What does ‘digital’ procurement really mean?.
This question is becoming increasingly common amongst organizations as they adopt more digitalisation, especially as a result of difficulties arising from Covid-19.
The Smart Cube’s whitepaper provides succinct advice on how you can guide your organization towards digital procurement, as it begins to replace the traditional procurement department in the near future.
Let’s define digital
It’s easy to get confused, especially as there are various meanings of what ‘digital’ really means, here is how The Smart Cube define digital:
- Digitisation – conversion from analogue to digital. We digitise data, not procurement.
- Digitalisation – applying digital technologies to transform and change a process or model.
- Digital transformation – transform a business to become deeply customer focused and valuable to them. It is more than a collection of digitalisation projects.
So what is digital procurement?
In layman’s terms, digital procurement means applying digital technologies and approaches across the entire procurement function.
It helps to automate processes and make users more efficient with their time to focus on more strategic tasks, making it proactive vs reactive. It is more insight-driven and predictive, whilst aiding customer and supplier engagement.
Implementing digital procurement is a type of digital transformation which can create a competitive advantage for businesses: it helps to improve insights, spending and how procurement interacts and serves its stakeholders, thus improving business performance.
Driving value through digital
What benefits can digital procurement bring to a business?
- Faster and more efficient sourcing through e-tendering tools and related analytics
- Greater visibility and control through smart contracting, Insights and informed decisions through better data visibility
- Improved operational efficiency through automated processes that increase speed and productivity
- Real-time spend management through machine learning and sophisticated algorithms
- Clearer, fact-based forecasting of demand using advanced analytics
Getting ‘digital ready’
To avoid jumping in at the deep end, there are some key points to consider to help your organization get ‘digital ready’:
- Access to data
- Do you have sufficient data available?
- Is it relevant, structured and organised?
- Is it easily accessible?
- Technology readiness
- Is your organisation open to the adoption of new technologies?
- Is your team tech-savvy and quick to adopt new technologies?
- Do you have the budget for technology investments?
- Access to analytical skills
- Do you have access to the right talent and skills needed to operationalise your digital strategy?
- Do you have access to a cross-functional team of people with distinct skills such as knowledge of data science and AI, category/business expertise, IT professionals who understand the technology tools and software applications, design professionals, etc.?
- The right policies and processes
- Do you have the right policies in place that will support your digital strategy?
- Is there a clearly defined framework of roles and responsibilities?
- Is there an opportunity to redefine the procurement operating model or processes to accommodate the progressive digital agenda?
- Senior level support
- Are your senior stakeholders truly pro-technology? Do they see it as more than a simple efficiency tool?
- Do you have adequate support from your senior stakeholders, including both the vision and inclination to prioritise and commit resources?
Making a digital strategy
Theory to practice can be bumpy, so how can you develop a successful digital strategy?
- Value-based procurement strategy
- Digital assessment
- Tools and tech
- Phased implementation
Key success factors
It’s tempting to jump right in to get ahead, but consider these first to achieve competitive advantage in a sustainable way for you and your business:
- Start small and do it effectively instead of going for the high-risk big bang
- Outline visible and vocal support from top management down
- Ensure all digital strategies focus on clearly generating business value
- Define clear roles and responsibilities – existing teams may need to be reinforced, updated or changed
The future of digital
What can we expect to see more of?
- Cloud-based applications
- Advanced analytics
- Robotic process automation (RPA)
- Mobile computing
- Big data
Nearly 85% of all procurement organizations believe digital transformation will fundamentally change the way they deliver services over the next 3-5 years. Digital procurement should be a major feature in how CPOs envision growth as it continues to save businesses time, improve compliance, reduce risk and elicit significant cost savings.