Procurement executives love talking about new technologies, even if they’re not entirely sure what such systems are. And why not? Such exciting innovations promise to help the function unlock new cost-saving and value-generation opportunities.
But the latest technology, whether that be blockchain, artificial intelligence or big data, is no panacea for procurement. For some businesses, getting the technology basics right first may be a better investment than betting on the next big thing.
Organisations often face a common problem when it comes to investment. A potentially game-changing piece of kit comes onto the market and people get excited about all the ways they could use it. This hype often overshadows less glamorous projects that might actually have a greater impact.
Although procurement teams are as guilty of this as other functions, there are some simple changes procurement chiefs can make to ensure they make the most of any investment in technology.
Technology makes life easier. Can you imagine doing your laundry without a washing machine? It’d take twice as long and require twice the effort.
Before making any investment, procurement chiefs should ask themselves if the technology will provide a solution to a challenge they currently face.
Research suggests, for instance, that blockchain is not necessarily what procurement chiefs need.
Ayming asked c-suite executives for their thoughts on the biggest opportunities that technology investment could bring to their departments, for its Procurement 2020 report. Only 14% of respondents cited the ability to gain a single source of truth with a full audit trail – one of the biggest benefits of blockchain – as an important aim.
This raises the following questions: why do so many procurement chiefs then think that blockchain is what they need? Is it really the best way for them to achieve their ambitions?
It helps to think of technology purchases like buying a new car. Investing in top-of-the-range technology is akin to buying a new Ferrari when what you really need is something more economical.
One of the best ways to improve the function’s reputation and increase its ability to lobby for future purchases is to assess the impact of implementing technology throughout the organisation. In many cases, stakeholders mainly interact with procurement through the systems they use. This means that the choice of technology can influence how other functions view the function within the business.
The best technology projects will solve issues for both procurement and the wider business.
Furthermore, staff outside of procurement often fail to make full use of the technology available to them. It is not uncommon, for example, for sourcing systems to be used to send messages to suppliers – like a glorified email client.
In modern companies, where business units need to be able to demonstrate the return on all investments, the successful implementation of one system means teams will have more leverage when looking to implement another. This is especially true given the costs of implementation can be far greater than the costs of purchasing the technology itself.
Go beyond simple onboarding courses to train staff on new systems, and adapt your culture to ensure procurement tools are fully integrated into day-to-day tasks.
It’s easy to get distracted by new innovations, rather than simply prioritising the business needs and finding solutions to match.
It is right to stay up-to-date with industry developments, as well as those in the technology space, to find new solutions. The answer may be the latest trend, such as blockchain, but it will often be something much simpler.
Applied correctly, technology can transform procurement and help the function become a strategic partner to the rest of the business. But getting the implementation right isn’t easy and procurement executives need to think carefully when deciding where to invest – or whether to invest at all.
The risk is they could be stuck with a Ferrari they can’t even take out of first gear.
Alejandro Alvarez is director of operations performance and James Bousher is operations performance manager at business performance consultancy, Ayming
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publication of this content.