Digitalisation and Procurement: Where are the real opportunities?

My goals
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2019-06-07
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Four years ago, for the first time I heard some people talking about cognitive procurement. I was coaching two talented people from a Telco company who were envisioning future digital solutions for their procurement team. Since that time, I have seen a continuous increase in attention and enthusiasm for the topic of digitalisation. I have also heard about many implementation challenges that reminded me of a previous one about information systems implementation.

Today, in the context of this growing attention for digital procurement opportunities, I would like to raise a key question: Considering digitalisation, where are the real opportunities for Procurement?

When I use the word digitalisation here, I consider the broadest set of technologies and business model changes currently undergoing development. They will probably be considered by future historians and economists as general-purpose technology. They are already proliferating across all economic sectors. Their impact still needs to be visible on aggregated economic measures such as productivity to gain this title.

The following pictures map the overlap around three ambitions: (1) what companies are trying to achieve through digital technologies; (2) What are the supplier ambitions are related to digitalisation and (3) What purchasing expects to achieve by using digital solutions. And not surprisingly, the three circles interact. Based on this representation I have identified three “digital zones” that will be briefly described underneath. My conclusion is quite simple. The most important opportunities for procurement do not lie in digitalising its own process, but in supporting the business with its digital transformation, by harnessing the right supplier capabilities that can make a difference for the company.

This does not mean that procurement teams should not pay attention to their own digitalisation. They clearly need it. But tomorrow this will be simply considered “as a necessary evil” like most IT solutions in the past. And what procurement should be remembered for, is its contribution to the company’s digital transformation.

 

The following suggestions for each zone in terms of initiatives are not exhaustive and the whole set of supporting technology is not presented either. The goal is to be illustrate the main message.

Zone A is about Digital Tooling with Purchasing digitalising its own activities for its own benefit. This is what I call “Tomorrow’s necessary evil”, you need to do it, you will gain some benefits, but you will not be remembered for this. It will quickly be taken for granted. Zone A can include taking initiatives related to implementing:

  • Process automation starting with simple repetitive tasks and growing in complexity
  • Demand forecasting powered by machine learning
  • Real time spend management thanks to the mining of unstructured data sets
  • Predictive pricing & predictive costing tools to support decision making processes
  • Smart contract solutions and other automated monitoring activities after a contract is signed
  • Diverse audits and compliance activities that can be supported by augmented reality and other digital tools
  • And more…

Zone B is the sweet spot. This is where digital tooling is bringing value to the business. This is where you see some strong synergies between procurement and its stakeholders, or with the suppliers or even amongst all three. This is a great area as value is created for all sides. Zone B can include taking initiatives related to implementing:

  • Simplified user experience for requesters
  • Real time performance monitoring tools
  • Real time data sharing across the supply chain
  • Intelligent risk management using fragmented data sets
  • Use of external data sources to optimise and enrich decision making processes
  • Enhanced compliance systems
  • Cybersecurity solutions across the supply chain and the extended asset base.
  • Alternative sourcing and operational models (3D printing)
  • Tracking solutions for goods or packaging
  • IoT powered circular economy
  • Platforms and configurators
  • Collaboration and idea management solutions
  • And more…

Zone C is where I would like to see more focus and activity. I have been documenting some case studies in this zone already. Nevertheless, we need to see more ambition from the procurement teams. This zone contains all projects where procurement supports the digital transformation of the business by harnessing supplier capabilities that will make a difference. Zone C can include initiatives related to:

  • Empowering the development of new digitally enabled revenue streams through supplier collaboration
  • Supporting 360° Market Intelligence right from the early stages of the innovation process
  • Sourcing data sets for digital business solutions
  • Managing the integration of suppliers in the development of digital solutions
  • Supporting and facilitating the adoption and integration of external technology and solutions across all key business processes
  • Sourcing of software, experts and digital tools
  • Enabling access to start-ups and innovation partners for critical business projects
  • And more….

 

So, balance your effort across Zone A, Zone B and Zone C. All of them will deliver benefits. But please never ignore zone C. This is where procurement will show its real worth!

Join the discussion! Share your views on my post on LinkedIn!

Hervé Legenvre, PhD

EIPM Value Creation Observatory Director