New Roles for Procurement Through Digitization

The procurement function is undergoing rapid digitization, and the transformation is an earthquake of change. The entire process is being shaken up, and now is the time to reinvent in order to avoid being left in the rubble.
— By Sharon Ross

Procurement (sourcing and purchasing) has made some shifts toward implementing technologies to improve the processes and bring others into an efficient decision-making model. Procure-to-pay, smart contracts, mobile technology, the cloud, sensors, predictive analytics and other technologies are changing the function in radical ways. Some analysts predict procurement will be mostly digitized in the near future, making team members worry about their near future in terms of job security.

The path is clear: Embrace digitization and develop new, more strategic procurement roles that maximize the benefits it can bring. This will finally make procurement a central function that provides critical information and services to departments as an equal partner in decision-making, rather than a last-to-know service department fulfilling needs after-the-fact.

Procurement Develops New Power
There is a tsunami of technology rapidly approaching procurement. Though some businesses have taken a leadership role in transforming procurement, many companies continue to struggle to get even basic information, like analytics that assist with selecting suppliers and systematic classification of purchases that enable useful spend information.

Most procurement departments are already automating some of their operations, but business leaders are looking for increasing digitization to do the work that will improve supply chain management. Where does that leave procurement staff? The fear is that procurement staff will be significantly scaled back, and only people with high-level technology skills will be retained.

Digitization is delivering a wealth of data and analytics and enabling more sophisticated supply chain management. It is also enabling processes in which decision-makers across the organization have input and the ability to collaborate, source suppliers, and initiate purchases.

Digital procurement streamlines sourcing, purchasing, and payment, but its real power for decision-makers is much wider and deeper. It offers spend in real time, prediction of demand, risk management, contract monitoring, country costs, future sources of supply, scalability without adding staff, and much more.

Preemptive and Proactive
With repetitive work automated, procurement staff needs to change focus in order to maximize the impact of processes like procure-to-pay (P2P) and smart contracts, and embrace new technologies as a path to delivering measurable business value. For example, P2P frees up procurement professionals to do a higher level of work, such as monitoring supplier risks through third-party data feeds, using augmented reality to hold supplier visits, improve supplier audits, and collaborate via supplier networks. Procurement professionals become preemptive and proactive in supplier management rather waiting for a problem to come up.

Multiple advanced technologies are already in use, but few procurement functions have fully embraced them at this point. For example, artificial intelligence (AI) and machine learning can categorize unstructured spend, assess supplier contract compliance, detect trends that signal changes in the market or countries that could impact product or services demand or resources availability, and enhance demand and price modeling. Procurement can use sensors for logistics, blockchain to verify and validate transactions, and visualization to help organizational members make better decisions and better partners with procurement.

The two words best describing the power of digitization are automation and insights. The insights are critical to efficient management of a global supply chain. In fact, technology is crucial to collecting and analyzing the full range of data flowing from physical files, sensors, suppliers, social media, third-party systems, transportation, government compliance requirements, spend, contracts, and more.

The massive volume of data and its analyzation are only manageable due to technologies, and using the cloud makes data collection and analysis scalable.

Reimagining a Traditional Process
Reimagining procurement is not a simple process because it is so embedded in the traditional processes. Adopting and utilizing new technologies requires fundamental changes in the mindset and the way things are done. Without the transformation, automation will expand and people who have under-utilized skills potential will lose their jobs.

A procurement function that moves to technology also needs the organization to make the right amount of investment in IT resources, whether developed in-house or outsourced to third-parties. This is where procurement functions often struggle – convincing senior leaders that transforming procurement is a value creator.

One of the realities, too, is that the people deciding the IT investments struggle to understand advanced technologies, so they are unable to provide much direction to decision-makers across the organization. For example, do category managers understand how AI can improve their performance, and why the implementation of AI in the procurement process is important to their future as well as procurement's? Probably not.

Think Big. Think Different.
Adding value is the end goal of technology.

Think big. For example, digital avatars can provide a virtual and realistic viewing of supplier locations and operations.

Think different. It is easy to get stuck in thinking of procurement in terms of adding technology to procurement, but what about adding tech-savvy procurement to other functions? One suggestion is that procurement will become distributed or procurement specialists will work in other departments, like Human Resources and production. Instead of a single function that gives "rights" to other department decision-makers through dashboards, procurement professionals actually join their staff.

So it is not just the adoption of technology that will transform procurement. It is the entire procurement function model that needs transformation in conjunction with the adoption of advanced technologies.

Gartner identified five areas of procurement changes needed to support corporate trends. They are value drivers through execution speed and business insights, developing roles as sourcing advisors, becoming disciplined sourcing agents, delivering through hybrid centers of excellence, and becoming professional advisory staff and implementers of customer-oriented technology. Procurement professionals will become critical resources as organizations strive to manage the complexity of the business world, but only if they strive to redefine their roles. Business as usual will not usually work any longer.