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Archive of the 'The Transformation Of Digital Procurement' page which was unfortunately deleted from the Supply Chain Digital website in mid 2020 and has now been republished by internet recovery program at Lolly Co.
Originally published 01 May 2017.
By SEAN GALEA-PACE - May 01, 2020, 12:07PM
How is the digital procurement landscape transforming? Let’s find out
The role of procurement is transforming.
There are a number of key reasons why companies are choosing to adopt a digital procurement approach. These are centered around increasing efficiency by automating repeatable tasks and achieving significant cost savings. Digital procurement helps with day-to-day decision making and allows real-time visibility into all areas of the supply chain.
Here are several companies that are embracing digital procurement and leveraging it into operations.
The multinational professional services company, Accenture, believes it shouldn’t be if companies choose digital procurement, but when. On Accenture’s website, it states: “The procurement organisation has largely been left behind in the digital revolution. This needs to change, fast.”
What makes an effective procurement strategy, according to Accenture?
Accenture’s three step change in business process digitisation
SelectHub is a technology management solution that centralises all processes through an easy-to-use, intelligent platform. Offering built-in best practices and activity tracking for procurement, IT and finance, means organisations can achieve more successful IT initiatives faster.
A roadmap to digital procurement, according to SelectHub
1. Gather data from inside and outside sources
With any successful digital procurement strategy, it is essential to embrace the latest trends to ensure that when a digital transformation is complete, a company isn’t behind the times. It is important to understand what problems are trying to be solved through digital transformation. Having an end goal or target in mind is vital.
2. Creating a vision of the future
Imagine the role of procurement in five years time. How does your organisation’s procurement strategy fit into that? Discussing a clear plan with procurement executives at every company is key to understand what technology is required to achieve success.
3. Implement the vision
Upon completing preparation, it is time to introduce the strategy. By setting achievable goals, it will allow momentum to be built. Organisations should create a timeline to ensure they are achieving targets in a timely manner.
Select Hub’s three tools for digitisation:
GEP empowers global companies to operate more efficiently and effectively, gain competitive advantage, boost profitability and maximise value.
Its unified approach to digital procurement transformation allows its clients to increasingly deploy the resources required to charge a high-performance digital procurement organisation. The company recognises the true value of digital procurement and through GEP SMART, offers an industry-leading cloud-native, unified source-to-pay platform.
What is the GEP SMART Platform?
The GEP SMART platform is the company’s own end-to-end procurement technology platform which can be easily integrated with leading ERP and F&A systems, and makes state-of-the-art capabilities available to procurement professionals.
It is a cloud-native, unified source-to-pay platform with comprehensive spend, sourcing and procurement functionality, which includes spend analysis, contract management, supplier management, procure-to-pay, savings project management and category management.
Through GEP SMART enterprise procurement teams can:
The management consulting company, Boston Consulting Group (BCG), believes that new technologies such as Big Data, artificial intelligence (AI) and advanced analytics provide a more defined degree of precision, allowing companies to better predict and mitigate quality failures more effectively than in the past.
BCG estimates that those technologies can “reduce procurement quality problems by as much as 60-70%”. It also believes that the digital procurement journey can produce significant results, such as achieving 5-10% cost savings as well as experiencing a 30-50% increase in efficiency.
BCG lists three key ways how digital can create value for procurement:
Bain’s report ‘Digital Procurement: The Benefits Go Far Beyond Efficiency’ explores how digital tools can enhance the efficiency and effectiveness of procurement, as well as playing a more strategic role in harnessing innovation and playing a significant part in an organisation’s digital approach.
Improving procurement efficiency and effectiveness
Procurement executives can play a more influential role in realising a company’s digital vision, says Bain. A digital-savvy procurement team can empower companies to partner faster with innovative suppliers, embrace new ways of working and lead change.
Digital procurement teams can allow companies to rethink their operating model, partnerships and talent and culture.
Enabling the company’s broader digital vision
Bain’s research reveals that 80% of procurement professionals believe they need to do more to take advantage of the latest digital tools. Bain believes that a good digital procurement strategy will allow for considerable cost savings to be achieved as well as freeing up capacity for more strategic activities.
Creating a procurement digital strategy and roadmap
In PwC’s report ‘Procurement 4.0: Are you ready for the digital revolution?’, the company provides a framework for adapting to the organisational changes that the modern day procurement approach requires.
There are six key areas to the Strategy & Procurement 4.0 framework.
The implementation of Procurement 4.0 will mean new value propositions developed, new business needs as well as the requirement to introduce data across functions and value chains.
In order to truly harness a digital first procurement strategy, it will require an agile mindset to reshape the procurement organisation and embrace new opportunities amidst the digital revolution.
The consulting giant, Deloitte, has observed the new capabilities that disruptive technologies can bring into digital procurement.
In its report,‘Digital Procurement: New Capabilities from Disruptive Technologies’, Deloitte found that an ever-increasing number of organisations are beginning to deploy several different types of core procurement technologies. These platforms are usually a combination between spend analytics, eSourcing, contract management and eProcurement.
Deloitte observed several key technologies that CPOs are beginning to introduce into operations in a bid to establish a competitive advantage. These are:
An agile approach
Deloitte believes that companies should operate with an agile and lean approach in order to adapt with ease to the latest trends in the industry. An agile approach can be effective for delivering digital projects. Deloitte recommends companies:
Start small - decide on one or two solutions to begin the digital journey and prioritise the projects based on impact, cost and speed of development.
Act fast - quickly validate the selection through the quick result and market the success to build momentum behind the journey.
Think big - always maintain an ambition to innovate and a drive to continuously improve.
The management consulting company, McKinsey, has offered an insight of what the future of procurement could look like. In its report, ‘Digital procurement: For lasting value, go broad and deep’, it finds: “Digitising procurement won’t do a company much good if its people don’t think it helps them get their work done. This means mapping out the details of how people involved in the procurement process work, tracing each step in their journeys that these procurement users follow in order to complete tasks.”
McKinsey also reveals that some of the biggest benefits could lie outside of the procurement organisation, such as from “suppliers that offer better terms once they are paid promptly and reliably.”
In total, McKinsey believes that the typical procurement transformation journey takes around 18-24 months, however, organisations may begin to see results much sooner than that. “We find that companies can begin achieving improvements after just three or four months, and can start building scale soon after.”
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