Digital disruption has arrived in procurement

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Helping Businesses to Perform Better

Procurement teams have always been measured mainly on their ability to contain costs and to squeeze out savings wherever possible.  As digital technologies take hold in procurement, teams are finding themselves with fewer tactical, labour-intensive tasks and more time to focus on strategic activities.

Automation of routine activities is helping to drive down costs, improve efficiencies and promote collaboration with suppliers.  Technology solutions that are designed to streamline procurement tasks provide opportunities to link buyers and suppliers in real time.

How can technology help procurement?
Digital networks allow procurement leaders to foster collaboration, spur innovation, and drive growth.  According to the World Economic Forum (WEF) 2018 Report on the future of jobs, four specific technological advances will change our working lives in the next five years:

  • ubiquitous high-speed mobile internet
  • artificial intelligence (AI)
  • widespread adoption of big data analytics
  • cloud technology

By far the leading issue that companies intend to address by 2022 is user and entity big data analytics. See Figure 2 below.

Digital disruption 

Big data analytics and the cloud
‘Big data’ is a technology buzzword that refers to the plethora of data that supply chain professionals have to deal with, not all of it is useful in its raw form. Nowhere is managing big data more relevant than in spend analysis where the data is gathered from multiple sources, in different time frames and in varying levels of detail.  Detailed analyses can tell us not only what was purchased, and at what price, where and how but also why.

Source: Report on the Future of Jobs.  WEF 2018

A major aim of creating reliable and credible information is to equip stakeholders across the business with real-time insights and usable data for effective decision-making. Quality information promotes better engagement with suppliers and can open up new lines of communications and collaboration opportunities.

Businesses are increasingly implementing low-cost analysis tools to assist with predicting outcomes or identifying scenarios.  Gartner defines predictive analytics as

“the analysis of structured and unstructured data using statistics, descriptive and predictive data mining, simulation and optimization to produce insights that query and reporting tools are unlikely to discover”

Their opinion is that predictive analytics take business intelligence to new levels promoting both productivity and growth.  Gartner estimates that companies who manage big data and use predictive analytics effectively can expect to grow by 20% more than their peers.

Digital procurement solutions are providing access to previously unavailable data, or bringing order to huge chunks of unstructured data. Strategic sourcing is becoming more predictive, transactional procurement is becoming more automated, and supplier relationship management is becoming more proactive.

As cloud-based applications increasingly take on many day-to-day tactical activities, they free up procurement leaders to focus on strategic priorities, such as strengthening supplier relationships and safeguarding the organization from supply risks.

Where to start
One of the biggest challenges with traditional sourcing software solutions in the past was that they were too expensive, too complex and required a lot of training which deterred potential users.  This has changed in the last few years.  A wide range of easy-to-use tools can now be applied along the entire procurement source-to-pay process to speed up activities and automate tedious manual processes.  Tender processes that used to take up to three months can be completed in one-third of the time.  Cost-effective online solutions are also available to provide support for contract negotiations and on-going supplier management, traditionally areas where human intervention is most required.

Many large and mid-size companies still don’t have complete, clean and usable spend data nor the facility to access to online catalogues from their suppliers.

What happens next
Digital technologies including cryptocurrency, blockchain, internet of things (IoT), artificial intelligence (AI), and robotic process automation (RPA) will continue to make their presence felt in procurement and supply chain. A 2018 survey conducted by Forrester Research revealed that 60% of enterprise organizations and 54% of mid-size organizations are making accelerating their digital business a top priority.

The power of mobile
Adoption of mobile technology in procurement is still in its infancy.  Procurement teams seem to be reluctant to embrace it fully and are often concerned about data security.  However, it has vast communication opportunities.  For example, whenever there is a process or policy change, everyone can be notified instantly.  End users now expect the same experience and intuitive interfaces from their procurement tools as those they get on their day-to-day use of mobile applications (apps).  They now expect to get visual supplier catalogues and simple payment processes just like those they experience with online shopping.

It’s important that organizations start their digital procurement journey now to ensure that they do not lose any competitive advantage. Digital transformation will continue to change how procurement organizations function and how they are structured.  It is not only a technological shift but an organizational change where technology, business and people meet.

Policies and procedures may need to change as the operating model evolves to ensure that everyone understands their new role and responsibilities.

Caliba provides a range of specialist procurement services, helping business perform better using the most effective solutions for their needs. Contact for more information.

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