(2014): Strategic sourcing management, Kogan Page, London. Schoenherr, T. and Tummala, V. M. R, (2007): Electronic Procurement: A Structured Literature Review and Directions for Future Research, International Journal of Procurement Management, Vol. To develop sharp insights using digital tools, procurement teams will need data science and analytics expertise. Consequently, once the organization has its digital vision and knows which journeys to prioritize, the next task is to look at IT resources, focusing on the organizations capacity for automation and its flexibility for integrating solutions at individual process points. As confidence builds, iteration can accelerate. Teo, T. S. H., Lin, S. and Lai, K. (2009): Adopters and nonadopters of eprocurement in Singapore: An empirical study, Omega, Vol. Leading companies are adding new talent to support a digital operating model. 3, pp. Clear roles, decision rights, governance and agile ways of working help procurement teams enter into strategic conversations with business unit heads and develop new supplier partnership models. Amine Abidi is an associate partner in McKinseys Berlin office, Fabio Russo is an engagement manager in the Milan office, and Marc Sommerer is an associate partner in the Munich office, where Alexander Streif is a practice expert. Centralized control with decentralized security. 415436. 11, pp. Additionally, large companies will need a new approach for dealing with promising companies that may not yet have a legal team. Artificial Intelligence (AI) is a range of analytical techniques that allows a computer to detect relationships, predict outcomes, and often act based on the patterns in data without being explicitly programmed to do so. With the advent of the Industry 4.0 era and the rapid development of digital (2016): Vorstudie Einkauf 4.0 Digitalisierung des Einkaufs. Retrieved from http://www.cfsm.de/fileadmin/Downloads/Studien/I40/Studie_Industrie_4_0_2016.pdf (accessed: 6 July 2017). With the ubiquity of software solutions for everything from the basics like email and productivity software to the truly high-tech (advanced Enterprise Resource Planning (ERP) suites, procurement software solutions, etc. All this information greatly simplifies procurement processes like risk and category management, too, since you can easily identify, track, and manage vendors based on their capabilities, support and service options, and performance. To establish a definitive data source, the company implemented a collaborative data platform that included contract records, savings opportunities and methodology, key metrics and analysis, and stakeholder signoff. And because procurement processes are so closely interconnected, transformation leaders must think carefully about which processes to digitize and when, as well as what attendant changes in the IT architecture must be made and when. For procurement organizations, the digital revolution is focused on developing eProcurement solutions that move beyond simple cost reduction and create new opportunities for more effective procurement processes, from supply chain management to big data analytics. PubMedGoogle Scholar, Universitt Mannheim, Mannheim, Deutschland, Universitt Wrzburg, Wrzburg, Deutschland, Universitt der Bundeswehr Mnchen, Neubiberg, Deutschland, Technische Universitt Dresden, Dresden, Deutschland, Universitt St. Gallen, St. Gallen, Schweiz, 2021 Springer Fachmedien Wiesbaden GmbH, ein Teil von Springer Nature, Held, T., Schneider, L., Koppenhagen, F. (2021). Webdefine a customized digital transformation journey for procurement. For example, it is making it possible for companies to share warehouse space and trucking capacity. The new tools improved quality, oversight and traceability throughout the entire transaction. Winning brands will rebuild their supply chains for three hugely disruptive technologies. Optimizing processes will foster business efficiency as well as user experience and allow talent to focus on higher, added value tasks and Frost, I. One of the top goals of its digital procurement transformation was to reduce S2P cycle times. Nicoletti, B. 2) Assessment. 2, pp. What operating model and partnerships will you require? 5065. Unlike cloud-based technologies, traditional Microsoft Office tools dont allow real-time collaboration. 11, No. Typically, initiatives are prioritized using two major criteria: impact on the organizations objectives for digitization (such as spend reduction, cycle-time reduction, or user satisfaction) and ease of implementation. The disruptors will be among the first digital organizations that define what a digital enterprise really looks like. Subscribe to Bain Insights, our monthly look at the critical issues facing global businesses. A failed deployment can dissuade leadership teams from further investments. Automating purchasing processes, in turn, will decrease the amount of time procurement teams spend getting invoices paid and free up time for more strategic work, such as identifying smaller, innovative suppliers. Just as successful software companies plan continual product-update releases, procurement organizations must learn to plan continual "digital-function releases." Procurement executives are finding that its more effective to teach data scientists how to deploy that expertise into the procurement world than to teach data science and analytics to procurement professionals. Together, these digital tools support three broad groups of applications: category-specific (such as for labor or travel), functionality-specific (for electronic invoicing, contracts management, vendor management, and the like), and multipurpose, including solutions for RPA, smart workflows, and NLP. Please select an industry from the dropdown list. 2, pp. Digital Transformation in Procurement 1.Procurement Planning. When you have, for example, absolute transparency with regard to every stage of every transaction, as well as real-time access to the full contract and service details of every vendor in your supply chain, you can begin to spot trends, identify redundancies, and begin to build a digital strategy that optimizes your spending. Simplified vendor selection and management. In a situation such as the mining companys, the road map might prioritize an initiative for implementing a basic collaborative-messaging tool so that multiple approvers could quickly consult one another in deciding on a purchase. 965984. This survey was based on an extensive analysis of the available literature. A mining company found that the people most involved in its end-to-end S2P process were actually requesters and suppliers rather than the category managers it expected to see. Those that wait to digitize procurement risk being outmaneuvered by more agile rivals. These tools improve efficiency, accelerate processes and reduce errors. Biffi, A. and Sacco, F. (2009): Why EProcurement does not work in small and medium enterprises (SMES): Some insights from an Italian case, in: Karmarkar, U. and Mangal, V. 7898. receive updates from our blog. If a procurement department is located in a low-cost country, it may not make sense to automate certain functions. The good news: A digital procurement strategy can help reduce costs and free capacity for more strategic activities. Sharing the space in this way enables the owner of the space to defray the cost of its unproductive asset and better align its warehousing needs with others demands. This is a preview of subscription content, access via your institution. In this paper, we focus on the area of corporate procurement as one of the key areas for fulfilling corporate goals and its transformation in the age of digitalization. Advanced Studies in Supply Management. The third cluster of tools includes those ranked high in importance but lower in satisfaction, largely because they are less mature or highly complex. 12% response rate) was performed. To get the most from procurement digitization, leaders must raise their ambitions along with their skills. Leaving the meeting, the CPO mused that five years before, she wouldnt have even known about the suppliers innovationsor dared to propose that her team help develop a customized manufacturing solution. Ready or not, digital transformation in procurement departments around the globe is quickly defining the To fully exploit these insights, companies need deeper interactions with upstream suppliers and customers downstream. Together, we achieve extraordinary outcomes. The basic-materials company went into its automation assessment assuming that very little of its existing IT would be useful. 13, No. Platform users gain access to the retailers transportation network as well as external gig drivers. Meanwhile, the CFO had made adjustments to the budget that altered targets. The majority of companies is still at the beginning of the penetration of new digitization concepts in the procurement process. 576587. Managers may need to expand the range of key performance indicators (KPIs) they use to encompass the opportunities created by digitization. How effectively the company can implement these types of digital solutions will depend on its architecture assessment, which comprises three major dimensions: integration architecture, data architecture and analytics, and infrastructure. Of course, procurement teams should make sure that the companys existing data system works well with new solutions. (2018): Procurement 4.0: factors influencing the digitalization of procurement and supply chains, Business Process Management Journal, Vol. Provided by the Springer Nature SharedIt content-sharing initiative, Over 10 million scientific documents at your fingertips. For others, the return on investment (ROI) isnt clear, or the executive team doesnt understand why procurement should be a strategic priority for information technology investments. ): Digitalisierung im Einkauf, Springer Gabler, Wiesbaden, pp. But these new opportunities will require managers responsible for developing supply chain relationships to facilitate collaboration, experimentation, and trust across organizational boundaries. 3D printing could reduce the space for parts storage and save on both cost and CO2 emissions. Thats one reason many companies have only just begun experimenting with digital tools. Stoll, P. (2008): Der Einsatz von EProcurement in mittelgroen Unternehmen, Gabler, Wiesbaden. Below Once the basic elements for a digital shift are in place, CPOs can set priorities including near-term goals that can create momentum for change, key investments, a detailed business case for the investment and a timeline. Mose, J. M., Nijhia, J. M. and Magutu, P. O. Retrieved from http://downloads.cfsm.de/Studien/2019/Barometer%202019%20-%20komplett.pdf (accessed: 2 December 2020). 1, No. But as external and internal stakeholders recognize that advantage, the practice is likely to become common practice, transforming the role of procurement. Problem statements such as I need more rapid market intelligence to drive product innovation or I need better tracking of my products in the supply chain will become the norm in the future, paving the way for procurement teams to offer innovative solutions. To make sure a strategy is well designed, start by gathering information on digital trends from the companys leadership, your industry, the market and procurement experts. They can either lead change by adopting digital solutions and developing new capabilities, or they can wait on the sidelines and react to a shifting landscape. Thats potentially a lot of work. Companies should be highly selective and customize these tools or await market developments that boost their satisfaction and importance. It instead found that 40 percent of its end-to-end S2P process would be automatable with technologies that are already deployable today. Retrieved from https://www.mckinsey.com/business-functions/operations/ourinsights/shifting-the-dial-in-procurement (accessed: 9 December 2019). 839866. For CPOs, making the most of the opportunities created by digital technologies can feel daunting. Together they become a digital factory. The truth is that we have found only one way to realize the full potential of digitized procurement: through a user-oriented, end-to-end transformation of the entire source-to-pay (S2P) process, so that the users involved in procurement can operate in a fully digital environment. Procurement executives who seize the opportunity today to accelerate innovation will increase the strategic nature of their work and help bolster competitive advantage. The building blocks are richer data sets, optimization engines, and tools to control demand and enforce compliance. Therefore, a survey with purchasers in Germanspeaking countries (180 useable responses; approx. Overall, the typical digital procurement transformation is a journey of 1824 months, during which the initiatives (indeed, the entire road map) should be regularly reviewed and flexibly adapted as priorities and technologies change. Thats a crucial part of the result: an organization that is far more capable of continuous improvement. 16, No. The focus was placed on the current state of digitization as well as on challenges and possible methods for simplified implementation. case studies, client success stories, and testimonials. (ed. ): Handbuch Industrie 4.0 und Digitale Transformation, Springer Nature, Wiesbaden, pp. 1, pp. Charting a path to success is tough when you dont have a map, a compass, or any idea whether youre even on the right road. 8398. Procurement executives can begin building a sound digital strategy by choosing two to four digital tools that have a proven track record in the market. This means that companies that are digitizing their supply chains or planning to do so need to promote new roles and supporting systems. Our research shows that 80% of procurement professionals believe they need to do more to take advantage of the latest digital tools. Sabri, E. (2019): Mastering Change Management for Successful Digital Supply Chain Transformations, in: Sabri, E. To identify the user journeys that are the most important to digitize, a company can start by understanding which roles stand at the center of the procurement ecosystem and which are more peripherali.e., who interacts with the most or fewest other people along the S2P process (Exhibit 2). One key signal is the amount of capital investors are pouring into the development of digital procurement tools, betting they will produce significant value. Digitization can be hobbled even before it begins by ambitions that are set too low. To support innovation more effectively, whether it is cocreating solutions, managing prototyping or speeding time to market, procurement teams of the future will need advanced digital skills and entrepreneurial ability. Many readers tell us they would have paid consultants for the advice in these articles. In fact, many elements of a digital procurement strategy are important input to a firms digital roadmap. Retrieved from http://spendmatters.com/2018/02/22/state-procurement-part-3-solutions-procurement-technology/ (accessed: 5 December 2018). 5455. 131140. Admittedly, rapidly evolving technology means that what is truly possible is a moving target. Without them, companies will struggle to compete in the new world. about us, and our long history of helping companies just like yours. Then there is the Walmart GoLocal platform, which allows other retailers, restaurants, or online services, small and large, to use Walmarts own delivery platform to complete last-mile deliveries to other merchants customers. One procurement team member created a bot that reduced the time to create a savings report from three days to three hours, freeing up his time for more strategic activities. This field is for validation purposes and should be left unchanged. They will lead in transforming the role of procurement and help enable a digital vision for the entire company. The next logical step is choosing tools that rank high in importance for the organization and relatively high in satisfaction. Twenty years ago, sales representatives purchased market reports to glean customer insights and predict future demand for a product. Agile operating model. Ongoing maintenance, repair and overhaul traditionally have required companies to manage a massive inventory of replacement parts. This design-thinking approach enables the company to sketch out digital alternatives that address real problems (Exhibit 3). 19, No. Digital technologies are allowing companies to share supply chain information and assets in new ways.
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