Procurement and the Digital Age
In October, 2017 many of you received an invitation to the inaugural Digital Procurement and Supply Chain Networks Think Tank Summit described as “… an exclusive opportunity for technologists and strategists to connect and discover new possibilities to transform digital supply chain networks.” You recognized that digital technologies are impacting supply and demand from all markets. We promised this would not be a single conversation. Instead, it is the start of our journey with you on this revolution in procurement.
This blog is part of a series following the success of our SAP Think Tank Partner Summit in New York on November, 8th, 2017. Ascending to the 48th floor of SAP Hudson Yards, you arrive at the SAP Leonardo labs, a sanctuary of thought leadership and innovation. Below are some of the digital innovations on display.
On that day, we brought together the leadership team of SAP Ariba, principals from our partners and Chief Procurement Officers (CPO’s) from some amazing clients to spend a day exploring what the future of procurement might look like…and what a future it has in store.
The morning featured a “Ted Talk” style format with both SAP and industry thought leadership sharing their observations and predictions. In the afternoon, we split our group of 62 into smaller teams and named them after some of the world’s greatest visionaries. (Newton, Galileo, etc.). Each team followed the same demo journey to see new technologies that are transforming procurement today. Then each team worked individually in “design thinking” style workshops to address current pain points and a vision for the future.
Team Newton was co-facilitated by myself and Elisa Mirkil, a colleague from the SAP AppHaus design group. The team members consisted of Tifenn Dano Kwan (CMO of Ariba), two CPOs as well as industry analysts and digital transformation Practice Leaders from some of the SAP’s partner community. After a brainstorming session, our team decided “data was the biggest of all the problems” – it was all about the data. It is ironic, how after thirty years, the term “garbage in – garbage out” still rings true.
Our efforts generated many ideas and one proposed solution emerged from those ideas which involved a data lake, an application and a new business model. The following picture illustrates the top challenges that were identified, the design statement that was selected and the idea coming from the brainstorming session as well as a snapshot of the final presentation board and the team at work.
But what does all this really mean? According to a report by The Hackett Group, the situation in procurement is different in that “84% of procurement organizations believe that digital transformation will fundamentally change the way their services are delivered over the next three to five years. Yet only 32% have developed a strategy for getting there.” For the past couple of years, the buzz word “digital transformation” has been permeating on every platform. Everything from finance and customer service to sales & marketing and supply chain are being re-designed for the digital age. But for the most part, procurement has been overlooked. Sure, there are discreet, cloud based, procurement tools but there are only isolated cases of an outcome based, data driven approach to better procurement.
One reason for this lack of true transformation is the confusion around terminology such as digital transformation, digitization and digitalization which can make it difficult for CPOs to know where to start. CPO’s are often unable to articulate a strategy because of the various words used in the context of digital. The other challenge is that procurement is a “middle child” that sits between the supplier and the buyer in their organization. This means that most transformation they attempt can affect either or both groups which requires longer planning cycles. Many C-level executives, including CPOs, are asking what their roadmap for digital transformation should include and which vendors can they trust to deliver real value.
Companies need to have a roadmap for how they will engage these new technologies in a manner that makes sense for their business and their budget. Many of the technologies that exist today have a low-cost barrier to entry and a quick time to value. Making just a small investment towards one or two areas can have a significant impact but it should not be done in a silo, rather as part of an over-arching strategic roadmap. From our discussions with the team, I learned that many of the quick successes are in centralization and cost reduction which ignores the fundamental shift that is possible. Done correctly, there will be changes across the entire business through transparency and visibility of the data. Below is a drone inspection service using virtual reality. Operations can inspect damage from miles away, identify what parts are needed and order through the integrated Ariba network.
Drone Inspection and Virtual Reality Demo
In today’s environment, the CPO is expected to help shape the company’s strategy, digitalize procurement processes and identify important emerging technologies. That is a tall order for most CPOs since there are so many technologies available and more becoming available every day. It was not surprising, therefore, to have our group (which included two CPOs) select data as the issue to tackle first.
Access to previously inaccessible data has the potential to drive significant efficiencies for both better supplier management and better buyer behavior. But which data do you pull? From where? How? This is the challenge question our team addressed that afternoon at approximately 500 feet in the cloud(s)
Procurement requires access to vast amounts of data to effectively manage spend. The data is usually spread across many disparate systems and formats and the process of retrieving gathering and analyzing that information leaves little time for anything else. The time involved reduces effectiveness and data is missed. To make matters worse, they don’t even know if the data they looked at is the right data.
Digitizing the data is critical to procurement organizations. The ones that get this right will have a substantial head start on delivering real value to their customers. Data must come from a wide assortment of sources and formats and be harmonized to be useful. Our team’s proposed solution was a data lake that many participants can supply data to and that would be accessible via an application providing a sort of Wikipedia style location for all to share.
“It is a capital mistake to theorize before one has data.”- Arthur Conan Doyle
Here are the other blogs in the series so far:
John E. Roche, CMC, Executive Client Advisor