Digital Procurement Reimagined – Bespoke and Appified
July 01, 2019
Even as organizations assemble building blocks for Digital Procurement in the long term, they also need short-term, tactical moves. Transitioning to Digital Procurement is a large-scale transformation that cannot be implemented overnight, no matter the promises. In the same way that digital means rethinking how an analog process works, the giant leap from your current procurement capability to a digitized procurement state will require deploying existing capabilities in new ways by following key levers to achieve the desired scale and speed necessary for a successful transition.
The Growing Buzz Around Digital Procurement
Since 2010, search chatter around “Digital Procurement” has steadily risen from just below 25% (of peak Google popularity) to where it has been hovering lately around 50%, with a peak of 77% in early June.
This indicates that users are more and more curious about “Digital Procurement”. While we can only speculate as to the cause of this rise, some probable causes are:
- FEAR OF MISSING OUT. Fear of being left behind in the race to adopt digital inspires companies to search from what it means to adopt digital procurement.
- TOP DOWN PRESSURE. Company leadership has embraced the digital transformation wave and are pushing all functions to “go digital” without direct guidance on what that means for each department.
- THE UNKNOWN. Some simply don’t know what digital procurement means or even looks like. They heard the phrase in passing and are curious how it effects their business. Or, they understand what it is and its importance but are not sure of the next steps for implementing it.
- SKEPTICISM. They want to understand if this really is the next big thing or just old procurement tactics wrapped up in a new package.
The One Large Roadblock to Procurement’s Digital Vision
Have you noticed that in any procurement study or research during last 10-15 years, the desire to implement a fully integrated Source-to-Pay solution has been the number 1 or 2 target by respondents?
Every day we come across companies that have implemented a Source-to-Pay solution but struggle with a small percentage of bottom pyramid suppliers and spend being purchased/paid through their Source-to-Pay solution. We wonder why?
Why are the best performing procurement organizations able to achieve significant savings from their spend (if that is one of the key performance metrics to measure procurement), even without a fully integrated Source-to-Pay solution in place?
The reason is not difficult to explain and can be found in each of the categories described below.
Process Driven Solution Model
Many companies are not able to adopt digitalization due to their selection of over-specified process driven solutions with burdensome controls. This is the same pattern that is repeated across Source-to-Pay focused solutions available in the market, most of which are process driven solution models limiting the ability to be simple, agile and value focused (digital procurement).
Inability to Adapt Quickly
Business at the speed of digital requires a procurement function to be nimble and respond quickly to changing needs, business structures and supply chains. Unfortunately, procurement teams have been misled into implementing a fully integrated Source-to-Pay solution in areas which offer little or no ROI. A full integration of all processes (which emphasizes connecting process, workflows and hierarchy, which in turn limits responsiveness) is good from a controls perspective, but we can also achieve control with a highly distributed solutions framework.
Consider banking, one of the oldest industries, as another example of rapidly evolving space of digital disruption. Blockchain, which is built on the principle of a distributed ledger system, is completely revolutionizing how you can achieve control while maintaining flexibility to leverage the power of connectivity and network principles enabled by digital technologies.
So why would Procurement continue to ask for a fully integrated Source-to-Pay solution? Actually, that’s not where the push is coming from. It is the relentless selling of an integrated Source-to-Pay vision by procurement technology and solution providers for the large and sweeping swath of what Procurement calls indirect spend.
Digital Procurement Transition – Where to Begin
We believe a shared value-focused paradigm is the new normal for digital in Procurement. One where the starting point is: how can procurement derive the best value for its customers, company, and markets?
Transitioning to digital procurement will be driven by agility, speed and value and delivered through bespoke and appified solutions.
Procurement Apps will transform the user experience and provide users with simple and easy-to-use tools while the supporting master data and workflows that are embedded in the core enterprise ERP.
To realize the vision of Digital Procurement will require an insane focus on value, a shared value vision, approach and connected solution where agility and responsiveness rule, rather than end-to-end integration slowing down the value chain.
- Shared value for Procurement’s customers: business and suppliers
- Shared value that is realized in much shorter time frames (responsive)
- Processes that are simple and agile and tools which are connected and social
This requires taking a fundamentally disruptive look at the Procurement operating model, a willingness to break the norms and boundaries and change Procurement’s role and structure in ways never imagined before. Bold innovation is vital to success and is the need of the hour digital procurement.
Be bold. Be agile. Be digital procurement!
Digital Procurement Makes Procurement Easy for Food Manufacturer
A Fortune 1000 food manufacturing company implemented Eka’s Procurement app to analyze and manage procurement while providing real-time scenario and intelligence capabilities to optimize decision making. The predictive, user-controlled advanced analytics and decision support tools improve management of risks and exposures.
With Eka’s Procurement app, the company can track, monitor, analyze and manage enterprise-wide budgeted, actual and projected spends. They can simulate projected spend, perform detailed spend attribution analysis and view coverage and price risk. If coverage breaches user-defined thresholds, they receive alerts immediately, enabling them to perform market simulations to evaluate the resulting impact on coverage.
Rajiv Gupta is the founder of Procurement League. Backed with two decades of functional and business leadership experience across industries, he is a founder, investor and mentor to several start-ups in procurement and supply chain.
Procurement League is the first free global community platform for procurement and supply chain professionals to network, share, and learn from each other. Anyone, irrespective of level and years of experience or affiliation, can join and benefit by way of asking and answering questions to address day-to-day and long-term challenges faced by professionals.