Procurement’s Digital Transformation Is a Marathon and Not a Race

Procurement is poised to take on a more influential role in business. But digital investments have to be made to gain the agility and flexibility needed to navigate markets, says Tamara Braun, chief customer officer, and senior vice president, SAP Procurement Solutions, Intelligent Spend Management.  

Despite the disruption and uncertainty that defined most of 2020, there were bright spots in the world of procurement. A light shone on procurement executives like no other time in history, and they stepped up, emerging as heroes in their organizations by securing critical supply and ensuring business continuity. Even more importantly, by laying the foundation for functional excellence in this way, they were freed up to connect to their organizations’ strategy and purpose despite challenges that at times seemed insurmountable. Procurement executives finally earned their seats at the table. 

But now that they are there, it is theirs to lose. How do they continue to prove their relevance once the dust settles and supply chain disruption is not the breaking story on the evening news? This is where the cream will rise to the top. Procurement leaders look beyond procurement to intelligent spend management. Staying ahead of the curve, optimizing the benefits of their technology, and most of all, fully embracing the data and analytics that come with digital transformation to make informed decisions to support corporate strategy. 

Growing Influence of the CPO

A December 2020 studyOpens a new window , conducted by Oxford Economics in collaboration with SAP, titled Agile Procurement Insights Research, identified a group of leaders –- about 10% — who stand head and shoulders above the rest. Leaders see procurement as a stronger contributor to the business, particularly in financial metrics — improving profitability, growth, and revenue and reducing costs. Beyond the financials, these Chief Procurement Officers (CPOs) are more often viewed as visionary. 78% of leaders, vs. 60% of others, say their CPO has a vision for transforming the procurement function to provide more strategic value to the business, and 70% of leaders say that their CPO has a roadmap to achieve that. 

There is so much more for CPOs to consider now than ever before. Gone are the days of only fighting for the best deal or the highest savings. Now decisions need to be made more purposefully, in alignment with corporate values. Sustainability, diversity and inclusion, incorporation of social enterprises into the supplier base, and reduction of the business’ carbon footprint are just some of the considerations to be made when making procurement-related decisions. All while still securing the best deal and the highest savings.

This is where digital transformation becomes a necessity. By investing in core procurement technology at even the most basic level, businesses achieve much greater benefits in operational efficiencies, cost savings, compliance, transaction accuracy, and supplier performance. The higher degree of automation attained through digital transformation also leads to fewer issues such as maverick spending, contract leakages, overcharges, and duplicate payments. These efficiencies free CPOs up to focus on more strategic functions. 

Learn More: 6 Best Practices to Enhance Visibility Over the Supply Chain

Procurement Challenging the Status Quo

Procurement leaders recognize that digital transformation does not stop at technology investment. Continuous improvement is required, not only with technology but with adoption and change management. To help drive higher adoption of new processes and technologies, leaders must partner closely with the business and ingrain in them these new behaviors. They must challenge the status quo to ensure that they are getting the most out of their investment. 

Just as the technology is always improving, so must the procurement function and its leaders. The skillset that defined a leader in the past will not define future leaders. Today’s leaders must embrace data-driven decision-making and work on sourcing the data analysis skills needed to fully leverage all the information that is now at their fingertips. The Agile Procurement Insights research shows that the lack of specialized talent is a barrier to the digital transformation of the procurement function (cited by 34% of leaders and 56% of others). What’s more, lack of data analysis skills is a barrier to using data for decision-making (40% of leaders and 62% of others). Although leaders report fewer skills shortages than other respondents, skills shortfalls remain a key challenge for all organizations to overcome.

Learn More: Deploying IoT to Enhance Warehouse Security

Visibility Becomes a Necessity

The importance of third-party data to mitigate supplier risk has been elevated to a top priority over the past year. As we have come to appreciate, supply chain resilience is fundamental to business continuity, and much of this comes down to the health of your suppliers’ businesses. Procurement leaders must extend their focus to supplier relation management and continuous improvement of the supplier experience. Having visibility into their critical suppliers, and more and more into 2nd and 3rd tier suppliers, is paramount to proactively prevent issues, alleviate disruption and accelerate recovery. But even more so, we have learned that it is procurement’s responsibility to safeguard their suppliers’ businesses to make sure they are economically healthy. Connecting to get invoices promptly and guaranteeing timely payments keeps their suppliers’ businesses running and ensures their business’ ability to secure critical supply without disruption. 

There is truly a myriad of topics and issues that today’s procurement leaders must stay on top of to serve their organization best both financially and strategically. By aiming higher and elevating the strategic value of procurement to the business, “The Leaders” have earned their seat at the proverbial table. But only through continuous improvement will they secure their position. By closing capability gaps and advancing their procurement digital transformation, leaders and others alike have a tremendous opportunity to boost their impact and deliver even more value to their organizations.

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