Globality CRO Keith Hausmann explained to IT Supply Chain why the time is right for procurement to expand its influence across the organization and deliver the future of sourcing today
Although procurement includes a broad remit, the key objectives for procurement leaders across industries remain those of driving lower costs, ensuring availability and supplier quality, and driving compliance. However, companies are experiencing a paradigm shift in the way they procure goods and services with the advent of new operating models, talent, AI, and digital technology.
On top of these factors, the increasingly important environmental, social, and governance (ESG) agenda offers a unique opportunity to make procurement much more strategic and valuable. As we all know, this no longer just relates to what happens inside an organization but more broadly reflects the impact a company’s entire supply base has across the countries in which it operates.
Five steps to success
While the time is right for procurement to increase its influence across the enterprise, enabling inclusive, competitive, and sustainable self-serve sourcing for every strategic need, this can be easier said than done. In order to create this bold vision of tomorrow’s procurement model, companies must redefine how they procure goods and services, adopting five new guiding principles. These principles involve turning key aspects of the function on its head and viewing them differently. Procurement should shift its focus beyond overseeing processes and ensuring savings and compliance, to finding new and innovative ways to increase strategic value across the wider business and deepen relationships with suppliers by:
- Turning Spend Into an Asset – By viewing a company’s spend as an asset of substantial value for customers, shareholders, employees, and other stakeholders—including communities, organizations can utilize innovative ways to drive growth, create new enterprise value and, crucially, lead the company’s ESG agenda.
- Empowering Business Partners – Procurement should facilitate—not hamper—business partners’ abilities to act independently. An AI-driven procurement model delivering an autonomous, intuitive, consumer-like user experience that exceeds even today’s expectations will empower business stakeholders to innovate and generate new value for the business.
- Evolving to a Best-of-Breed Ecosystem – Technology today can cognitively manage processes, provide guardrails, gather relevant information, drive decision-making, become smarter, and eliminate inefficient analog dependencies. Organizations should prioritize building a best-of-breed procurement ecosystem that allows multiple digital solutions to work together and deliver superior user experiences.
- Allowing Procurement Talent to Flourish – Innovative digital technologies can free procurement talent from repetitive manual tasks and redeploy their capabilities across more ‘human’, value-creating roles, such as problem-solving, partnership and relationship-building and developing new business strategies.
- Redefining How Value is Measured – Procurement’s value scorecard should be redefined to align with the new vision for the future of sourcing. New metrics will include revenue-generating and growth-enabled KPIs, reinvestment in R&D and product development, and hitting ESG targets through direct and indirect measures.
The pillars of digital transformation
This transformation can be driven by reimagining how a company procures goods and services, using innovative technologies such as AI and advanced analytics to help procurement to work more efficiently and become more user-friendly. When managed correctly, modern technology can contribute toward a best-of-breed procurement ecosystem that provides an elevated stakeholder experience, superior provider quality, lower total costs, and increased collaboration. At the same time, freed from manual, repetitive processes— procurement talent can focus on partnering with business stakeholders to achieve their strategic goals with KPIs that match this new vision of procurement.
Competitive, inclusive sourcing
Understandably, procurement leaders are excited about the opportunity to positively impact the future of the global economy, using their company’s spend to enable its ESG strategy by ensuring all business is awarded fairly and transparently, and that suppliers across the value chain share the same sustainable values. Even before the COVID-19 pandemic, stakeholder expectations were evolving and becoming more demanding. Digital transformation has profoundly accelerated across businesses, regardless of sector, and a new procurement operating model is now a requirement not an option.
Delivering the future of procurement
Leading CPOs agree that the time is right to seize the new opportunities afforded by new ways of working and modern technology. These procurement leaders are implementing platforms that not only deliver visibility, efficiencies and cost savings but also drive strategic growth and create enterprise value. A Globality survey of 101 procurement executives revealed that 97% agree digitization will advance their strategic goals; however, less than 5% are fully digitized in a manner that meets or exceeds stakeholder expectations. To meet these goals, the time is right for CPOs to adopt the five bold new guiding principles that will allow them to deliver the future of procurement today.
Learn more about the five principles by downloading the white paper here.