Digital procurement: the alternate reality

Transforming existing systems and processes with technology was frequently cited as the top procurement objective for 2018 in our recent study, “Procurement 2025: Is digital transformation driving more effective procurement?”. 

42% of survey respondents consider themselves to be ahead of the competition when it comes to delivering this transformation – clearly indicating its importance within these organisations. This points to a function that is embracing new technologies and the opportunities they can potentially bring. But is this the full story?

Our experience suggests an alternate reality, with many procurement professionals confused by the current technology provider landscape and unsure of which digital solutions can potentially add value to their organisations – both today and in the future.

Even of those companies investing in technology, many are, in our view, still leaving significant amounts of time and money on the table while they reinvent the wheel on vital but repeatable procurement activities related to cost reduction and strategic supplier management. 

We believe there are numerous cases of digital transformation activity being driven as much by fear of missing out (FOMO) as by a true understanding of what the long-term business case for it is. Indeed, a staggering 48% of our respondents agree with this statement. Add to this the fact that some procurement functions believe a one-hit investment in technology will enable them to accomplish their business objectives, and the potential perils posed by a combination of these attitudes are clear. The reality is that companies need to embrace the view that digital transformation is a journey and one they need to remain on top of for the longer term.

Focusing on short-term fixes is not new to procurement functions. Delivering savings that may not be sustainable, failing to place sufficient emphasis on capability development and, even in the case of external players such as consultancies, not focusing enough on the long-term transformation of clients, have all been limiting factors for the industry.

The next five years

What do current trends tell us about the procurement function of the future? It is well documented that procurement needs to become more strategic and less tactical if it’s to deliver greater value to the business. But what does this mean in practice – and in a digital era?

One interpretation is that less time should be spent acquiring, curating and analysing data and more time should be spent acting on the insights it provides to deliver outcomes. The use of intelligent knowledge-capture tools that record not only decisions but the data and reasons behind why those decisions were taken can allow for more informed and scientific decision-making in the future. If technology can facilitate and automate the data collection, analysis and insight cycle, the obvious question is what will be the future purpose of a procurement function – beyond providing insight and foresight?

Could we be on the cusp of businesses being able to self-serve their procurement needs in a way that individual consumers already do through e-commerce platforms today?

Our survey findings suggest this is a very real possibility. Procurement functions already appear to recognise this shifting landscape with the improvement of customer experience well ahead of any other strategic priority over the next five years. Nearly a fifth (18%) of participating companies anticipate this to be their primary objective for 2023, while 40% rank it among their top three strategic considerations. This is followed by ensuring they have access to the right skillsets and maximising efficiencies across the supply chain.