May 22, 2018

Enabling the Digital Roadmap for Procurement – Version Three

Technology, who would have thought it would have driven change at such a rapid pace twenty years ago. In our world of software, innovation is a daily occurrence. The importance of not only matching your competition but bettering them in leveraging new technologies to help your customers is something that will always be a priority for any software company.

As software vendors have developed at speed, so have procurement departments. Taking a lot of time to invest in solutions that will cut costs, prioritising P2P and S2C solutions first and foremost. Milking their suppliers effectively for every saving they can.

And yet, we are at a turning point, one that has come about thanks to the advent of what could be viewed as a radical new wave of technology. We all know the buzzwords too. Artificial Intelligence (AI), Robotic Process Automation (RPA), chat bots and most infamously, Blockchain, the technology that crypto currencies are based on  – which we now refer to as ‘Digital’

Whilst the maturity of these new offerings is questionable, it is unquestionable that they will make an impact and forward thinking CPOs are already looking to get ahead of the game.

So here we are, this is the time of Procurement Architecture Version Three.

Version One was pre-Technological Revolution. Version Two was the race for tactical and transactional systems such as P2P and S2C with a focus on POs and spend control. Which also created the shift between strategic and transactional procurement – with the latter being outsourced or seen as low value add.

What will Version Three require?

It’s an important question and one that is being asked across leadership groups, consultancies and analyst firms all over the world.

How best to move forward and how to enable these new technologies?

The answer seems to be a simple one. Although, regrettably, far less glamorous than the last version. In order for these automated systems to make intelligent decisions, they need to interact with your data and crucially, the data needs to be excellent and it needs to cover all your suppliers. From there, AI and its many cousins can help organisations make the right decisions; the CPOs will be empowered and whilst the initial return may not be instantaneous, it will allow for new technologies to excel in the long run.

CPOs are suddenly realising all the boring stuff which was outsourced or removed from procurement focus as part of the operations – such as data management, PO approvals, etc. are the future back-bone which will enable such futuristic capabilities as cognitive procurement.

Version Three needs to be approached in a completely different manner. As a result of the previous focus on putting strategic tools first, we have begun to see more and more big challenges around data quality and data integration – these have been cited for the last two years as the biggest challenges for CPOs in the Deloitte CPO survey.

The whole approach has to be flipped upside down in order to deploy the digital roadmap for procurement. Organisations have to focus first on establishing a very clear foundation around their supplier master data and information governance – controlling the entry point for data and management of relevant information. This will enable organisations to move beyond having just a golden record but rather a golden ‘thread’ which can be spread across systems to help connect the dots.

Version Three won’t be remembered for building a foundation of high quality data as a priority. But the reality is that if you want to harness Digital then you need to focus on long-term value instead of short term gains (which will ultimately carry you backwards). Research shows that you need five years of good historical data in order for AI to start to become effective for you.

The immediate value might not be easy to quantify at this point but looking at other industries which have successfully harnessed this such as Amazon, Google, Facebook etc. its clear that there is significant value to be created for those that get it right.

In summary, if you are looking to future proof your procurement technology investment think data management and supplier control first and then focus on deploying transactional processes such as P2P and S2C, because they are only as good as your supplier data is. If you want to not have garbage coming in then its time to make that process the first order of business.

Postscript:

This blog came about after spending a great day in Madrid – May 2018 – with the Beyond Group where the topic up for discussion was ‘Deploying the Digital Roadmap’. An interesting and thought provoking day with some of the leading lights in Procurement. 

by Costas Xyloyiannis

Chairman & CEO

With HICX since its formation in 2004, Konstantinos has been instrumental in building it into a leading Supply Base Management company. He is responsible for setting the company’s strategic direction as well as overseeing the growth and expansion, strategy, planning, execution and overall performance of the company.
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