Instinctive Enterprise
Nov 19, 2018

Procurement's journey within the instinctive enterprise

As industries continue to face disruption and technology creates opportunities for innovation, organizations need to evolve in radically different ways. We believe the enterprise of the future will be a new species of business, perfectly adapted to this challenging landscape. We call it the instinctive enterprise. It moves smarter, faster, and closer to the customer, outmaneuvering threats and devouring opportunities.

By connecting its people, processes, and industry knowledge, the instinctive enterprise makes faster, more accurate, and forward-looking decisions. Operating with instinct, it behaves more like an advanced organism than a fixed organization. It has artificial intelligence (AI) as its central nervous system, which enhances the power of prediction so it can anticipate customer needs and potential threats and act on these insights at speed.

So what role will procurement play in an instinctive enterprise? Imagine a procurement function that is a strategic partner, critical to helping an organization achieve its business and financial goals, such as revenue and earnings growth and working capital optimization. One that owns the mitigation and reduction of third-party risks. One that has the ability to uncover external business opportunities that drive innovation and provide a competitive edge.

To achieve this, procurement must move away from activities that are purely cost driven and align with the organization's fluctuating priorities. This might be profit or earnings improvement one quarter and then product innovation, third-party risk management, and market-share or revenue growth the next.

To reach this level of agility, procurement needs to develop and embody the three core traits of an instinctive enterprise. To begin this journey, there are a number of steps procurement can take.

Connected ecosystems

For procurement this means:

  • A balanced, well-structured, cross-functional team of talented procurement professionals, tightly connected to their internal stakeholders across IT, finance, R&D, and HR
  • Being trusted business partners, involved in key decision-making across strategy, corporate development, budgeting, and revenue growth
  • Rigorous supplier relationship management and collaboration to find better ways of working that meet customers' needs. And automated reporting and alerts on suppliers' financial, operational, and reputational KPIs
  • Effective use of application programming interfaces and system integration to provide a real-time view and control of every dollar the organization spends 

Predictive insights

This includes AI-based predictive modeling of supply-chain risks (guiding sourcing, working capital, and contract-negotiation decisions) and suboptimal or non-compliant spending trends to automatically prevent cash leakages before they happen.

Adaptive workforce

This will be demonstrated by:

  • Focusing hiring and training on current and emerging technical capabilities and emotional intelligence skills
  • Balancing resource management with speedy access to external partners to support short-term adjustments in business needs
  • Full adoption of AI-based automation of tactical buying activities, freeing up junior procurement professionals to work on higher-value tasks
  • Tight and real-time alignment of procurement team member goals with broader organizational objectives and changes in the supplier network. This takes advantage of supplier opportunities as soon as they appear and avoids predicted risks

About the author

Simon Rycraft

Simon Rycraft

Partner - Source to Pay, Consulting Practice

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