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Way to Next-Gen Procurement - Part 1

 

 

The way to next-gen procurement - Part 1

 

Procurement today is very different from how it used to be twenty years ago. Previously, the job of procurement involved making phone calls, generating purchase order copies, manually creating invoices, etc. Today, it has evolved into a function that uses an efficient people + software approach that leverages state-of-the art packages like Ariba, e-procurement, SAP SRM, Oracle iProc, etc. But that's not all; change is the only constant and so one can expect more disruption in this space.

 

For now, the topmost question on the minds of almost every chief procurement officer (CPO) is: how do I leverage latest technologies like digital transformation, robotic process automation, machine learning, and design thinking to enhance procurement function? CIOs also face the same challenge since procurement depends on IT. To answer this, I suggest evaluating how some of the popular IT tools can be used to drive change. While I have chosen SAP for this example, the same approach can be applied across other tools and technologies.

 

In my view, the evolution of the procurement IT landscape for a large organization involves four stages - basic, starter, enabled, and cognitive. It looks something like this:

 

 

While some organizations have leapt straight to the 'enabled' phase, many are still in 'basic' and 'starter' modes. For these companies, investments tend to be focused on sourcing and order management to meet pressing priorities and realize tangible results. However, they should aim at quickly reaching the 'enabled' phase in areas like spend analysis and supplier management. These are may not be urgent but they are critical to control future spend.

 

The 'cognitive' phase is the apex of the evolution today. Many organizations are already reaping the benefits of using machine learning tools in procurement. However, operational and tactical issues persist such as choosing the right ML tool, identifying potential opportunities, creating strong governance, increasing return on investments, etc. On the bright side, once these companies begin their transformation journey and leverage ML in areas like supplier risk management, spend analysis and sourcing, they will realize returns faster and streamline procurement into a lean and agile function.

 

Check out my other blogs in this series to know more about transforming procurement through cloud vs. on-premises IT infrastructure and insourced vs. outsourced procurement process execution.

 

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