Procurement is a purchasing process that controls quantity, quality, sourcing and timing to ensure the best possible total cost of ownership. Procurement professionals are nowadays key member of firm’s core team and are actively participating in new product development, managing supplier risk and sustainable procurement. Digital technologies are enablers and supporting procurement in this direction. Procurement leads needs to define a clear strategic roadmap to achieve digital procurement.
As you can see from above diagram, a strategic roadmap covers the following steps:
1. Define Procurement Strategy
2. Understand benefits and pitfalls of Digital Procurement
3. Assessment of current stage
4. Select digital tools and partners
5. Define scope of current transformation
6. Get buy-in from stakeholders
7. Implement as per plan
Defining Procurement Strategy
Strategy should clearly articulate the goal of the organisation. It should improve effectiveness, efficiency and sustainability. From the effectiveness perspective, the goal is to reduce price, or total cost of ownership (TCO) and up the revenue. Sustainability means reducing supplier risk, continuously innovate and show agile way of working.
Beside effectiveness and sustainability, it’s important to improve efficiency. Efficiency means that you have insights or actionable intelligence, work you do should enhance customer, supplier and workforce experience and encourage collaboration. The future of Digital Procurement will enhance all three areas of Procurement, as shown in the diagram below. Strategic Sourcing will become more predictive, and transactional sourcing will become more automated, with supplier relationship management becoming more proactive.
Understanding Digital Transformation
It is always better to understand deeply the benefits and pitfalls of digital transformation, and is easier to sell ideas of transformation to senior management and users once you have thorough knowledge on this area.
Below is a diagram that depicts the key benefits and pitfalls of digital implementation.
AssessingCurrent Stage and Digital Tools Selection
People, Process and Technology are three core elements for successful business transformation A balanced focus is needed to address each one of them. Ignoring any one of them means that you cannot create true value of transformation.
Digital tools impact the four key areas of automation, decision-making, connectivity, and innovation. Thus it is always better to select tools according to the procurement strategy or objectives.
Defining Scope of Current Transformation
The following questions address the scope of transformation.
• Clearly define what is covered and
• How much time it will take to achieve the defined scope
• Assess the cost of procurement transformation
• Build the business case so that you can get senior management approval.
The scope should clearly answer following questions
• What will you do as part of procurement transformation?
• What will you not do as part of procurement transformation?
Getting Buy-in from Stakeholders
Sponsorship is critical for procurement transformation and he or she should be Senior most in the organisation. Depending upon the scope, procurement transformation could be expensive. So spend some time calculating the return in the form of Internal rate of Return and Net Present value of your proposed investment.Procurement success is based on stakeholder engagement. The better the engagement, the better the chance for success. So, take views of all control functions you generally work with e.g., legal, compliance and data protection.It is always better to take views from client who you are supporting. Your client may have concern on supply chain or concerns around how the vendors would react to it.
Whatever the concerns might be, list them down, discuss the concerns and make sure you and your stakeholders agree on the game plan. Finally, always take views from your own procurement team. Create a team of change agents whose responsibility is to take continuous feedback from team members
Implementing the Plan
Once you have done all of the necessary prep work, it’s time to get your digital strategy moving. These three important aspects, the people, process and technology must be in alignment for a digital solution to be effective and holistic.
The real value in digital solutions is in garnering the corporate buy in, or in other words training the people to make use of digital solutions. The people, however, are ineffective in their application of digital solutions if the processes are not in place to support transformation. Interestingly the technology implementation requires the most hard dollar costs, and returns the least in terms of ROI.
The diagram below shows the ten guiding principles for a successful implementation.
Key criteria of successful implementation of digital solution:
• It should encourage Customer First Culture – Culture within the organisation must be that you deliver customer needs; features that are beneficial to the customer or quick turnaround or low cost. Whatever it is, the customer must be first.
• Instant Feedback – in a digital world, customers should expect instant feedback to their requests.
• Real-time – Data should be the latest.
• Automated – Computer processing as possible (ideally 100%) and without the need for manual intervention.
• Intelligent – Service should be able to anticipate our customer’s next steps and prepare and suggest.
• Online – It should be accessible anywhere with an internet connection, with no limitation on device and usage.
• Beautiful – Bringing what is most important to the customer to the forefront.
• Driver for change – Digital means business processes changing to fit with the computing world and not the other way around
• Regular Improvements: A digital platform should be improving itself as often as necessary.
Procurement is about more than purchasing goods and services from outside sources. It’s a vital part of the business for any company that wants to grow fast and stand the test of time. Transformation of procurement is multi-year program. If it is done right, it will deliver significant value to the organisation. Some of them are cost reduction, improved employee satisfaction and experience, reduced risk from supply chain and improved turnaround time for agile projects.
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