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The Evolution of Digital Procurement in the Supply Chain

5 June, 2020
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Digital procurement promises a broad array of improvements across the supply chain. From acquisition to financial tracking and forecasting, the ability to access in-depth data and automate recurring processes through all areas of the supply chain permits the possibility of increased efficiencies at a scale that has never been seen before.  

The technological tools to implement this type of revolutionary evolution are available, but few businesses are taking advantage of it. According to a recent study by Deloitte, a mere 6 percent of procurement leaders believe that their digital procurement strategy will help them deliver on their objectives and improve enterprise value. Even fewer (4 percent) believe that procurement has any influence on their organization’s overall digital strategy.

The industry is ripe for change, assuring substantial competitive advantage for those organizations willing to adapt sooner rather than later.

 

What Digitalization Can Do for You

Digitalizing procurement processes introduce benefits in three primary areas: Strategic Sourcing/Source to Contract (S2C), Transactional Procurement/Procure to Pay (P2P), and Supplier Management (SM). Deloitte defines digital procurement as the application of disruptive technologies that enable S2C to become predictive, P2P to become automated and SM to become proactive.

Through effective digitalization, S2C professionals can categorize and manage spending in real-time, driving consistent cost-saving measures. They can leverage artificial intelligence (AI) to predict demand with greater accuracy, decreasing supply overage and lowering the frequency of supply shortfalls. Primary sourcing becomes easier as they can see, in real-time, the landed cost for commodities across a range of countries and more intelligently negotiate contracts.

Advances in blockchain technology permit automated P2P payments that are triggered by material delivery, reducing delays and standing Accounts Receivable balances. Goods can be exchanged through validated and trusted decentralized ledgers, leveraging efficiencies in every transaction. Sophisticated logistic software can automatically sense material demand and then commission replenishment deliveries from suppliers without involving manual interventions or approvals. This reduces delay by delegating repetitive processing actions from humans to robots.

SM can monitor potential supply disruptions and risk throughout the entire supply chain, facilitating rapid pivots whenever potential issues are detected or forecasted. They can conduct more thorough supplier audits through crowdsourcing and collaborate throughout a supplier network, ensuring that the best goods are procured at the lowest price.

 

How Can Businesses Take Advantage of Digitalization?

Tools to facilitate automation and in-depth data analytics are available for every link in the supply chain, but introducing them ad hoc can drive effectiveness and efficiencies down. Many businesses haven’t adopted a comprehensive strategy that will guide digitalization, which has led to low adoption rates of innovative tech that’s begging to be used. Instead, they’ve stuck with systems that work, foregoing potential increased efficiencies out of fear that change might decrease effectiveness.

The first step in digitalization must be to create an overall strategy that will guide each phase of tech selection, adoption and integration. Some of the crucial questions that must be asked include:

  • Is the technology we’re looking at scalable, or does it only work at our current rate of operations?
  • Can this tech integrate with our current system as well as future innovations?
  • Is a new approach cohesive with our overall strategic vision, or will it need to be phased out as other technologies or systems are introduced?

Begin with an overall strategy of where you want your business to be in five or ten years, then break that vision into concrete steps with specific deadlines. Prioritize digitalization based on cost, ease of introduction and efficiencies gained. Once that plan is drafted, look at it in reverse to see if the phased implementation you’ve planned makes sense, and see if you can uncover any potential interruptions that should be anticipated and overcome.

When you begin implementing innovations, invest the time upfront to do it right. One of the primary benefits of increased automation is the depth of data you can access through machine learning, leveraging artificial intelligence to drive insights your company couldn’t dream of previously. These tools, however, are only as good as they’re instructed to be. Increased data collection doesn’t do you any good if you aren’t looking at the right things, so taking the time to identify efficiencies you want to gain — and where you need to procure the data to do so — is absolutely critical.

 

Keeping the End in Mind

Finally, keep in mind that your overall goal is to solve problems. You’re not pursuing digitalization for its own sake; you’re introducing X technology at Y point in the supply chain to drive Z result, and you’ve already outlined how you’ll measure its success and what data you’ll capture to get there.

Digital procurement offers the ability to harness innovation and drive increased effectiveness and efficiencies throughout the supply chain. When done right, it could revolutionize your business.

Moiz Bhinderwala

Moiz Bhinderwala leads the technical services and logistics teams at Dynamic. With more than 10 years of experience in the IT industry, Moiz has deep knowledge of the complex technological landscape, working closely with clients to understand their IT challenges and help design custom technical solutions to meet their business goals.

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