Digital Procurement is the application of information and technology to help raise human performance in the area of procurement. It does not necessarily imply the implementation of new technology tools – on the contrary, it can often imply how human performance can be increased through the use of existing tools to help drive higher standards of performance which leads to top line and bottom line results.
It also implies internal adoption of this change. The use of cloud, mobile technology, social media, Big Data and RPA (Robotic Process Automation) can be leveraged to achieve strategic procurement objectives such as cost reduction, risk mitigation, innovation and efficiency.
Finally, by developing the skills of procurement staff to take advantage of digitization, companies can elevate their relationships with suppliers beyond transactional and collaborate strategically to not only reduce cost, but also create new value from improved processes.
Implications of Digital Procurement
- Social Media can widen the scope of potential sources through crowd sourcing, Posting of RFx, Consultations on optimum specs, Initiate conversations with previously hard-to-reach contacts all over the world through Facebook and Twitter, etc. It can also help seek new talent, obtain expert opinions from the supply base, and identify opportunities for ‘piggy backing’ contracts.
- Big Data can help Identify new innovative vendors, predict supplier behavior during negotiations, detect supply chain risk across the multi-tier supply chain, and support Supplier Performance Management.
- RPA (Robotic Process Automation) can be used to identify market trends and demand, reduce free text use in PO’s, automate generation of key reports, eCatalog updating, etc. It can be also used to optimize payables into a profit center through real-time insights into invoice approval status, efficiently manage cash, and enhance back-office operational and transactional procurement activities to enable transaction processing, data manipulation, and communication across multiple IT systems.
How to begin developing a Digital procurement road map
|Cloud||Review your eProcurement investment plans
Review your current applications portfolio for greater efficiency
Review your future applications portfolio
|Challenge the business case based on the availability of SaaS, PaaS platforms
Make optimal use of integration potential to help drive information gathering, decision making, and execution
If a business need exists, but a solution is not presently available on the cloud, issue a design challenge to the market
|Mobile||Review your policy on use of mobile technology
|Identify opportunities for cost reduction, policy on BYOD
Review your approach to flexible working times
Drive efficiencies through greater flexibility
|Social Media||Create a social media policy
Create a social media strategy
Review the potential positive and negative impacts of social media on procurement
|Insure that it reflects procurement needs from the supply market
Develop a proactive plan to use conversations to achieve strategic objectives / mitigate risk
|Big Data||Understand what the business needs are for procurement intelligence
|Develop an integrated approach to Big Data analytics to help draw procurement data from internal / external sources and make conclusions / better procurement decision making – supply markets, market trends, risk, internal spend, etc.
|RPA||Identify procurement processes that are suitable for automation||Identify processes that are Non-Intrusive (no change to systems / processes), Non-personal (software to emulate human action), IP Based (permit componentized orchestration of tasks), Repetitive in nature
There is an awful lot of hype today around digital from many sources. One way of cutting through that is to understand the potential upside and downside to the P&L / Financial Health of the organization. An equally important measure is to understand the needs of the procurement organization and develop sub strategies to embed digital technologies into the procurement process. The Digital Procurement journey does not always follow a “big bang” approach – instead organizations can take small and incremental steps to accomplish meaningful goals to help drive efficiencies and cost optimization.