A click here, a click there; technology has never made it easier for us, as consumers, to purchase what we need. For the corporate world, however, with a myriad of moving parts, this is a very different story. It’s easy to forget just how vastly the buying process differs for corporations versus consumers. For the former, it often involves a deluge of forms and requisition templates; a wait for vendor responses; the request from procurement to buy something slightly different to what you’ve ordered; limitations around only using vendors already on your system; and more. Whilst technology can certainly smooth the experience for consumers, it can easily serve as a logjam for businesses and corporations. That is, unless accompanied by the right process and skills.
People and processes – stronger together
Procurement hasn’t been impervious to digital transformation; it has simply fallen short of its stated aims, due to a common organisational error. It is not to say that technology hasn’t been explored to rectify the situation. Rather, technology is being invested in as an opening gambit – a Hail Mary to those aforementioned problems. As such, the siloed box being ticked doesn’t embrace the data available, the people using it, and the processes being implicated.
Close to 80% of procurement leaders across Europe and the US agreed that tech investment should be a boardroom priority, according to Efficio’s Procurement 2025 study, published in 2018. But half admitted to purchasing resultant solutions simply through a fear of missing out, rather than based on a full understanding of the product’s benefits. And here lies the issue.
If the tech isn’t working in tandem with its people and processes, it’s likely to be working – at best – adjacent to them, and – at worst – against them. No matter how shiny, advanced, or impressive the solution might be, if it’s not being both informed and guided by bespoke strategy, then really that’s all it is – a nice, new machine. An accessory. If anything, it may even turn out to have a detrimental impact on proceedings, as it may hinder the parts of your business that are already in good shape.
The holy trinity of procurement innovation: automation, communication, blockchain
We’ve often compared this error to building a steam-powered Tesla. The machine is elite, but it has no fuel in the form of data or application. So, it doesn’t move.
With any digital transformation, the technology should be the result of company strategy and objectives, not the precursor. Solutions should be employed to support an operating model. And in procurement specifically, there are three core ways that this relationship between tech and model can be established.
1. The first is automation. Hardly a dark secret, the role of robotics and AI are well entrenched in the supply chain, but very few organisations have got close to automating their purchase to pay (P2P) activities yet. This is despite AI already making automation in this area possible, as it unifies and connects the numerous different processes that make up a P2P network. It remembers the requisite processes, translates them, and encourages resultant interaction. Ultimately, the business user can handle queries and make orders much more quickly. But it also highlights new opportunities through spend and contact data analysis, and automation helps to highlight risk forecasts with key suppliers with your data pre-prepared and aligned.
2. The next strand is communication, striving for more of a B2C marketplace mindset, as seen through the likes of eBay. Having to go through specific individuals, often in procurement, to speak with suppliers is not uncommon in the B2B world. This can slow down communication, lead to confusion and create bottlenecks. Tech in the form of a dedicated B2B marketplace can help to mitigate these challenges and allow buyers and suppliers to interact based on pre-set rules and frameworks so that control is not lost.
3. And finally, the reliability of procurement data is set to be one of the biggest step-changes across the supply chain, largely as a result of blockchain. Compliance checks, audits, performance monitoring, and tracking of suppliers take up a lot of the procurement team’s time and, even then, the data is often disputed; but blockchain serves as a fool-proof way of ensuring accurate data. The data is encrypted and cannot be tampered with, without anyone in the chain being notified.
Driving towards corporate comfort with data
Data and its trustworthiness are central to the impacts of that final tech advantage – it should be data that companies build their procurement digitalisation strategies around. The above solutions are potentially game-changing but, as stated:
You need to formulate a conducive operating model first – and it needs to put data at the heart of decision making.
Corporations need to take ownership of their data and resist the urge to over-configure if they are to embrace these technologies effectively; they need to better visualise their data and turn it into usable insights for the business, and they need to capitalise on their existing knowledge.
An effective way to get started on this first element is to implement a common taxonomy for spend and contract data so that opportunities for spend optimisation can be identified. Turning data into insights that are well visualised is achieved by first understanding what insights will help the business to make better decisions, and then adopting software that takes required data from disparate systems.
‘Managing your knowledge’ means capturing and curating knowledge and data generated by your processes so that they can be reused, over time reducing the need to reinvent the wheel. When identifying procurement tools in which to invest, make sure you have designed your knowledge management process first, as that will inform what you really need.
By basing your tech journey on facilitating data-driven decision making in procurement, you’re far more likely to generate positive returns. Specifically, you’ll be making your procurement function more efficient, effective, and attractive to potential suppliers.
Ultimately, technology in procurement should be seen as an enabler, rather than a panacea, to a more streamlined corporate purchasing experience. For too long, organisations’ primary objective in their digitalisation efforts has been to ease the process for consumers. Now’s the time to extend that same courtesy to the corporate world, making them a little more comfortable too.
Simon Whatson is the author of PROFIT FROM PROCUREMENT: How to Add 30% to Your Bottom Line by Breaking Down Silos with Efficio colleagues Alex Klein and Jose Oliveira, published in 2021 by Wiley.