From the traditional manual process to digital and intelligent, digital transformation is not only a change in ideas and processes, but also a new business model and management mode, so as to improve efficiency. Starting from the module of procurement and spending, the author of this article analyzes the trends and adjustments in digital transformation in detail for your reference.
As historically paper-based processes evolve from automated to intelligent, procurement departments must respond to data and cultural changes. Driven by today's digital trend, the field of procurement and spend management is also undergoing a profound transformation from traditional manual paper processes to digital and intelligent, which not only improves efficiency, but also brings new business models and management methods.
1. The goal of improving procurement efficiency has been achieved
"If there are no changes, we just wait for the product to arrive." A manufacturer's supply chain performance manager told me.
Half of the manufacturer's purchasing department had purchase orders that needed to be changed before the product arrived, and buyers had to look through thousands of rows in spreadsheets to update quantities or other parameters and send new information to suppliers by phone, fax or email.
However, using a supply chain collaboration tool can communicate order changes with suppliers in real time and confirm that suppliers are aware of revised orders, greatly improving procurement efficiency.
The company's CEO revealed that a customer saved $35 million in revenue by automating purchase order management during the COVID-19 pandemic, reaffirming the value of digital procurement.
According to the Dun & Bradstreet survey, 5 million companies, including 938 Fortune 1000 companies, have Tier 2 suppliers in the Wuhan area, indicating that the demand has existed for a long time. Moreover, the pandemic has highlighted the need for supply chain risk management, which in turn requires technology and visibility to support a more timely identification and response to potential risks to keep supply chains running.
"It's critical to know the vendors of your suppliers, but now building a database that can then be tracked through automation is a very inefficient and manual process," said Bryan Fuller, executive director of research at CAPS (Center for Supply Management Research at Arizona State University), adding that the entire industry is looking forward to smarter technology.
Second, the trend of intelligent demand is being moved
Procurement technology is developing from automation to intelligence.
Historically, procurement activities have been based on paper-based processes on RFQs and purchase orders, requiring manual entry, review, and signing. But for nearly 15 years, companies have been using procurement technology to automate processes to reduce administrative costs and move them into the digital age.
Today, it's common to automate transactional processes with robotic processes. Instead of replacing humans, software can automate repetitive, transactional tasks such as paying supplier invoices or replenishing inventory levels based on triggers such as how many products have been shipped.
When repetitive tasks are automated, procurement staff can focus on high-impact decisions instead of managing purchase orders. "Automation frees up our buyers to do other things to help improve our supply chain." According to the manufacturer's CEO, the next step is to use prescriptive analytics to understand contracts and spending, with even more expectations for technology to become smarter.
"The next step is artificial intelligence or predictive analytics, which tells you when and when to order based on the signals it learns, such as weather or consumption patterns, and orders can be fully automated," he stresses. ”
It can be seen that digital procurement is not only a simple automation, but also a development trend of intelligence. In addition to robotic process automation, the application of predictive analytics and artificial intelligence technologies is also becoming increasingly popular.
(Gartner's Predictions for the Future of Procurement and Spend Management)
For example, the head of digital procurement at Maersk Group, an industry leader, said they had conducted more than 10,000 electronic auctions, with buyers posting requests and suppliers bidding to win contracts, without having to pursue multiple offers, while helping to determine the best market price.
"It's a fully automated negotiation process and a market-driven negotiation, and I'm confident that most of the procurement categories can be successfully auctioned," the person in charge said. ”
Maersk has also developed machine learning tools to automatically read and interpret contracts with more than 15,000 suppliers.
"Instead of reading each contract, we can search for contracts with specific terms and determine our level of compliance with those terms," the person in charge said. ”
(Maersk is adding data scientists to its procurement team)
3. Practical challenges of data management
Before advancing the technology, the procurement department must first address the fundamental problem of "garbage in, garbage out". Even if a company uses enterprise resource planning (ERP), a data management system may not be able to support technology-driven procurement.
"If your spend data isn't consolidated, you can't do spend analysis; If you don't integrate contract data, you can't move to blockchain. ”
Today's tools need to structure data by type so that software can understand it. Gartner predicts that current spend analytics software will be replaced by tools that use unstructured data to generate insights, so that intelligent analytics tools can use data in any format for strategic guidance and spend analysis.
Tools like strategic sourcing and procure-to-pay (P2P) suites may transform into more comprehensive solutions in the future, including CSR and supplier diversity data from third parties. To support this shift, the most forward-looking approach is to build an open ecosystem of APIs that allow software to communicate behind the scenes to provide procurement staff with all the information they need in one system. The platform will also serve as a core trading data center for businesses.
But the biggest challenge facing procurement leaders today is to use the best solution for different purposes from different vendors, or to find a one-size-fits-all solution, which results in information being scattered across many databases and programs, especially in information silos.
In addition, external factors such as market intelligence, tariffs, labor issues, etc., make it difficult to establish a holistic view of the relationship with suppliers, which further makes it difficult to build an analysis system with full information.
These data management challenges are the service tenet of financial supply chain collaboration of Zhongke Xunlian Innovation and Research, they take the "digital bills" of the fourth phase of the mainland golden tax or the "Leqi service" facilities of the tax-enterprise direct connection model of the group enterprises as a breakthrough, not only to connect the traditional breakpoints to open up the end-to-end process automation from procurement to payment (P2P), but also to break the upstream and downstream data barriers of the supply chain to build a supplier network, so as to integrate the industry, finance, tax, capital and other information of the whole chain, and realize the visibility and independent controllability of the supply chain.
(Zhongke Xunlian - P2P full-process business of financial supply chain collaboration)
Fourth, the new face of procurement and expenditure
In the future, enterprise sourcing is expected to be more like Amazon and other consumer channels, where users can interact with automated chatbots to identify the products they need and place orders.
For some products, Amazon-like catalogs will allow users to place orders with approved vendors.
Procurement organizations are looking for data analytics professionals to manage the influx of data, such as Maersk, which has added data scientists to its procurement team and included a PhD student in applied mathematics for a three-year program.
"Ten years ago, data scientists weren't what we were looking for in procurement, but you had to have those skills to realize the opportunities that digital brings," they said. ”
(According to The Hackett Group, intelligent process automation programmers and cybersecurity experts are the most in-demand talent in the digital transformation space)
Obviously, the type of intelligence that a business adopts will depend on the specific problem that the procurement team wants to solve in their organization.
So, it's best to start with a small digital project, such as adopting robotic process automation for accounts payable or adding predictive analytics to inventory management, rather than revamping an entire procurement department at once.
But in the process of digital procurement, it is important to be aware of the importance of cultural change.
Successful digital procurement is not only the application of technology, but also the establishment and promotion of a new business culture, only by treating digitalization as a way of life, rather than a temporary project, can enterprises truly realize the value and potential of digital procurement.
This article is written by Everyone is a Product Manager Author [Kun Shao Said], WeChat public account: [Kun Shao Said], original / authorized Published in Everyone is a product manager, without permission, it is forbidden to reprint.
Image from Unsplash, based on the CC0 license.