Digital Transformation
May 16, 2017

Building a digital roadmap for procurement in six steps

Drawn by the hype, organizations are exploring ways to transform procurement with digital technologies to enhance the user experience, improve decision making, and eliminate manual effort. The challenge, however, is that many aren't sure where to start or how to generate impact.

According to a recent study by Harvard Business Review Analytic Services, only 24% of procurement functions say that their organizations are reaping the full value from digital. One of the obstacles that organizations face is maintaining the right focus on business outcomes – such as profit growth, working capital, risk mitigation, or innovation – rather than making standalone decisions to automate one-off processes.

Take robotic process automation, for example. Most firms see this as a nimble digitization move offering easy payback: buy a handful of RPA licenses and foist them on existing processes in the hope of achieving incremental efficiency savings.

But slam-dunk automation rarely works given broken processes, non-standard buying channels, manual receipts, and poor operational control on services spend (which typically makes up 55–60% of a firm's indirect spend). This approach leads to higher costs of rework, and too many hand-offs and exception. With workarounds, the total cost of ownership not only increases operating costs but causes user dissatisfaction.

A smarter and more long-term alternative is to embed the drivers of the desired business outcome – operational cost reduction, in this case – into a strategic automation roadmap. Follow these six steps to reap the full benefits from digital in procurement:

  1. To start, eliminate potential obstacles to your digital initiatives by mapping the current layers of master data and fixing any MDM rationalization issues – such as duplication and attribute normalization
  2. Follow this with an aggressive catalog program that ties into other buying channels, like blanket purchase orders (POs) and info records/price lists, while in parallel driving greater contract coverage on managed spend
  3. Enhance your contract management tools and workflow with natural language processing and RPA-based applications that help scan contracts, search and extract relevant metadata, and create outline agreements and catalog content
  4. Set up a strong analytics engine that can work across multiple data sources – POs, invoices, and expenses – to identify spend patterns, and track key performance indicators. Also, creating a balanced scorecard is key to monitoring the automation program's progress
  5. Start deploying specialized virtual buying assistants where neural chatbots leverage machine intelligence to route unmanaged spend through organized buying channels. This approach can bring an element of gamification and interactivity to the typically mundane ordering process through computational linguistics and conversational artificial intelligence algorithms
  6. Extend digital technologies, such as the internet of things, predictive analytics, and neural intelligence, to direct material categories like MRO, machinery and equipment, and consumables. This can have a significant impact as planning and inventory management are key requirements. By providing buyers and requisitioners with proactive alerts on safety stock and re-order levels that factor in supplier delivery patterns and lead times, technology can solve ordering and stock control challenges

Bookending these steps are two important considerations: spend time on the design of your approach up front. Fixing issues at this stage is much easier than after you have committed to a technology or deployment. And factor in a period of hypercare post launch to bring stability and greater user engagement to your initiative. 

In support of these efforts, developments among technology providers offer more choice and flexibility. As cloud-based e-procurement solutions build or add new services to their platforms, users need to make strategic choices between investing in point digital solutions and integration with future platform releases.

By deploying technology in this way, it is possible to bring close to 70–80% of unmanaged spend under control while also improving transactional efficiency and end-user satisfaction.

A digital roadmap that embraces design, technology, and process nuances can thrive alongside other e-procurement platforms. Supported by a robust business case and ROI goals, digital technology can help organizations achieve their critical procurement business outcomes with agility and minimal business disruption.

About the author

Raj Bhattacharya

Raj Bhattacharya

Vice President, Source to Pay Practice

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