Digital Transformation in Procurement: When Business as Usual Isn’t Enough
Every organization is a commerce business today. That is, in order to operate, it needs to buy and sell products and services. Consider how many procurement transactions are mission critical to your business to the degree that just a single break in your supply chain can wreak serious havoc. For example, if you manufacture a simple product, just one late order or quality issue from a supplier can shut down manufacturing, impact critical project deliverables, affect customer satisfaction, and potentially disrupt financial results for your entire business. Suppliers can also pose environmental, reputational, and societal risk to your business. For example, a supplier could be exposed for using child labor or having hidden, dangerous chemicals in its raw materials that can end up in your products without your knowledge.
So the pressure is on for procurement professionals to find and source the best suppliers; negotiate the best prices and terms; balance supplier quality, reliability, and cost on an ongoing basis; manage contracts and payments; and oversee global spend. At the same time, they need to control risks while managing massive amounts of data on suppliers, products, and transactions; controlling costs; and evaluating supplier performance.
It is a tall order – especially given the fact that procurement has evolved in recent years. As noted by IDC what was once a one-to-one process (where procurement professionals place orders on behalf of lines of business) is now a many-to-many process (where line-of-business buyers across the organization place orders). Your business may have hundreds and even thousands of buyers dealing with potentially hundreds of suppliers of thousands of goods and services. And increasingly, the supplier relationships being built by these buyers are strategic and collaborative. So they need to be managed with care.
You may have a patchwork of best-of-breed procurement, contract management, invoice matching, and EDI solutions to try to manage and control this kind of chaos. But given the business-critical nature of procurement – and the massive amounts of money flowing through your financial system – do you really have the transparency, control, and insights to optimize enterprise-wide, many-to-many procurement and still achieve economies of scale with common suppliers? With data scattered across siloed systems, you need ways to bring it all together and analyze and report on it to help people:
- Plan and analyze to make strategic sourcing decisions that meet company standards and goals
- Sense and respond to events and trends – for example, when supplier orders are late or incorrect
- Model and predict future outcomes – for example, so that manufacturing can predict with a high level of accuracy when suppliers will actually deliver materials and can choose vendors and plan production accordingly
Viewed from this perspective, anyone involved in procurement is in an information role. They need real-time, complete information and insights at their fingertips to manage effectively and make the best decisions. And given that procurement data and processes are likely very fragmented, adding another “fix” to your complex web of existing systems won’t be enough to make this happen. What’s needed is digital transformation.
At SAP, we do this through the next wave of innovation for SAP S/4HANA, our next-generation business suite. Now all areas of your business – including procurement – can be connected, with SAP S/4HANA as the digital core. This digital core enables digitized, mission-critical processes that interconnect all aspects of the digital value chain. That includes workforce engagement, the customer omnichannel experience, assets and the Internet of Things, and supplier collaboration and business networks such as the Ariba Network. Imagine having:
- Secure, many-to-many, networked collaboration with trading partners
- Consumer-grade usability and mobile apps for business users
- Full source-to-pay processes, including spend analysis, sourcing, contract management, supplier management, procurement, invoice management, and payables management
- Comprehensive solutions with deep category-specific capabilities for direct and indirect materials, services, contingent labor, and travel and entertainment
By replacing your patchwork of procurement solutions with the digital core and supplier collaboration business networks, you empower buyers and trading partners with real-time information and insight. You can safely share compliance, risk, performance, and transaction information. And you have the real-time visibility and intelligence needed to choose the most appropriate suppliers to align your business decisions and react to changing market conditions with utmost agility for greater competitive advantage. This results in benefits such as increased profitability enabled by employee compliance and sustainable cost savings; effortless user experiences with unprecedented transparency into spend; and faster vendor order and invoicing cycle times with fewer errors.
What’s your plan to drive digital procurement transformation? Read the IDC Technology Spotlight, “Business Networks and Digital Transformation Combine to Modernize the Complete Source-to-Settle Process,”to learn more and start your digital transformation journey.