Leverage the power of the digital revolution

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Can you imagine yourself interacting with a category advisory cognitive agent that provides guidance on the right strategy to follow? The agent would assess a variety of dimensions, including your function’s progress against savings targets, compliance and other benchmarks. They could even develop should cost models, if asked.

 

Can you also imagine engaging a supply risk cognitive agent that could help place suppliers into risk quadrants? These agents - being smart machines – can speak and understand 20 languages, are highly efficient and do not have bad days. Nor do they stop, leave or retire.


Within the next ten years, procurement functions and businesses in general will undergo a major transformation of operations powered by these technologies.


“[By] 2023, one-third of all highly skilled work done by doctors, lawyers, traders and professors will be replaced by smart machines or by less skilled (nonspecialist) humans assisted by cognitive computing technology,” wrote the authors of a recent study by Gartner Maverick Research. The paper also noted that by “2030, 90% of jobs as we know them today will be replaced by smart machines”.

Change on the horizon

As a young procurement professional, I feel excited to be part of the generation that will help redefine the way the occupation operates. The impact of the digital revolution on both the function and society as a whole will be profound. Every business function needs to reconsider the way in which it operates – from the tools it uses to the ways in which talent engages and makes use of new digital applications.


The digital transformation will be a huge undertaking and the difficulties will vary from organisation to organisation, and from function to function.


Is it better to use new or existing platforms? Is it better to move all processes to the cloud? What happens if automation breaks? These are just a few of the burning questions procurement chiefs will be challenged to understand.


To take advantage of the raw power that exists in data and the potential insight it offers, procurement needs to first understand the implications these trends will have on both its structure and the skill set of buyers.


The start of the digital journey will begin with the rotation to a new model; a new way of thinking about how data can power a transformation. The objective is to create a body of data that captures all interactions across the end-to-end process; across all stakeholders – end users, teams of buyers and suppliers. Every field is relevant and could be used to power the next phase of the journey. Most organisations are doing this today.

 

Next, it is about capturing the context – why supplier A was selected over supplier B.


The reasoning behind decisions is often more important than the outcome itself, since this information is used to feed cognitive computing. Systems need to learn, mimic and predict the human role in decision-making. This is why big data is so important – a successful digital transformation relies on businesses taking control of their information.


This new vision of digitally powered procurement functions will be enabled by four key technologies. Cloud computing, which will serve as a foundation for procurement’s digital strategy, will be characterised by greater usability, rendering employees more productive and engaged. It will also provide access to content, which an organisation can use to facilitate core procurement activities.


Real-time analytics, paired with advanced use of the industrial Internet of Things in which objects are connected to one another through the internet, will generate deeper and more valuable insights that can greatly enhance decision-making as well as identify potential issues and mitigation strategies.


Cognitive systems, meanwhile, will serve as digital agents integrated into the fabric of procurement, eventually handling not just transactional activities, such as helpdesks, but also more strategic pursuits including spot-buying and even intelligence augmentation for category management.


These digital technologies will allow functions to gather and analyse greater volumes data more quickly than ever before, which will, in turn, drive better, smarter and more accurate decisions. Ultimately, digital technologies make it possible for procurement to question everything it does – even principles that have been central to the function for decades, if not longer.

Digital reality

First, it is fair to say that developing requests, conducting bidding events, evaluating tenders, vendor/product master data and order process will all be dramatically different, if not wholly automated, in ten years’ time. If virtual agents are assisting procurement professionals on a day-to-day basis, will staff still require pure procurement acumen? Almost certainly not.


It will be more about people’s business expertise and the ability to focus on strategic pursuits. It will also be about knowledge work, which will require sound judgement and soft skills. Activities such as face-to-face negotiations, business requirements gathering, contract reviews, strategic sourcing and strategic decision-making will continue to require a human touch that cannot be replicated by technology.


Given this more strategic focus, the procurement professionals of the future will require more advanced and diverse skills. They will need to be change agents, collaborators and risk advisers – all at once. They must be technically savvy, have deep financial knowledge, understand how products are developed and be adept at building relationships.

Shifting sands

The structure of the function will also change significantly. Buyers will be embedded within key parts of the organisation and uniquely connected back to a smaller, central, core decision-making team supported by advanced technology.


These embedded buyers will spend the bulk of their time addressing business issues while applying procurement knowledge. The core team will use the real-time transparency of information on demand to handle business strategy, global demand and supply, policy, compliance and global strategic supplier management.


This structure, which will require new skills and roles with a more strategic focus, will enable procurement to focus on strategically differentiating activities and to generate a much broader range of value.


We know, for example, procurement functions that have strong supplier relationship management processes in place and view their suppliers as extensions of their team can add tremendous value to both organisations. I truly hope the future will be about taking this approach to the next level by developing deeper, more substantive relationships with suppliers, with some of them being truly embedded in the business.


One of the reasons I am passionate about procurement is because I love the idea of long-term partnerships with providers and creating win-win relationships. Goran Cangl, director of ecosystem steering at Nokia, told attendees at the World Procurement Congress that “innovation comes from nowhere and at the same time from everywhere”, which rings true to me. Suppliers are experts in their field and are going through deep transformations, too. Procurement needs to capture the amazing value that each of them can add to our organisations by moving towards intimate relationships with a smaller group of strategic suppliers. In such a relationship, the demarcation between buyer and supplier will become blurred to the point that strategic suppliers are simply seen as part of the company.


How can we progress towards the procurement function of the future? First, it is important to say that the starting point will vary both by organisation and by function. The transformational path that is relevant to one business may not be relevant to another.

 

People, arguably, are the biggest wild card in this. Technology, alone, does not transform a company or a function. Legacy procurement staff with longstanding, traditional methods will need help to make the transition.


Imagine if you were a category manager who had been doing strategic sourcing for 15 years, and you were told that your role in the future would be more of a relationship manager and spend adviser relying on virtual agents to run tenders? People need to feel empowered to actively embrace change as a fantastic opportunity for growth and innovation.


Management consultant Peter Drucker said: “Culture eats strategy at breakfast”. So how can we ensure we have the right culture in place that supports change and innovation? Needless to say, the CPO of the future’s leadership skills will be instrumental in leading the way towards the future state and embracing what data and new, innovative technologies have to offer.


It is an exciting time for our profession and I, for one, cannot wait to have a chat with my category advisory cognitive agent.

 

Pauline Rolfe is procurement operations manager at Accenture Australia. She won the 2016 CIPS Australasia
Young Procurement and Supply Chain Professional of the Year Award and was shortlisted for the Future Leader Award at the World Procurement Awards 2017

 

First featured in PLQ, now available to members on the Procurement Leaders app, ready to download here from iTunes and Google Play

 

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.