Solving the Procurement Data Dilemma: The future of technology in Procurement
In the final interview in our series on ‘Solving the Procurement Data Dilemma,’ Gren Manuel speaks to Nic Walden about, what is the future of procurement technology?. Nic leads the procurement executive advisory programme in the UK for consultancy The Hackett Group. In this role Nic works with senior executives from some of the world’s leading companies to guide their transformation, and provide top quartile performance insight, research and networking for their procurement functions.
What is the future of procurement technology – To drive Procurement as a strategic function
In this interview, Nic starts by setting out his vision for Procurement in the next five years. Nic believes that the function will be driven by business-focused, strategic aims, with technology as an enabler. As a result of these technologies, Procurement will be much less about operational buying, as these activities will become largely automated or self-service, as Nic explains, “Technology is already providing some glimpses today in terms of how these things might be different.”
Emerging technologies in the space include smart automation, smart robotics, machine learning, cloud technologies, APIs, sensors, and the Internet of Things; all combined with the opportunity for digital networks and collaboration. Nic also mentions Blockchain and smart contracts to consider in the longer term, adding, “Something else that I’ve seen are sourcing and negotiation ‘bots.’ So, if we think about low value or low risk spend, these bots are able to interact and negotiate in a simple way with suppliers, to deliver value.”
In Nic’s opinion, we are now on the cusp of having real-time intelligence and risk insights, as he explains, “Certainly paper and emails are disappearing – we’re now using systems for that. We will have real time analytics to provide visibility into spend, or how processes are being executed. So if we have that real-time visibility, and something is stuck, or we are not using an approved supplier, or a preferred contract even, then we can intervene and re-direct that spend ahead of it even being committed.”
The role of data in the future of procurement technology
The new technologies bring with them a great deal of opportunity in terms of information, such as market intelligence, risk information, diversity information, as Nic continues, “Systems will be able to harness that market intelligence, and pair that with the knowledge that is already captured to recommend the best approaches, or the best suppliers, in a way that [enables us] to interact and engage with the market.”
“If we had information around commodity pricing or lead times or availability, then I think we would be able to provide a much more valuable support and service to our stakeholders as well.”
There remains, however, a number of key challenges. Nic points out that much of our focus today is on the tier one, or most significant suppliers. Accessing and harnessing information that relates to the lower levels is a gap that needs addressing, although this is beginning to change as Nic adds, “It is a real challenge but, nevertheless, many organizations that I speak with have taken the time and effort to actually map out their supply chain, their supplier base for specific commodities or categories where it makes sense, so if it’s scarce or rare, or critical sources of supply.”
In the interview, Nic says that updating approaches to RFPs and supplier onboarding plays a crucial role in addressing some of these challenges, including collecting information about ‘suppliers of suppliers’ in areas such as sustainability and diversity, as he maintains, “We need to be thinking about how we update our practices to actually collect this information.” This will require training and coaching within the procurement function.
The transition to a strategic role
In the interview, Nic talks of his delight in seeing Procurement receiving the recognition that it deserves for the role that it has played to support the business during this period of disruption in terms of the supply chain. However, he believes that this is just the beginning of the journey, adding, “We need to continue to focus on playing that strategic role, making sure that we consistently deliver our core services – sourcing, contracting, delivering cost savings and so on – but on top of that we need to be focusing and staying aligned to what’s important to the business.”
While technology remains the enabler, Nic stresses again the need for continued learning within Procurement, as he advises, “There may be other priorities that they [members of the leadership team] are talking to you about, which means delivering new services, which means new skills, which means we need expertise, we need to stay up-to-date on the marketplace.”
Making the case for future procurement technology investment
The future vision laid out here requires, of course, investment in the technologies to support these changes. Typically, Procurement data has been viewed more as a subset of data within the overall finance function, which means that it has not been necessarily prioritized to the same extent as sales, marketing or customer data.
This could, however, be set to change, as Nic concludes, “If relationships are going to be quite key, in terms of managing supplier performance, and the additional value that’s on the table, do we have tools to support that? If we’re able to make a clear business case, align to the strategic role, align to the additional value that we can provide – and it’s going to deliver productivities and savings for the supplier and for us, then I think there’s a good possibility we can make the case to invest there.”
This interview was conducted as a response to the HICX publication, “Solving the Procurement Data Dilemma,” a comprehensive survey of 100 senior procurement professionals from some of the largest US and Western European manufacturing and CPG businesses, in partnership with Raconteur. Don’t forget to download your full copy to read more.