While we hear an enormous amount about procurement digitalisation, few companies are ready to adopt and implement new digital technologies in their procurement function. The ever-changing technology landscape, and the problems that come with syncing with legacy systems, mean progressing on the digitalisation journey is often fraught with difficulties.
Yet too much focus on the technology itself also presents challenges: the human element is equally as paramount. Teams need to be multi-skilled to deliver value, however many CPOs believe their people are not equipped to turn strategy into results. To capitalise on innovative technologies and new data streams requires a constant review of capabilities and skills.
Companies that have made advances with technology are reaping the benefits. Much improved monitoring systems are helping businesses to understand their current position, often in real time. Simple automation, combined with visualisation tools, are speeding up accessibility to data and reporting. Machine learning processes can aid supplier risk assessment, and cognitive tools can analyse RFQ responses quickly, effectively and with reduced errors.
But the challenge of assessing how to build a complete digital roadmap for the future goes beyond implementing individual tools. Technology is an enabler – not the complete solution – and needs to be fine-tuned to match specific business contexts and legacy systems.
Taming the tech
To put leading-edge tech to work in procurement, CPOs must work out how and where it will be most useful and relevant to their business and procurement strategy. The first task is to understand which technologies are applicable to an organisation’s challenges and maturity.
The current buzz around Artificial Intelligence (AI), Machine Learning (ML) and automation has yet to translate into widespread benefits for procurement. But it can’t be disregarded, as it’s likely to be ‘when, not if’ these technologies become commonplace. This leaves CPOs with a difficult choice to make about the first step of their tech-enabled transformation strategies.
Forward-thinking CPOs could begin by running a series of AI/ML pilots for mature procurement functions or teams, with access to refined and structured data sets, and where the end objectives can be clearly defined; for instance, PO processing to reduce turnaround times, contract management to enhance compliance, or forecasting to improve accuracy.
In parallel to these pilots on mature, standardised functions, other procurement streams need to be nurtured by deploying an information governance model – a set of policies and processes that govern how an organisation’s information is recorded and maintained. This will help procurement teams to integrate disparate legacy systems, refine data to enhance the effectiveness of analytics, and make them ready for wider AI/ML adoption.
AI + HI
Human intelligence plays a key role in deploying new processes, AI/ML tools and information governance. Data collection, aggregation and enrichment need significant human intervention to ensure tools are fed with accurate inputs – a critical precursor to gaining actionable insights. Without the right capabilities to make sense of tools and technologies, apply contextual knowledge and interpret the resulting outputs, it’s difficult to make informed decisions.
For category and contract managers, data analytics is the largest skill gap. Teams struggle firstly with identifying and obtaining relevant data – including market intelligence, supplier portfolio optimisation and granular spend analysis – and secondly, with using these levers to best effect.
Plugging the skills gap
To identify and plug skills gaps, CPOs should start by assessing the roles, capabilities and skills needed, based on their functional strategy and technology roadmap. Gaps should then be categorised around criticality, ease of fulfilment and value to the procurement function (this process will vary widely across organisations, depending on their maturity and strategic plan).
Once the gaps have been identified and categorised, CPOs need to consider which capabilities to build in-house team, and which to fill through external resources or third-party specialists.
- Maintaining simplicity of internal organisational design. Too many teams with distinct roles can lead to inefficiencies and siloed working.
- Widening the procurement team’s skill sets to enable future progress. A classic ‘make versus buy’ analysis will help balance long-term objectives and short-term results.
- Knowledge of the skill sets and technology available externally. This enables teams to achieve more while keeping the organisation lean.
- Understanding of the time and resources required to hire, train and manage in-house professionals.
Shaping the optimal team
CPOs should always have a holistic perspective of their functions’ needs and capabilities, including available external resources and a strategic roadmap for up-skilling the current team.
In many cases, it makes sense to leverage external resources for specific capabilities, while also investing in developing more relevant internal skills. Specialist suppliers can offer deep expertise in category intelligence, data analytics, risk monitoring, eAuctions and innovation scouting, freeing up category managers to focus on supplier and stakeholder relationships.
Giving procurement the edge
By thinking differently about how to use their key assets of data, technology and people, and how to bring them together, CPOs can add more value for their businesses and stakeholders – addressing new opportunities and risks, and becoming an increasingly strategic partner.