April 17, 2019

Digital Foundations: Fixing the Basics

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Many procurement teams today are under tremendous pressure to jump on the digital bandwagon and initiate projects that are glamorous and which contribute to the company’s digital strategy, but which may not connect to procurement’s own needs.

This push to ‘do something digital’ has left procurement teams searching for a straightforward (but not necessarily easy) golden path towards digital nirvana.

Presumably, this is an endpoint where the entire procurement process is automated, augmented with AI and operating, as much as possible, without human intervention.

Switching procurement from reactive to proactive

In this blessed state, procurement moves from using descriptive data in a reactionary way towards using predictive data in proactive ways, all underpinned by full automation.

While reaching towards this state should be fully endorsed, we probably first need to step back and appreciate how complex procurement’s role has become over the last several years.

In the time it has been considered a true profession, procurement has never been asked to do more.

In addition to the traditional role of managing inbound costs, teams are now being held accountable for managing increasingly complex supply chains that often reach into highly risky geographies, ensuring corporate sustainability and citizenship objectives, evaluating complex business choices, and building risk-assessed investment cases – all while vastly improving the user experience and building a path towards becoming trusted business advisors.

The path to digital nirvana

With all that at stake, it is no wonder they are seeking a straightforward path through the maze of digital technology options. However, the cart is somewhat in front of the horse.

While the ultimate goal is pursuing the high-level benefits that can be derived from well-crafted digitalisation these benefits cannot be gained on the back of multiple system instances, uneven processes, poor data standards or a myriad of other basic issues surrounding how we operate the most basic of our systems.

Regrettably, the path to digital nirvana may be far less glamorous than had been previously thought.

In fact, the first steps on this journey are improving basic processes and implementing data management, both of which have been at the root of the automation journey for the last 20 years. As the poet T.S. Eliot put it, we “arrive where we started and know the place for the first time”.

Offering value beyond mere savings

We have come full circle in recognising that improving basic systems and the underlying data management process are not just the solutions for improving process efficiency, speed and user experience, but also are at the very foundation of providing the path to better insight.

It is not an exaggeration to say that data management and basic procurement processes unlock the door to providing value beyond simple savings.

Better insight drives a better understanding of our markets, suppliers and risks, thus allowing us to make more intelligent decisions and thereby fulfilling the role of becoming a true business advisor.

Companies should build and lead digitalisation efforts with less random experimentation. Instead, they should emphasise aligning procurement needs with specific technologies that will yield real benefits in a minimal timeframe.

Redefining the procurement function

To make this happen, senior procurement teams should continue to be a key part of the decision bodies that select operational procurement and data management platforms, with veto power if necessary.

If they step away from transactional activities they risk decisions being made by financial or operational teams that do not recognise that transactional systems are the foundation for collecting useable information and insight. The rest of the story is untold.

The next question that we must deal with is ‘what happens next?’ Assuming we can finally finish the job building out and automating our basic process with digital technology, we must then redefine what procurement does as a function.

The digitally-enabled world

No longer can we claim that procurement teams are the masters of the purchasing process. Even our higher functions like category management are easily automated in a digitally-enabled world.

When this happens, we finally get the opportunity to start thinking more deeply about what is procurement’s role within the firm.

This article by Giles Breault, principal and co-founder at The Beyond Group, originally appeared in our special report, Supplier Data – The Path to Digital Procurement. Click here to read the full report.

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