©2018 by Jean-Louis Moreau

Procurement Consultant - Interim Executive - Speaker
Digital Transformation of Procurement

When it comes to digital transformation, Procurement is lagging compared to other functions. The advent of technology has already transformed the way we source goods and services, but the potential is mostly intact.

Such tools as advanced analytics, big data, robotic process automation (RPA), cognitive procurement, cloud-based applications, and mobile computing, to name a few are all expected to experience significant acceleration in adoption by companies with annual revenue of $1 billion or more.

Although most Procurement organizations believe that digital transformation will fundamentally change the way they deliver services over the next future, only a third of them have implemented a digital strategy. The vast majority has not even elaborated a technology roadmap and planned for adequate skills and resources. 

Budget may be an issue, but it is mostly the lack of awareness of technology and its potential applications to Procurement that is impairing adoption. 

A 2017 Hackett Group* study found that focusing on four main areas may make digital transformation and the associated competitive advantage easier for those companies: 

1- Improving stakeholder experience: Beyond cost savings and efficiency gains, improving the stakeholder experience is a way to create additional value. Building stakeholder experience across multiple channels and personalizing it, measuring value beyond savings, and segmenting the stakeholder community to find the right service level mix are three key enablers to succeed in this area.

2 - Building a procurement-as-a-service portfolio: The creation of an ‘as-a-service’ portfolio that offers better reactivity and streamlines the overall buying experience, aligns procurement more closely with the needs of stakeholders. Establishing purchase-to-pay and sourcing offerings gives stakeholders more options and increases procurement’s value to the wider company. Rebranding Procurementto increase awareness and influence, combined with the optimized use of centers of excellence and global placement of resources will strengthen value further. 

3 - Laying the foundation of analytical insight: As procurement evolves from a mere administrative function to a true business partner, a key enabler is proficiency with “big data,” supported by advanced analytics to efficiently extract relevant information in massive volumes of structured and unstructured data from multiple sources. To deliver this superior market intelligence and mitigate risk through predictive forecasting, Procurement organizations will have to invest is specific training.

4 - Accelerate transformation with technology: Technology is by definition at the heart of digital transformation. The Hackett Group suggests to mix niche and suite software solutions that accounts for the emergence of newer and more sophisticated technological tools. Being an example and improving technology sourcing for the company as a whole is also part of a successful transformation.

The path to digital transformation is clear and some organizations are up-to-date. However, most Procurement organizations that are still lagging will have to optimize their budget, expand their role in the company, change the perception they convey among stakeholders and adapt to the evolving technological world in order to catch up.

 

*The Hackett Group's 2017 Procurement Key Issues research is “The CPO Agenda: Keeping Pace With and Enabling Enterprise-Level Digital Transformation,”