Procurement Goes Digital
Transforming procurement goes far beyond the four walls of the function as a significant portion of the process takes place in the business performing tasks like requisitioning, receiving and contract administration. Digital transformation will not only allow procurement organizations to be more effective, but it will improve the productivity of the broader business.
Digital is often used as the latest buzzword and no matter who you ask they have a different definition. Digital to me is not just another word for technology, digital creates a user experience where technology is in the background, and in the procurement context, guides the business user effortlessly to suppliers with the most favorable terms and incentivizes smart buying behaviors. It is the experience created for the user that matters most. Procurement in many companies is considered a back-office function focused on transactional activities and engaged by the business when a contract or purchase order needs to be established with a supplier. Procurement organizations that are able to transform themselves to become part of the front-office as strategic business partners are true catalysts for growth and enable bottom-line value creation to the business.
To do so they embrace digital as an enabler while partnering corporate functions with the front line operation of the business. Gone are the days of traditional procurement organizations that beat up suppliers to get the lowest price. Future procurement organizations are an enabler of the business strategy and shape the end to end value chain with a focus on the total cost and sustainable value. The promises of early eProcurement solutions in the late ’90s largely went unrealized as they were technology “shells” that became bloated with too many features making them complex and cumbersome. With the digital age upon us, the next generation of tools emphasize data, content, simplicity of use, and automation delivered through cloud-based platforms designed around the end user experience. Machine learning and predictive models can detect spending behaviors which can forecast demand, penetrating the supply chain at an optimal time. RPA, which has been around for years, is just now being widely adopted and augmented to enable not only scripted tasks but intelligent solution-driven automation.
Procurement professionals will evolve to trusted advisors and value engineers focused on enabling business strategy, mitigating supply chain risk and facilitating innovation
Traditional procurement processes, like sourcing execution, are being industrialized and delivered through as-a-service platforms that combine human and machine to deliver the best outcomes at the lowest total cost. Sensors on the manufacturing line will signal when a part is failing and in the background an order will be placed with a supplier offering the best terms in a dynamic marketplace. In this scenario, the algorithm will prioritize delivery terms as the highest priority to minimize the risk of downtime. Through a proactive versus reactive digitized process, millions of dollars can be saved by keeping the plant up and running.
For this to be realized, new skills are required for the retained procurement organization who must evolve the capabilities of their people and close the digital skills gap. Advanced analytics and modeling, technology savviness, ecosystem management, business partnering, and strategic planning will be essential. Through direct and constant collaboration with their business counterparts, procurement professionals will evolve to trusted advisors and value engineers focused on enabling business strategy, mitigating supply chain risk and facilitating innovation. It is imperative that procurement organizations adopt a culture that accepts that change is constant and apply an agile methodology. To go digital, there must be a willingness to experiment and fail fast with as many pilot driven engagements as needed. The pace of change will only get faster, and future procurement organizations must develop strong change management and execution muscles to ensure new capabilities stick with high degrees of user adoption.
If you are a procurement leader and you are not thinking about what Procurement 2.0 looks like for your organization, now is the time. With the digital era upon us, the opportunity has never been greater to shift from a transactional back-office function to a team of business leaders leveraging digital transformation to deliver sustainable value.