The purchasing function evolves and professionalizes within the organization
Each year there are various topics the procurement strategy is aiming at to develop and improve with the objective to optimize the procurement function, in other words to raise the procurement maturity.
Over the last couple of years procurement has put a lot of attention to organizational development – more centralized way of working and standardization – and procurement’s operating model – how to maximize added value to the stakeholders ?
A wide range of improvement topics and trends were introduced the last decade and a lot of these topics were called ‘hot’ but lost quickly their priority going forward.
The top objective “doing more with less” remains a very popular measure but meanwhile one needs to address the changed focus: not only answering the question in which way year-on-year targets can be achieved but also which tools / techniques can be deployed to support this measure. The latter experiences a significant evolution at the moment.
Macro-economics change and data creation explodes
Also like other parts of the organization, procurement does not escape from the global changes that current organizations experience. Under pressure of these global trends and also internal dynamics makes that adaptability becomes a necessity. The need to reposition procurement organizational wise and the delivery of maximal added value to stakeholders are the two top priorities at the moment. The up side is that these challenges trigger opportunities.
One of these opportunities in general, is that the creation of data begins to take on unseen proportions. Each activity, transaction, movement, event generates data. Especially in the area of unstructured data (social media, images, video’s etc.) there’s an ongoing explosion of data that generates an important potential in favor of procurement. The aforementioned data types are mostly integrated and complex, require new ways of data management and a certain expertize of storage, analysis in order to support information generation as well as decision making.
All of us will need to get used to high-tech analysis on this data which provides added value for example regarding new product development, services creation, as well as the improvement of operations across the organization.
The discipline of procurement will never be the same. It will require more and more adapted skills sets / capabilities to ensure sophisticated analysis where possible on demand and also development of valuable insights to optimize end-to-end processes across the procurement function – from sourcing to management of contracts and suppliers.
Category Expertise within Technology
We will not be surprised that procurement organizations have to allocate more effort to identify technology suppliers and solutions in the analytics spectrum. To capture, analyze and transform data to information and knowledge will be the opportunity to add value.
Proliferation of cloud solutions which enable data analysis is a fact. They all promise so called ‘time to value’, ‘agility’ and ‘enhanced user experience’. The procurement function will need to build expertise regarding these developments and pursue to establish a technology category backed by the right capabilities.
In addition it will be wise to install a good relationship with the existing Information Technology club within the own organization in order to be able to align with the challenges within the IT landscape.
Challenges and potential areas of implementation
A recent market survey of Capgemini Consulting (1) confirms that the data-tsunami which can be experienced on a daily basis remains a good source of information companies can capture. Each and every organization generates without a doubt a lot of data but does not make adequate use of it primarily due to the fact that data processing time is such that the Management Information (MI) obtained after analysis is outdated.
The use of adequate technology is one of the basic requirements to speed up the analysis and the MI-creation. Next to that there are still two other important challenges: the lack of adequate data analytic skills sets / capabilities within the procurement team and the lack or absence of leadership to address the opportunity across the entire organization, both manifesting themselves as two important show stoppers.
When we look at the potential areas for implementation within the procurement spectrum, we would highlight the following: advanced analytics, but also data modeling can be executed under the condition of capex intensive investments in tools / solutions. In case the choice is being focused – right tool for the right job – and is strategically acceptable, data analytics can generate the best return for category management, supplier performance, and compliance & risk management.
In summary, also here must be stressed that the right tool should be used for the right purpose whereby the use of internal developments or solutions from third parties – as a service – will need to be compared and implemented backed by the same business case.
Advanced analytics in Procurement and the future
Finally, a quick look at the future. Provided the so called Big Data and Data Analysis are becoming more and more important today, in five years’ time this could be different. Why ?
Procurement talent today that can easily handle and deal with contract management or has a profound knowledge about the 7-step process in sourcing might lose importance. Employees of the procurement department being well experienced in treatment and analysis of data now, might though become gradually obsolete.
In future there will be much more the need to develop the requirement as procurement talent to support supplier relations to trigger innovative solutions which help develop the own organization’s business model in market wherein they are today / will be present in future.
2020 companies would rather need procurement skill sets / capabilities which ensure information is transformed into strategies which help evolve business segments onto a higher level instead of business segments looking for support from Procurement to solve a specific problem or an idea that already was been defined. Isn’t it about time that we as organization consider to mirror ‘customer experience’ and try to make our companies as attractive as possible to important strategic suppliers ?
(1) 2015-16 Global Chief Procurement Officer Survey, Leveraging Supplier Relationships and Procurement Analytics for Growth, https://www.capgemini-consulting.com/think-1/digital-operations-think