The last 10 years have seen rapid technology adoption heralding the digital era. It changed industries, markets, business models and even customer behavior and expectations. Digital technologies have disrupted how companies do business by making them more agile and dynamic. These technologies have been leveraged to collect, collate, and analyze data to drive strategic decisions and transform operations.
For organizations confronted with increasing global competition, price volatility and cost reduction pressures, a digital technology-focused procurement strategy becomes critical to business success. Such a strategy reimagines the supply chain to upgrade its role from tactical procurement to one that is value-driven and aligned to business goals. The demand is for an impactful procurement that effectively manages costs while unleashing the potential of the supply market to significantly improve business performance.
However, the challenge lies in changing traditional attitudes to introduce a technology-driven culture aimed at creating an integrated procurement approach. Technologies like automation, digital reporting, cognitive analytics and cloud make processes simpler. They provide evidence based options that allow quicker decisions by significantly increasing accuracy and efficiency in operations through artificial intelligence. This creates a more agile organization where both upstream and downstream procurement activities are supported by digital technologies.
As procurement caters to the entire organization, it has an excellent command over the demand for goods and services. The function also keeps a tab on movement of equipment and supplies from various channels. The data emerging from all these sources, when captured, analyzed and classified becomes a springboard for enabling transformation and value creation. In fact, today, Chief Procurement Officers are leveraging data for real-time updates on transactions and financial activities across the organization. They are also analyzing valuable customer data to improve management of transportation flows, sourcing, inventorying, warehousing, quality inspections, delivery and other aspects of the supply chain.
The biggest advantage of digital technology comes from its ability to optimize the supply chain performance by integrating data from customers, distributors, and suppliers in real-time. This not only reduces lead times and inventory costs, it significantly improves the supply chain and thereby increases customer experience. Another key advantage to data integration is supplier management. Big data analytics can crunch unlimited quantities of financial and external data to predict changes in risk ratings. This not only provides a holistic picture of the supplier-market-customer dynamics, but also predicts machine and product failures.
Early adopters of business intelligence and other cutting-edge technologies have moved away from traditional procurement operations to strategic sourcing. Digital technologies help procurement increase collaboration and engagement along the entire procurement value chain, from planning and sourcing to contract negotiations, order delivery, payment, and supplier management. Digitalizing the procurement processes involves digital requests for quotations, digital procurement, e-signature verification, and analysis of supplier finances and procurement risks. This definitely creates a smarter, more secure and efficient value chain.
There is no doubt that the combination of new technologies - from big data analytics to automation - is revolutionizing companies’ operational and administrative processes thereby creating new revenue opportunities as well as streams for cost savings. While traditional procurement solutions primarily focused on spend visibility, digitalization of procurement has enabled multi-tier visibility and opportunities for improvement across the organization. It has reduced cycle-time in sourcing processes and hastened time-to-market.
In the years to come, CIOs will have to work closely with the CPO to understand how digital innovation can enhance not only organizational efficiency but also the procurement’s value proposition to their suppliers, customers, and internal process partners. No doubt then, the case for digitalization of your procurement function is indeed compelling.