Digitalising the function will be a priority project for many CPOs during the year ahead, according to Procurement Leaders’ CPO challenger guide 2019. “CPOs are serious about making 2019 the year they start to implement next-generation technologies to automate administrative tasks,” the report notes.
Indeed, respondents identify the digitalisation of procurement processes as their number one investment priority heading into the new year (see Figure 1, below), indicating that procurement chiefs are ready to place emerging technologies at the heart of the function.
In particular, respondents say data analytics, machine learning and robotics are the technologies with the most disruptive potential. The application of such tools promises huge opportunities for CPOs to improve their decision-making capabilities and the efficacy of their functions’ operations. It also presents challenges, however.
As one procurement executive from the technology industry asserted during their keynote address at Procurement Leaders’ 2018 Data, Intelligence and Technology (DIT) forum in London, digitalisation is actually less about technology and more about transformation. As with any shift in strategy, the switch to digital requires executives to produce strategic plans for their people and processes, as much as the technology they want to purchase and implement.
|Digitising procurement processes||1|
|Data and predictive analytics tools||2|
|Developing agile procurement||4|
|Driving greater innovation from the supply base||5|
|Implementing advanced technologies||6|
|Sustainability and CSR initiatives||7|
|Engaging with startups and nontraditional suppliers||9|
Source: Procurement Leaders CPO challenger guide 2019
While CPOs are concerned with creating their functions’ digital strategies, their teams’ are responsible for enacting those plans. As such, the burden is very much on procurement chiefs to encourage their employees to buy into the process of digitalisation.
Speaking at the DIT forum, one executive from the technology sector revealed how their company had attempted to secure the support of their team by creating a digitalisation taskforce.
This agile working group, they explained, comprises volunteers from across the business, whose responsibility it is to deliver digital projects. Anybody from within the business can contact the group to submit ideas for projects, and the team members then decide which ideas to take forward in review meetings that take place during ‘sprints’ held every four to eight weeks. “The most important thing is people,” the executive concluded. “Take your people on the journey with you.”
While it is essential for CPOs to bring their teams with them on the journey, procurement chiefs should also ensure they have the right skills within their teams to adapt to these new systems and ways of working, especially when it comes to handling and analysing data.
Data analytics is considered to be one of a number of technologies that CPOs believe will disrupt the function next year (see Figure 2, below). But if the skills don’t exist within the team to handle that information and find what is valuable in it, it will be essentially useless.
With that in mind, it is therefore no surprise that the CPO challenger guide 2019 found the majority of procurement chiefs say that they intend to hire data scientists and analysts during 2019 (see Figure 3, below).
But even this will come with its own set of unique challenges. Individuals with these specific skills are unlikely to have ever worked in procurement. As such, CPOs will have to learn how to manage and develop these data specialists in terms of their knowledge of the function. In addition, procurement chiefs will also have to work to integrate these new hires into their teams.
In a 2017 interview with Procurement Leaders, Ed O’Donnell, chief procurement data officer at IBM, expressed concerns about erecting skills barriers between those employees with ‘data’ in their job titles and those without. He believed it was essential the entire procurement function should, to varying degrees, be comfortable working with data. To ensure this is not an issue, he said he had created a “data wrangler” programme – a training initiative designed to teach IBM’s category strategists some data-science basics.
“One significant change we’ve made is the introduction of data scientists. But another is the development of this broad, general programme to improve the skills of our procurement staff,” he said.
At the DIT forum, one panel session considered whether technology would solve all of procurement’s problems. While the answer to that question was inevitably no, the discussion raised some interesting questions about why the function needs to embark on this digitalisation journey. One of the words often used to describe procurement is “complex”. People in other sectors regard the function as something that puts a process in the way of them purchasing what they want, when they want to buy it.
This issue was also evident in the CPO challenger guide 2019. The majority of respondents say their vision for the function is to “become a more meaningful and important function; a strategic partner”. If individuals outside of the function continue to perceive procurement to be cumbersome and riddled with complexity, procurement chiefs will never be able to achieve that vision.
It is something that has become increasingly more problematic in the age of Amazon in the consumer space. You can order exactly what you want and have it delivered to your desk by lunchtime the following day – all within two or three clicks. People want that experience in their working lives and are frustrated when that does not happen.
This issue of complexity was where a panel discussion at DIT started. They identified these complexities as a critical problem that technology could help solve and discussed how to get to that point.
“The end goal should be to have a comprehensive digital platform in place. But it is important to start small, so you aren’t disrupting your own processes and can get your team used to any new ways of working,” one procurement executive suggested.
While agreeing with the point that the function ultimately needed a comprehensive digital platform as its end goal, another procurement chief on the panel said it was vital to keep in mind the fact that things have to be simple.
“We need to make it easier for people to navigate our systems,” they said. Finding and using such systems will help procurement professionals cut such complexity. And ultimately, this will help the function achieve that vision of being a strategic partner.
While digitalisation is clearly one of the main priorities for procurement chiefs, there are a number of considerations they need to make to realise what they set out to achieve. They need to know their end goal; they must build support for that goal among their senior management as well as their own team; and they must put in place a strategy to take them to that end goal and upskill their teams to go on that journey with them.
That strategy has to be well planned and be built by considering the key stakeholders both inside and outside of the business. The procurement chiefs who get those early steps right will set themselves up for success. CPOs who use these new technologies will reap the rewards, such as greater insight into spend, simpler purchasing processes and, critically, more time for your team to spend on strategic initiatives. All this will enable the function to achieve its overall ambition of being a strategic partner, one that can deliver value long into the future.