Digital Procurement

Next Generation Digital Procurement

PurchTips Edition #443

We are indeed in the era of Smart Systems, Robotic Process Automation, Blockchain, and Artificial Intelligence. These mechanisms are underpinned by digitization and the true manifestation of “Systems Thinking.” The concept of Systems Thinking or the science of studying a business entity as a whole that consists of several parts working together to realize a specific outcome. The desired outcomes are usually a valuable product or service that meet customer requirements and specifications.

The reality is that businesses exist for the same reason why Supply chains and Procurement Functions exist, solely to create value for their customers. It is noteworthy that the traditional view of the Procurement Function is that it is rigid, a cost center, a tactical process, a hurdle, spender of wealth, and a necessary evil.

Digital Procurement

There are many examples of modern procurement departments that are the exact opposite of each one of these profoundly dire perceptions. They are highly collaborative, innovative, profit centers, that realize more value than they expend. They professionally ensure the support of operations by guaranteeing the consistent on-time delivery of high-quality inputs at the right price points via capable suppliers. The outputs of the cumulative sum of activities of the forward-thinking procurement departments are usually a valuable product or service that meet customer requirements and specifications. The mandate of the modern procurement department is to, manage to spend, support mission-critical operations, and to protect their organizations from risks.

The following are ways that progressive Procurement Departments can realize the outcomes of their mandates:

  1. Digitizing and leveraging Big Data Analytics. Data is the cornerstone of a business system. It is a critical input for decision-making processes to yield satisfactory outcomes for stakeholders. The key is to leverage data patterns related to Customer Requirements to the realization of those requirements by aligning the Procurement Function Process to Supplier, Manufacturing, logistics, and customer processes, mandates, technological platforms, and forecasting models.
  2. Developing Skills Assets around Technology and Digitization. The key is to build procurement teams with high degrees of IT skills and acumen. The key is the intersection of business, procurement, and IT acumen. This approach reduces the effects of silos, increases buy-in, and enhances inter-process synergy and collaboration.
  3. Strategic and Operational Model Design. It is critical that these models and frameworks are designed by thinking with the end in mind. AI can be leveraged to scan business landscapes to aid in the design of Strategic Response Models (SRMs). Once the Input, Process, and Out Variables are determined, and strategically and operationally aligned, digitizing can yield maximum benefits.
  4. Gain Buy in by leveraging User Case Methodology. Buy in is key to Digital Transformation or any type of transformation. The understanding that resistance to change is a natural phenomenon that must be effectively managed to realize desired outcomes. On average 20% of people in a business environment will readily support transformational initiatives, 60% will need to be persuaded, and 20% will resist change. The focal point should be 60% or Critical Mass. The key is to involve people early and continuously during the transformation process, solicit their input, advice, and ask them how they use the current tools to execute their functions. Look for pain points and let technology users help in the design of new solutions. People support what they help build!!

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Copyright 2019. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By David Millington, SPSM, SPSM2, SPSM3 - Director of Education (Next Level Purchasing Association)

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