Further to my previous blog on procurement being used as the lemon press of an organisation, I want to highlight a different part of a trend and development within the procurement and strategic sourcing area. Luckily there are great things and shifts happening in the world that I’m so passionate about.

Findings from recent studies show that 84% of procurement organisation’s strongly belief that a digitalisation of the procurement processes will dramatically change the way their services are offered within the next few years.

The more astonishing is the fact that only 32% have developed a digitation strategy and roadmap!

One of the core areas where fast growing, high impact companies are focusing on to initiate digital initiatives is the procurement function.

Is digitalisation of procurement only about software?

No certainly not! If we look at the digital transformation of procurement we need to think in a broader perspective than just software. It impacts procurement in all its aspects, since it is about changing and automating existing and probably years’ old processes. Developing a more effective and efficient manner to achieve savings in costs and time. The transactional, strategic and vendor management part of procurement will all be impacted.

Using innovative technology such as block chain and artificial intelligence, will make transaction in procurement more automated, strategic sourcing far more predictive and manageable and vendor management more proactive.

Traditionally strategic sourcing needs to plan upfront what goods or services they need to source to get the best value for money option. Using state of art technology allows them to manage spend and spend volume as it allows them to act more accurately and make real-time decisions.

Using artificial intelligence will enable you to run spend analysis during any stage of the sourcing course and after. It also will allow you to identify market and vendor performance analysis, even before starting a vendor sourcing process.

Drawing a conclusion from the above it is a clear that innovative technology/artificial intelligence gives you a much greater insight and context about spend to inform your procurement and strategic sourcing function. And keep in mind that almost 80% of all procurement leaders are having cost reduction, cost savings and spend optimisation as their top business priorities, it’s obvious that investing in digitising the procurement function is something that can’t be ignored anymore.

What about the digitalisation of the P2P process?

A lot of the procurement function’s time is ‘wasted’ on operational/administrative tasks; this prevents them to explore ways to improve the procurement processes, tools, procedures, as well as spend time on vendor relationship management and market research. Using something such as Robotic Process Automation (RPA) will help to manage these repeatable, simple but time consuming tasks. This will allow procurement to focus on the area’s they are meant to do. It will also help to streamline the R2P process, without almost any human interference, therefore eliminating human errors.

Procurement digitalisation and vendor management?

Within the procurement function, vendor management requires the highest degree of human involvement. Development, managing relationships and risk mitigation are essentials within the procurement field. Those responsible for this part of the procurement function need to know their vendors inside – out.

How can digitalisation help with vendor management?

With the use of data. It will help to monitor all your potential vendor risks by monitoring them through data that has been collected from 3rd party sources.

By engagement with industry experts through methods such as crowd-sourcing, one will have access and availability to meaningful and valuable data. It also means the procurement function has constant access to information of their partners and vendors to enable them to develop strategies, spot opportunities and also detect potential risks.

As we can conclude from the above, these are exciting times in the world of procurement and strategic sourcing. Digitising procurement will help to optimise its processes by using meaningful data which gives procurement in-depth knowledge about the market and their vendors. It will make processes more accurate and less dependable from human intervention, so less room for errors.

To conclude

These are still first steps in an ongoing journey to transform procurement and strategic sourcing. I expect to see further development, changes and evolution in the next 3 to 5 years (hopefully sooner) towards next generation procurement and strategic sourcing. Data gathering from within the business as well as from outside the business will be crucial in making decisions in the future.

For the more frequent readers; you might have noticed that I didn’t use any similarities with my other passion cooking this time, sorry for that. Digitalisation in the kitchen has already taken place many years ago. Not speaking about electronical devices, but I think the microwave was actually the first real digitalisation in the kitchen.

There has been the change in how we find our recipes, from using cook books to now having the option to find them on a tablet. The introduction of sous vide and the latest innovation of the 3D food printer. Similarities with digital procurement? The availability of all kinds of recipes, new techniques, trends and also developments. Optimising processes in the kitchen. Conclusion in both worlds you need to keep your eyes on the ball, or plate or technology to stay ahead of the game.

So get ready, it’s going to be an exciting journey! Don’t lose out!

AUTHOR
Eric Mesrits
Global Head of Services Procurement, Hays Talent Solutions
Drawing on more than 30 years’ experience in sourcing and procurement leadership, Eric has all the trophies and battle scars of driving strategic procurement change, and will gladly discuss his learns with you.

Quoted as saying he stopped ‘buying’ in the 80’s Eric’s view of procurement is firmly vested in the importance of strategic relationship development, both internally and externally. When he’s not immersed in connecting stakeholders for services procurement solutions development Eric is a busy entrepreneur, educating the world’s top chefs as a certified olive oil sommelier.