The predictions from the ProcureTech100 were focused on 4 main themes of:
1. Digitalisation, 2. Intelligence, 3. People, Planet and Prosperity and 4. Organisation.
Digitalisation predictions point to greater investment in AI, RPA, intelligent automation and advanced analytics that will make digital procurement more resilient, intuitive, flexible, standardised, streamlined, transparent, agile and predictive.
This drives supply chain convergence and best of breed, ‘composable’ solutions that address new and existing challenges.
Sophisticated, yet simple solutions augmenting specific capability or category needs.
In 2022, we’ll see ‘trigger’ events initiating change, from significant cyber security events and inflation to broader company initiatives eg S4Hana and action on Environment, Social and Governance (ESG).
“If you look back 3-4 years ago and spoke to big enterprise companies, they would’ve said people were moving less towards best of breed and more towards having 1-2 vendors to provide as much technology as possible. Now companies are moving towards best of breed.”
Jason Kurtz, Managing Director at Accel-KKR
In part 2 of 2, we share predictions and insights from the ProcureTech100 pioneers on the digitalisation of procurement from sophisticated solutions to building your own apps.
Bot to Bot negotiation
In the same way AI has helped scale with businesses as they manage increases in digital interactions with customers, it can create further opportunities for value creation at scale by negotiating commercial agreements between companies and their suppliers.
Latest developments in ultra-large language models and AI-based game systems lead to an AI as adaptable and capable as a human intelligence to automate and optimise business processes which involve compromise and consideration of how people’s preferences coincide and conflict (eg. route planning around congestion, commercial contract negotiations.) Negotiation chatbots are available 24/7 when companies experience surges in volumes or need to pivot to adapt to rapid supply disruption. Volume of interactions handled by chatbots increased by as much as 250% in multiple industries while 80% – 90% of companies using conversational AI enjoy faster complaint resolution and increased call volume processing.
Drive supply chain convergence
The top procurement solution in 2022 will drive the convergence of procurement and supply chain operations
Leading companies around the world are today looking for a single system that gives them the means to execute more effectively in each individual part of the operation but to interoperate in lock-step, as part of an overall strategy. Increasingly, organizational leaders are looking at the whole business and making demands across the board for greater resilience and transparency. Whilst procurement and supply chain have largely existed in silos, the overlap – in the realm of direct materials procurement – is driving the need for a complete end-to-end system that permits the organization as a whole to work better, with greater sustainability and with much more visibility to the C-suite. The unified data-centric architecture is driving the development of a single digital workspace in which all functions can work, independently and yet collaboratively as required. We are already seeing major corporations converging their indirect and direct procurement operations with their supply chain functions and using the latest digital platforms as the catalyst for that convergence. This will accelerate throughout 2022 and beyond.
Composable, mid-market digital solutions
2022 heralds the opportunity for Mid-Market organizations and PE firms to benefit from the new wave of composable spend management solutions to digitize and optimize spend.
Up to now, ‘eproc and P2P’ solutions have been the preserve of large organizations with deep pockets due to prohibitive license and setup costs. These barriers to entry are now being removed. There are now a plethora of agile procurement solutions with functionality that is perfectly suitable for most mid-market businesses without the price tag associated with the likes of Ariba, Coupa, Jaggaer, iValua. The ROI from a procurement technology investment is often measured in years, which is simply not acceptable for most businesses who demand a near instant return on any investment.
Simfoni’s mission is to democratize procurement and make procurement technology available to organizations of any size, whether the requirement be tail spend through to wider indirect spend. Our Pay As You Save model has eliminated upfront costs which accelerates the business case for adoption.
Adoption of more sophisticated risk management tools
2022 will see a major focus on addressing supply chain challenges with a shift towards localization/concentration of vendors.
This is a great opportunity for Procurement to ‘step-up’ and use analytics and market data to really understand their supply chains and to develop sourcing strategies to mitigate against supply chain failures and price volatility which has had such a significant impact on business over the past two years.
Procurement teams require the tools and access to data to profile spend and suppliers in details and to be able to produce robust risk analyses and supply chain resilience models to protect the business. These tools such as Simfoni Spend Intelligence are available today, which include Vendor Risk Assessments and ESG Impact Assessments which can help identify local supply capabilities. It’s then about procurement leaders adopting these tools and then using them as part of their normal activity aside from optimizing costs.
Tackle the final mile of spend
The recent emergence of specialist tail spend solutions such as Simfoni means that organizations of any size can access a solution that is specifically designed to manage ‘hard to manage’ spend. Whether you are a large organization with a global procurement team, or a mid-size team, tail spend solutions work for everyone and can be operational within days where they operate alongside the ERP and existing procurement system. APIs negate the need for heavy duty integration – with integration often not required because tail solutions such as Simfoni delivering a full Purchase to Pay service – with Simfoni even paying your tail vendors. Transactional data is simply uploaded into the ERP – boom!
Tail spend has been called the final bastion for spend management. Simfoni has solved tail with a solution which marries a Technology with Content + Services. Tail spend is segmented into zones which allows us to wring optimal value out of total tail with a blended delivery incorporating self-service bidding, hosted content and category sourcing services.
Full cycle solutions
Full cycle of solution will be much needed and implemented: from request to reconciliation.
Best of breed
The existing level of digital maturity will continue to shape digital procurement. Looking for an AI-driven category management solution isn’t useful if the function is still working off Excel spreadsheets, with individual category managers storing their own intelligence and data on their hard drives. This remains a common issue, even within well-established procurement functions. Digital transformation, and the pace of change, has to be contextualized in order to ensure buy-in and adoption. Practically, this means we will see continued growth and experimentation with best of breed solutions and organizations testing/evaluating the possibility of knitting together an ecosystem of technologies that serve their needs and balance their budgets. Digital will continue to be a competitive advantage, transforming procurement into a vehicle that not only manages costs, but unleashes the potential of the supply base and market to significantly improve business performance.
Build own apps
The next generation of digital procurement systems that will begin to appear in 2022 will allow companies to design and build their own applications creating a completely new operational paradigm.
The fundamental architecture of the next-generation procurement platform is built around the concept of low-code/no-code development. Applications and new functionalities can be designed, prototyped and brought to market in a fraction of the time of previous generations of software. The costs associated with customising the way software works, to suit a specific company will thus disappear, almost entirely, as business users begin to be able to build their own apps as extensions to the core product. A third-party app market will develop as leading industry systems integrators begin to build point solutions which are still inherently connected to the underlying platform. Companies will swiftly adopt the “build your own” as it will enable them to respond to changing circumstances and react rapidly without being restricted by the inertia of static, inflexible legacy systems.
SAP4H migration is the big thing of the next five years, with big impacts in procurement and inventory management. Even more than an S2P implementation, it is a unique opportunity to highlight and make all stakeholders conscious about preventive data quality as a strategic enabler factor for a successful migration.