The digitalising of procurement in 2023 – vital, growing and confusing
Peter Smith, CIPS past president and consultant has shared his vision on how the procurement digitalization should be navigated in the company today.
Executing procurement tasks proved well-nigh impossible without technology to allow remote and physically dispersed accessing and sharing of data, collaboration with colleagues and suppliers, and management of complex processes such as sourcing exercises.
If we analysed every word written about procurement in 2022, “digital” and “digitisation” might well come top of the frequency charts, vying perhaps with “sustainability” and “crisis”.
That’s not surprising. Digitisation simply means using digital technology, and automation to improve procurement processes and performance. Clearly, procurement cannot succeed without that, and the Covid lockdowns & war in Ukraine merely accelerated already strong trends, as organisations had to adapt to home working.
But procurement now faces new digitisation challenges. Organisations and internal stakeholders expect procurement to embrace the best technology, and the cry, “why isn’t it as easy for me to buy stuff at work as it is at home” is regularly heard.
Another challenge is the extraordinary expansion of digital procurement tools over the last five years. Literally hundreds of new firms have sprung up, supplying products that address every conceivable aspect of the procurement and supply chain universe. Sometimes it is difficult to even understand the offering – how about “a predictive procurement orchestration platform that amplifies the impact of procurement’s influence”?
No, me neither. And it took a good ten minutes of digging around that firm’s website to get some idea of their actual use-case and possible benefits. That experience is not unusual today.
As we move into 2023, procurement digitisation – executed well – will create competitive advantage, and even to just keep pace, organisations will need to invest and implement the right tools and processes. However, the options will continue to appear complex. The programme of CIPS helps the students, experienced in procurement, to deepen the knowledge and to develop the procurement processes based on the best worldwide practices and cases. Explore the CIPS programme >
How to navigate digitalisation:
1. Don’t expect one platform to do everything
The old argument about single platform or “best of breed” procurement tech has been won by the latter option. No-one really thinks today that a single mega-platform can do everything, when there are so many effective products addressing disparate but genuine needs. You might still use a multi-functional product to underpin the core source-to-pay process for example, but don’t limit your thinking and miss additional options that might generate value.
2. Linking your digital strategy with your procurement strategy
However, you do need an overarching digital strategy, linked to your wider procurement strategy (which is linked to your business strategy, of course). Innovative approaches and tools are great, but there is a danger of ending up with a plethora of different tools, platforms and apps, and an uncoordinated, unfocused and non-strategic approach.
3. Usability
Consider issues such as interoperability, data governance, and user interfaces. If you are asking stakeholders, or procurement colleagues, to use different tools, it helps if they have at least a vaguely similar look and feel.
When marketing tell you they want to use this amazing marketplace portal to buy promotional items, that’s fine. But does it have controls that support your procurement policies, does it interface to other systems, and can spend data be extracted for analytics needed to develop category strategies? And ask: how much will the tool actually cost?
4. Sustainability
In terms of specific 2023 trends, expect to see more tools focusing on assistance with ESG issues (not just Scope 3 emissions, but also bio-diversity, human rights, supply chain equality, diversity and inclusion, etc), risk, resilience and the move away from global low-cost country sourcing.
5. Tech will change the procurement function
As procurement delegates more activities to users, and automation reduces lower-level work, important new roles for procurement should emerge. That undoubtedly includes providing digital procurement strategy and governance, and leading on operational implementation and oversight of the procurement technology landscape.
6. Apply the “common-sense approach”
Finally, if challenges around selecting digital tools look daunting, help is at hand. Just as there are more tools than ever, there are more people offering help. From huge generalist tech advisers to specialists procurement tech experts, there are analysts, advisers, writers and technologists offering support.
There is even a considerable amount of worthwhile free material, always a plus for procurement professionals. But do apply your cynical procurement view, and check how any product recommendations are arrived at, in terms of rigour and potential conflicts of interest. But apply that common-sense approach, and there is plenty of good advice out there.
Who are the main procurement software players?
So far in Ukraine the business is in no rush to automate the procurement segment. In the current environment, management has a good understanding of why investments in marketing, production, sales, etc. are needed – all the things that move the company forward. But procurement is on the sidelines for various reasons. Either it is not linked to the main KPIs, or the person responsible for procurement is at the second level of reporting and is not part of the board of directors. Therefore, it is not obvious to the management how the digitalization of procurement would affect other indicators.
Digitalisation of procurement is a real opportunity to save costs, gain access to a larger number of suppliers, regardless of the size and location of the business, a way to build new supply chains, a way to minimize risks associated with counterparties, etc. The more providers, the more opportunities the solution opens up to its users. This especially affects small companies, as well as regional ones, which initially have little choice.
The market for procurement solutions is heterogeneous. On the one hand, there is an unequivocal leader with a large margin from other vendors – SAP Ariba. On the other hand, it has some other players and many companies has been using customized or self-developed products.
If you google it, you will be able to find local Ukrainian players who provide solutions for automating purchases and can adapt programs to your request.
So good luck – and here’s to successfully digitised procurement in 2023!
