Digital Transformation is Disrupting Procurement
Digital transformation is high on CPO's agenda. Procurement-as-a-platform (PaaP) is leading change and innovation. Finding the right PaaP solutions for your business needs in collaboration with key stakeholders will lead to successful digital transformation.
What is procurement?
Procurement is procuring goods, products, or services from external sources. It includes purchase planning, supply management, supply-chain handling, sourcing methods, logistics, price negotiation, inventory control, risk management, legal and value analysis. It is constantly evolving and driving innovation and is an important contributor in helping organizations grow. Procurement creates value from the supply market by building relationships with key stakeholders.
When discussing procurement within a modern-day context, it is important to note how the procurement function has evolved - from a clerical, order-taking role to a far more strategic role. Modern procurement functions operate cross-functionally with a more diverse portfolio of activities than in the past. Functions include: selecting suppliers, maintaining supplier relationships, developing company supply strategy, and solidifying collaboration between suppliers and intra-company personnel to shape the organization. A modern-day procurement definition also requires recognizing the influence of digital in its function. According to Deloitte, digital procurement can be defined as the application of disruptive technologies that enable Strategic Sourcing (S2C) to become predictive, Transactional Procurement (P2P) to become automated, and Supplier Risk Management (SRM) to become proactive.
What is digital transformation?
Digital transformation is a term that is often misunderstood. It can be used to describe integrating new technologies, automating operations, going paperless, or the rollout of digital products and services. However, it’s much more than adding tech processes or bolting on a digital solution to an operational problem. For organizations, digital transformation encompasses enterprise-wide culture shifts that ask companies to embrace innovation, rapid change, and experimentation. In addition, the digital change process integrates technology into every aspect of an organization and transforms everything from business practices to customer experiences. At Olive, we define digital transformation as adopting the right technologies and processes that transform companies' internal and external-facing operations to achieve an overarching business goal.
Understanding digital transformation in the procurement function
In the digital age, expectations for procurement are no longer confined to the contribution to the bottom line. To develop the right vision of what a digital Procurement organization is - and to develop into one - it is important to look at digital transformation from a big-picture viewpoint, from an operating model point of view. This approach is important because it reaps the benefits of digital transformation. However, it is important to note that digital procurement is not just about automating outdated processes. It is about doing things in a new way that is more efficient and effective in delivering value and growth to the organization.
‘’Surviving in the digital reality will require procurement to move beyond bottom-line efficiency by embracing digital and transforming the supply chain to become a valuable strategic business partner.’’ - Kearney
The journey to digital procurement: The influence of digital transformation on procurement is not a linear journey. The very foundation of the organization changes as repetitive procurement tasks become automated, supply market data becomes more prevalent, and resources shift from focusing on transactional and administrative tasks to integrating data and examining analytics. Thanks to the leveraging of AI that digital transformation allows for, companies can optimize and automate operations to improve delivery times, manage inventory, optimize customer experiences, and create new experiences that increase satisfaction and boost sales.
Looking to the future: Digital transformation’s role in the procurement function will continue to grow in importance in the coming years. It is predicted that by 2025, 20 percent of procurement employees will be data experts, and 70 percent of savings will be generated by data analytics. In the future, procurement will no longer be a large siloed department but will be integrated into the broader organization’s value chain. The right solutions will remove unnecessary processes, and each available resource will come together to form a network of expertise to address business issues.
Why The digital transformation of procurement is high on CPOs’ agenda
“CPOs are also asking which of the new digital solutions will bring real value to their companies today. Which of the many “digital procurement” software vendors will live up to their promises? What should their company’s roadmap for digital procurement look like?”
It is no surprise that the digital transformation of Procurement is high on CPOs’ agenda. The procurement world is advancing rapidly, and digital transformation efforts are needed to keep up with the accelerated rates of technological changes.
Let’s look at a CPO whose digital transformation efforts in procurement have paid off substantially. Isabel Hochgesand, CPO, Beiersdorf started a digital transformation journey 7 years ago. Isabel and her team set out to adapt to the consumers’ increasingly fast-moving shopping behavior and constant change of product preferences and deliver competitive advantage and added value for the company’s success. Beiersdorf standardized their IT–platform to function globally with harmonized processes and full transparency in procurement on global spend. Thanks to digitization efforts, the organization moved quickly from lighthouse projects in corporate procurement to a global application. Isabel explains how digitalization became the critical efficiency driver in these procurement processes. By automating the inquiry process, Beiersdorf was able to free up resources, putting more focus on value-adding activities, such as exploring new markets and working closely with business partners on strategic topics.
“The digital operations advantage is about more than great tools. It’s a combination of people, processes, and technology connected in a unique way to help you outperform your competitors”.
-Leading Digital: Turning Technology into Business Transformation, George Westerman, Didier Bonnet, and Andrew McAfee.
A successful digital transformation journey in procurement:
Suppose your organization is unsure of how to navigate digital transformation. In that case, Olive is here to help your organization find the right digital solutions, including Procurement-as-a-Platform (or PaaP) solutions. Using your business requirements as a compass and gaining consensus on these requirements in collaboration with key stakeholders will lead to successful digital procurement.
Let’s use the example of identifying the right PaaP solution for your business needs. Procurement-as-a-Platform (or PaaP) cohesively offers a ‘’package’’ that includes several characteristics and attributes that elevate procurement’s strategic role within the business. As outlined by the Hackett Group’s Five Imperatives for Creating Greater Procurement Agility, PaaP is important because it can:
- Reallocate resources from transactional focus to value-adding
- Embrace digital transformation
- Leverage analytics-based decision making
- Adopt stakeholder/customer-centric service design and delivery
- Re-skill the Procurement function
Using Olive to find the right PaaP can simplify and streamline the process.
From Procurement Team-Player to Collaborative Business Partner
Digital transformation within the procurement function is not just about finding new technology. It’s about continuous agile collaboration with key stakeholders to ensure that you are procuring solutions that will drive digital transformation and managing all of your technologies to ensure they all feed up to the big picture. Making this behavior part of the fabric of the organization will sustain a culture of digital transformation. Although the CPO plays a vital role in leading the digital procurement process, other key stakeholders cannot be overlooked throughout the journey.
Your digital transformation team is most likely made up of people from different cadres within the company. The C-suite executives are important because their voice is representative of the company’s position on important matters. The managers below the C-suite level are closer to the company's day-to-day operations. They interact with the front-line workers and pick up important sentiments from them. Their feedback is important to collect to improve user adoption later and ensure that the chosen solution works for the entire company. The supervisors directly contact the front-line workers and provide incentives and rewards for desired outcomes. Procurement must partner with and empower those teams to enable advanced procurement or add more automation to their process. Olive can help ensure the digital products that are procured are buying are the best possible fit.
“Many companies lack the knowledge and experience to identify the right tool and collaborate effectively. The result is technology partnerships that may not complement management’s aspirations. This often causes delays in the trial and adoption of new market trends, costing companies precious time in getting ahead of their competitors.” - Kearney.
Aligning the affected departments and stakeholders will streamline your process for assessing the needs, gathering requirements, discussing and evaluating the options. Olive was built to facilitate and support this concept. A major roadblock in finding the right technology is understanding exactly what your stakeholders and collaborators need in their ideal solution. With Olive, it is painless to quickly capture feedback from around your organization without the overhead of having to meet with everyone individually. Listening to these needs will give you a broader perspective on your organization's needs and align stakeholder expectations accordingly.
Our platform is the ultimate tool for digital transformation and can help your company align on the right solutions. Olive facilitates an agile, collaborative software sourcing process and provides you with the right tools to select the best digital solutions for your unique business needs.
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