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Tech trends 2016, Part IV: Procurement gets fixed.

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In this, the fourth in a series of guest posts, Procurement Leaders invites technology companies in the procurement space to imagine, predict and speculate on the future of software in 2016. This contribution is from Tradeshift's Christian Lanng.

I can sum up the state of procurement in a single sentence: The way large companies buy goods and services is broken. Even the name we give it – “procurement” – shows something is wrong. Using the word “procure” instead of “buy” is a perfect example of how we in the business world tend to over-complicate something as simple as getting the products, services, or people we need to do our jobs. The great news is that we are about to witness a sea change in this category.

 

First, a quick story. I was recently in a meeting with a Fortune 50 customer who was worried about digitizing the process of onboarding suppliers and buying from them. His rationale for worrying was simple: If we make it easier and faster for people to buy from suppliers, people will buy more and it will cost the company more money.

 

I asked him, “What would happen if your company couldn't deliver several large projects on time, or if you are slower to market than your competitors?” He responded with a blank stare. In today's global market, agility and speed are not just strategic advantages – they're imperative for survival. In this case, the company's procurement department was willing to sacrifice agility for process compliance.

 

But my question was…”why?” We're no longer in an era where we can spend months sourcing our trusted vendors and trying to enforce rigid, top-down processes. Yet progress has been kept in check. Why do otherwise agile companies not take advantage of the strategic opportunities offered by procurement?

 

Simple. It's not you, it's the tools. For the last 20 years there's been very little innovation in eProcurement. Most of what are considering leading tools are essentially all the same; some just have prettier user interfaces.

 

The world has changed a lot in 20 years, but procurement tools haven't kept up. We all use the Internet; we're expected to create value and drive projects to get results independently; and speed is of the essence, not just getting the lowest cost.

 

Procurement processes are not broken because people in the procurement department want to create broken processes. They're broken because the tools and methods we've been taught are “best” have forced us to act in certain ways that don't ultimately benefit us.

 

“The adoption of eProcurement tools is still not where they need to be,” says, Amy Fong, Senior Procurement Advisor at The Hackett Group. “They can be difficult to use and have out-of-date information. End users need better tools so they FIND the right thing and DO the right thing.”

 

Here are three core areas that I predict procurement will finally begin to address in 2016:

 

Attaining more spend under management

Most organizations are only able to manage a fraction of spend through catalog-based eProcurement tools. This is pretty sad. All the factors that contribute to this such as inadequate search, out-of-date product information, and inaccurate pricing and poor descriptions will eventually be a thing of the past.

Reducing end-user dissatisfaction and maverick spending 
Passionate employees looking to get their jobs done are labeled ‘maverick' or ‘rogue' spenders and are deemed to be at odds with procurement policies when they have to sidestep them. With improved buying tools that are in line with the e-commerce experiences we're all accustomed to, harmony between flexibility and policy is within reach.


Adding value beyond cost savings
 
Today's CPOs want to go beyond cost savings. CEOs look to CPOs to elevate their roles to trusted advisors, improving procurement's business agility, and enable innovation via suppliers. By automating more of their procurement process, CPOs can refocus resources from transactional to more strategic efforts.

 

Procurement tools and processes will be forced to better fit the modern world, while supporting the needs of the larger organization in ensuring compliance, cost focus and value creation. There is no other path in light of the swarm of technological advancements that are raising expectations from procurement.

 

Christian Lanng is CEO and chairman of Tradeshift.


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 publishing of this content.

Christian Lanng
Posted by Christian Lanng

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