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In this guest post, Procurement Leaders invites Xchanging's Luke Spikes to provide insight from the company's latest Global Procurement Study.
Technology is a catalyst for change and an enabler. Deployed in procurement correctly, it can reinvent the purchasing process, from being purely operational, to adding strategic value across the entire business.
Technology provides opportunities for procurement to boost market coordination, introduce new suppliers, enable better compliance, increase capacity and speed, minimise risk and engender trust by removing human error. Implementing cloud-based technologies not only enhances the performance of the buyer's organisation, but it also enhances the performance of the suppliers, helping improve the buyer-supplier relationship, collaboration and most importantly, innovation.
The 2015 Global Procurement Study exposed an interesting dichotomy. On one hand, technology adoption was shown to be relatively high yet, when asked what one change they would make for improved procurement performance, the majority of respondents cited "more/better technologies".
But with so many new technologies available, it can be hard to know which will prove most valuable and significant to procurement. More than half of respondents revealed they have already implemented 11 of the 12 technologies listed. The most widely implemented being savings-tracking and spend analytics technologies, in place at 77% and 76% of organisations, respectively.
As spending cuts and streamlined processes remain a priority for businesses, these results may not be too surprising. They also mirror respondents' answers about the key performance indicators on which their procurement functions are measured – the top four being cost-related. Around half (47%) cited "cost savings realised" as their most important measure, while 19% answered "revenue impact", 16% ‘cost savings identified' and 14% "cost avoidance".
Looking at the technologies currently adopted by procurement departments the research showed:
Not everyone is keen to adopt all technologies – with 46% of respondents stated they are unlikely to implement online auctions.
Going by these impressive adoption rates, anyone would believe procurement is a highly tech-savvy function. Yet when participants were asked which one change they would make for improved procurement performance, the majority cited ‘more sophisticated technologies'. An interesting dichotomy that implies the technologies adopted, are not having the desired effect.
There is a big difference between adopting technology and using it in your day-to-day activities. Most companies have much of the technology discussed and pay for it, but they do not actually use it – certainly not to its full potential – because it is 'over-complicated' and “difficult to use”.
Another reason why technology is not being adopted is the confusion caused by having a range of different definitions as to what the technology is. A company using simple equations and charts within Excel, for example, may class itself as using 'spend analytics'. Xchanging's definition of spend analytics, however, involves a whole data transformation process first.
The other chief problem is people focusing on eye-catching tools, rather than opposed the data they feed in to such solutions. Integration between the different parts of procurement technology is a must, especially in medium and large organisations. But you need the right human/technology mix.
The first step in any data-driven activity is ensuring the data is fit for purpose. As insight derived from analytics is only ever as good as the data that goes into it. That crucial step is often missed out, which leads people to blame the technology and lose confidence in its value for decision-making. What people often do not realise is that getting your data into shape requires a certain level of human input in order to get it right.
I believe that in order to answer business critical questions that lead to real actions and outcomes: it's not about business intelligence applications, but the application of business intelligence.
Luke Spikes is CEO Applied Analytics, Xchanging Technology at Xchanging.
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.