall best product or service is delivered, and the development of more strategic supplier relationships.

And that’s a wrap on procurement analytics! In this article, you have learned about the impact that your organization’s data has on your deals. First, you discovered some of the most important ways to look at and use the data of your own company to your advantage. Finally, you learned about the most common analytics that will likely impact the outcome of your deals.

1st Procurement Expert’s Advice on Procurement Analytics

For this article, we asked a seasoned procurement professional to share his insights regarding procurement analytics.

Sjoerd Goedhart
Owner, Goedhart Interim Management & Consultancy

LinkedIn Profile: https://www.linkedin.com/in/sjoerdgoedhart/

1. Can you share a personal example of procurement analytics? What can readers learn from this?

“In my role as a procurement manager, we did extensive supplier and contract analytics, and the outcome of this was used in every meeting with a supplier. To evaluate the existing business and KPIs and benchmark this vs other suppliers, but also during the negotiation process of a new contract.”

Follow-up Question: Did you receive any feedback from suppliers on your data-driven approach during meetings and negotiations, and did it lead to any adjustments or adaptations in your analytics process?

“Feedback on the data-driven approach is often received negatively when discussing defects. However, if we accept this feedback for a moment, what does it entail? It means there are no adaptations in the process. You have to follow the process as it is, and that’s it.” 

2. What should readers know about procurement analytics?

“Without good procurement analysis, no good deal will be concluded. Procurement analytics are a crucial part of a procurement department to achieve a good result in a deal and are the starting point of every negotiation in procurement management and all the responsibilities of a procurement department.”

Follow-up Question: In a field that involves data analysis and relationship management, how do you balance analytics and supplier relationships during negotiations?

“Certainly, they converge in a negotiation, but to me, they are distinct concepts. Data and analytics are essential for a fact-based negotiation or for monitoring supplier performance. If a supplier adopts this approach, it enhances the relationship. Conversely, if the supplier does not align with your operational standards as a customer, it signals a mismatch and can impact the relationship. While the relationship holds significance, performance remains paramount.”

3. What is the biggest misconception about procurement analytics? What do most people get wrong about this topic?

“Good purchasing analytics are the basis and a condition/mandatory for achieving a good procurement vision and strategy.”

4. How can procurement analytics drive better decision-making and cost savings in organizations?

“Existing data can be analyzed using analytics. The results of this analysis should be the basis for decision-making or the determination of negotiation strategies. With the right analysis, you can improve decision-making with the aim of a better strategy and results.”

Follow-up Question: How can insights obtained from procurement analytics be effectively communicated and integrated into the decision-making processes of various stakeholders across the organization?

“It may be beneficial to include stakeholder management as part of the formal integration process. It is important to note that there are both formal and informal ways of involving stakeholders, with the latter utilizing insights and analytics. However, when sharing information with stakeholders, it’s crucial to avoid inviting them to participate in the decision-making process. Sometimes sharing information can be misconstrued as an invitation to discuss or provide opinions. Stakeholder management is more about informing stakeholders without engaging in discussions with them. One should be aware that data can have unintended effects that may require further discussion or explanation with stakeholders.”

5. What are the latest trends and tools in procurement analytics, and how are they shaping the future of procurement?

“The last and most important trend is AI. This provides many opportunities for new analyses, but also more advanced analyses. Companies that have not (yet) hidden AI in their purchasing policy will lag behind Simultaneous that have implemented it.”

6. How can procurement analytics help ease the work of procurement professionals?

“Procurement analytics enables managers to identify savings opportunities, prioritize suppliers, mitigate supply chain risks, manage sustainability performance, develop supplier relationships, and drive innovation.”

7. Are there any tools for procurement analytics that you can recommend to procurement professionals?

“It is recommended for procurement professionals to start using AI, even if they don’t have a specific procurement tool yet.”

2nd Procurement Expert’s Advice on Procurement Analytics

For this article, we asked another experienced procurement expert to share her insights to help answer common questions about procurement analytics.

Faiza Iftikhar
Co-Founder, Procura

LinkedIn Profile: linkedin.com/in/faiza-iftikhar

1. Can you give us an example of how procurement analytics work and tips on how to make it better?

“Procurement analytics involves data analysis to improve procurement processes. For example, analyzing past purchasing data can lead to cost-saving opportunities. To make it better:”

  • Ensure data quality.
  • Use advanced tools.
  • Employ predictive analytics.
  • Collaborate with suppliers.
  • Track KPIs.
  • Benchmark against industry standards.
  • Continuously adapt strategies for improvement.

2. What do most procurement professionals get wrong about procurement analytics?

“Most procurement professionals overlook the critical importance of data quality in procurement analytics, often assuming that having data is enough. However, accurate and clean data is the essential foundation for reliable insights.”

3. What is the most important lesson that you learned in procurement analytics?

“One of the most important lessons in procurement analytics is that data quality is paramount. Without accurate, complete, and well-structured data, the results and insights derived from analytics are unreliable and can lead to poor decision-making.”


In conclusion, this article sheds light on the often-overlooked significance of procurement analytics for professional procurement managers. It delves into the process, metrics, and generations of procurement programs, emphasizing the pivotal role analytics play in informed decision-making.

After reading, you’ll grasp the essence of procurement data, its sources, and the vital reasons procurement analytics is crucial for effective contract management, category management, strategic sourcing, and the procure-to-pay system.

The article navigates through different types of procurement analytics, illustrating their purposes, and concludes by providing insights into tracking procurement with various generations of analytics tools and essential metrics like spend under management, cost savings, supplier rating, and more.

Frequentlyasked questions

What is procurement analytics?

Procurement analytics is the processing of collecting and analyzing data that is needed for important decision-making.

How to set up procurement analytics?

A business needs an automated procurement system to set up its procurement process. It is an AI program created to study and analyze data from different sources.

What are important procurement metrics?

These are metrics followed by the automated procurement system and the company in determining important procurement decisions.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics