Bound by the challenges of reducing costs, managing supplier risks and ensuring financial and regulatory changes in policies, chief procurement officers (CPOs) have a tall order. Sarah George, ERP/EPM Cloud Applications Business Development and Product Strategy Manager at Oracle, unpacks the changing digital face of the procurement office, in this month’s SmartProcurement.
CFO roles are evolving from finance specialists to strategists, helping CEOs navigate changing business landscapes, spot new opportunities and drive growth. The new demands on CFOs are driving finance teams to rethink their missions and operating models.
The C-suite in turn, is looking to procurement to deliver savings, mitigate supply chain risk, deepen internal relationships and drive more robust analytics. But labour-intensive processes soak up much needed resource time, and hinder visibility.
The rationale for transforming procurement into a modern business asset is compelling. Procurement needs to be more strategic than tactical, and digital is revolutionising the procurement office.
A procurement organisation that is still managing the tactical processes and not moving up the value chain is unlikely to influence the strategic management of the business.
Fully integrated organisations provide the visibility and ability to better manage and track spend, depth of insight into supplier relationships (moving them from vendors or suppliers to partners) and improved information collection as a means of mitigating risk.
Like finance and human resources, procurement is undergoing a transformation that requires a shift away from administrative, task-driven work, to a value-driven role to the organisation. And the demand is to add real value to the business.
According to the Deloitte Global CPO Survey of 2016, investments in traditional procurement technologies continue to grow, as do new, emerging disruptive technologies, but 60 percent of CPOs lack a clear digital strategy.
The modern way of working in the procurement office will require a shift in people, processes and technology, which includes the creation of new job profiles and skills sets. For example, buyers of new categories of items, contract experts on intellectual property, or data scientists for data maintenance, analysis and mining.
By adopting modern technology, back-office operations and transactional procurement activities will be enhanced by more evolved workflow applications, robotic process automation that will interact directly with back-end systems. Robotic process automation will enhance manual processing by acting as a virtual workforce, contributing to a back-office processing centre that requires fewer human participants.
Digitalisation will increase globalisation, which in-turn will speed up communications in a more closely connected world.
But what is the real opportunity of transformation?
A transformed procurement organisation becomes a vital part of the business. Not only is such an organisation more influential, but its expertise extends beyond traditional administrative roles.
Procurement organisations that are modernised offer five compelling benefits:
1. The ability to protect the business from risk, at the same time decreasing the cost base by rationalising suppliers after an acquisition
2. Become the custodian of managing supplier risk, by ensuring all suppliers are properly qualified to actively source and direct spend to those preferred suppliers.
3. Proactive management of the contract lifecycle – timeously identify contracts that are nearing expiration, renegotiate them and ensure that changes in policy or vendor status are reflected in updated terms and conditions
4. Fast, compliant procurement services to other areas of the business
5. Offer ideas on cost savings and top-line value generation that goes beyond traditional sourcing activities
A fully integrated suite of procurement solutions, built for the Procurement 4.0 era should provide embedded and adaptive intelligence, mobile connected devices and robotics which are natively within the applications to assist procurement officers. It is built for the modern procurement user, with modern best practises, borne in the cloud to assist with reducing costs, manage compliance and improve efficiencies.