September 13, 2019

5 Procurement Digital Transformation Ideas (to challenge your thinking or even to piss you off)

5 Procurement Digital Transformation Ideas

Nearly every company is involved in some form of digital transformation, but how many are actually seeing it pay off?

The answer is surprisingly few. New research by Bain & Company finds that only 8% of global companies have been able to achieve their targeted business outcomes from their investments in digital technology.

Said another way, more than 90% of companies are still struggling to deliver on the promise of a technology-enabled business model.

What secret formula do the 8% deploy?

Rather than asking which technologies they should add to become more digital, the 8% ask how they can do things differently and how technology can enable that change.

When we apply this to the context of procurement the biggest mistake, we see being made, is not challenging the existing thinking of what Procurement has done for the last 20 years.

Digital Transformation is not implementing a new P2P or S2P solution like Ariba, Coupa, Ivalua, etc. – this is not Digital Transformation. These ideas are now almost 20 years old, dating back to early 2000 when Ariba implementations started.

There needs to be bolder thinking and a willingness to challenge the status quo and relentlessly ask why? At the end of the day this is about transformation not incremental improvements – like a better UX, it should be things like, how about no UX?

So, if you are looking for inspiration here are five ideas you can consider, aimed at challenging your thinking around how to evolve your function:

1. Why does Procurement need to be involved in the P2P process?

To some this may sound like heresy but many are starting to ask the question – Does procurement have anything to do with P2P? Are we budget controllers? We are only interested in making sure that our internal customers use the best suppliers – driven by various factors such as price, quality, service, risk etc. So really, we are just interested in ensuring the right suppliers are being onboarded. If a department has budget let them spend it, that’s their responsibility.

2. Why am I investing in a suite, why not have a tech stack filled with best of breed innovation?

We are in the era of craft beer and technology disruption. With innovation moving at such a fast pace do I really want to be doing everything in one system? What if I don’t like one module, after all most suites started doing something good and just cobbled together acquisitions. Many will argue about integration challenges– but these are all excuses for not thinking outside the box. Every organisation is different and nobody is good at everything – think of the art of the possible if best of breed systems could work seamlessly together and you delivered a superior experience to your internal customers and suppliers in all areas -not just some of them.

3. Why do we keep saying the Amazon like experience – why not the Google like experience?

For whatever reason there is an over emphasis and link between procurement and P2P and this led to clunky systems being deployed which made it difficult for users to buy. However Procurement is so much more than buying and if that’s what the focus is still on then it will very quickly cease to exist. There are so many other areas where Procurement adds value and the focus should be on providing a great experience in all the areas of working with suppliers. Don’t limit yourself to buying and the ‘Amazon experience’, think of all the things you do which add value.

4. Why is there a Procurement function – isn’t it just a process? Let’s not call it Procurement (or Sourcing).

I hate to be the one to say it but Procurement in itself is just a process. The word procurement may in itself be part of the problem, leading people to associate the function purely with buying or buyers. In the near future, a lot of traditional sourcing and procurement is going to be autonomous – bots will be able to figure out better pricing than humans. However, the procurement function is not really about Procurement. We need to see it more like Marketing but rather than our Customer Markets it is about Supplier Markets. The function could shift into looking at enabling, managing and creating Supply Markets which can leverage existing, and new Suppliers, to change and improve how it operates.

5. Why is Procurement measured on Savings, when that’s not really what we do?

If we pause for a moment and consider that really the function is very much like Marketing but just for Supply Markets then we should think about savings differently.

In the same way as Marketing has a contribution to revenue, that is not the only KPI and way in which Marketing is measured. The reason most organisations never put Marketing & Sales under the same function is that Sales would always win as revenue is king, but we know that it wouldn’t come at the same level or ease without Marketing. In some industries it might not come at all.

The same applies to Procurement and Finance – you cannot stick the Supply Market function under Finance because it wrongly over-emphasises savings. Savings is a Finance KPI which would be nothing without Procurement’s contribution. As the Supply Market gurus there is so much more value which is being created beyond savings.

There are new ways of doing things with new technologies, for some you might think these things are not possible within your organisation, however Digital Transformation is about pushing boundaries.

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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