Digital Procurement Practice: A Look at the Bottom of the Iceberg
The Global CPO Survey 2018 participated by 500 procurement leaders of businesses worth $5.5 trillion across 39 countries has some interesting insights into procurement across various industries and verticals. In this article, we study the cues drawn from the research that hint toward digitization of procurement.
- 17% of respondents of the survey indicated not using any digital strategy. Of the remaining 83% that has adopted digital strategy, only one per cent thinks digitization will augment organization’s market value.
- 83% percentage that adopted digital strategy invested more on transactional Purchase to Pay (P2P) followed by sourcing and tactical buying.
- Overall, the survey report indicates an increase in analytics usage for cost optimization (50%), improvement (48%), and management reporting (45%).
Honestly, this report is no short of amusing. Particularly so when we see skepticism is better adopted than technology and that too according to 500 procurement leaders who took the survey. Now let’s see how the bottom of the iceberg actually looks like; how can we turn the above findings in favor of your business.
- Digital procurement is deep and data rich unlike our existing procurement practices. The road ahead is steep and challenging for organizations that do not see value in adopting digital procurement technology. Great businesses thrive on great technologies that steer toward making both financial and social impact. Organizations that are far away from considering technology are doing themselves a great disservice.
In digital procurement, business controls are coded into AI models to help users skip redundant and often cumbersome steps. Users do not require exhaustive knowledge but act on data that is presented in strict compliance with company regulations. This streamlines execution of buying decisions and reducing manual intervention thereby bringing procurement to the helm of technology that saves time, energy, and money all at one go.
It is indeed high time that organizations that are unsure of digital transformation should consult experts and deploy necessary technology to stay relevant in today’s fast evolving landscape of procurement.
- Of the 83 percentage of procurement leaders that adopted digital strategy, we see the investment is majorly on transactional Purchase to Pay (P2P). This indeed is far better than not adopting any technology at all. However, the concern here is, when will this large quarter of enterprise businesses decide for strategic P2P?
At an organization level, whoever is tasked to decide for procurement technology, person should know a strategic move in procurement is not the rejection of transactional Purchase to Pay (P2P), sourcing or tactical buying. While transactional procurement activities include system interface such as invoice payments, MRP purchase order maintenance, document review routing, and other routine actions that provide marginal value, strategic procurement activities include requirement analysis, source selection, cost modeling, negotiations, supplier relations and initiatives that build sourcing value.
- Imagine meeting your high school buddy who is a great journalist but has always been laid back about technology. You come to know that she has got an interview call with a major news broadcasting company and you are so excited about her. You eagerly wait for her to get the offer so that she can take you for a nice Sunday dinner. But much to your dismay, when she finally meets you and even treats you to a nice dinner, she informs you about failing the interview. You are so disappointed that you probe further to learn that her knowledge of data analytics actually failed her; that your friend is more of a field journalist and does not have the skill of filing reports on the reach of published news pieces. And you are like, “O! Why didn’t you ask me before?“
In conclusion, you are the smart one and understand how digitization of your procurement functions can be the best strategic move forward. Now that you have seen the bottom of the iceberg, you know the importance of analytics; so exhaust this renewable source of energy to the best of your organization’s interest.