Procurement Technology Has Reached a Mature Level of Performance - What's Next?
[Drawn from the Procurement Supplier Innovation in 2021]
The quality of Procurement's supplier selection and the function's ability to manage its myriad suppliers are increasingly connected to technology solutions, and cloud-based solutions are dominating this space.
Software like business spend management (BSM) solutions, enterprise resource planning (ERP) platforms, and supplier intelligence solutions have become critical tools for both Procurement leaders and their teams. When integrated, these types of software can help Procurement gain unparalleled visibility into their spend and their suppliers, no matter how far down they are in the supply chain.
WBR Insights has recently explored how effectively Procurement departments have deployed and integrated these technologies. It was clear that although some organizations are struggling with their deployments, others were experiencing new levels of success.
Procurement departments have now reached a level of technological maturity unparalleled in the function's history.
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Procurement Makes Headway in Its Technology Deployments
In the past few years, Procurement departments have taken significant strides in their technology deployments. However, the true key to their success in supplier management is tied to how mature the solutions Procurement has in place are and how integrated they are into the function's processes.
In Procurement Supplier Innovation in 2021, a recent report by ProcureCon and WBR Insights, we learned that over 50% of the Procurement leaders surveyed believe the performance of their current Procurement technology is above average or better for all the capabilities presented to them in the survey. For example, 63% of respondents said their technology performance in identifying innovative suppliers was above average or better. Meanwhile, 64% said the same about their technology's ability to provide visibility into sub-suppliers or their contracted partners.
Still, there are a few capabilities that Procurement departments are struggling with. Fewer respondents were confident in their technology's ability to help them with supplier selection and diversity. It's also notable that significant portions of the respondents—ranging from 11% to 27% rated—their technology's performance as "below average" or "worst" in several categories.
As such, organizations must determine if their current technologies are adequate for performing business-critical tasks. It may be necessary to replace or augment the solutions responsible for the most challenging processes.
But for organizations that have reached a high level of performance with their technology, a new question arises: What's the next step that will give them a competitive edge and help them deliver more value to the organization?
Reimagining the Role of Procurement
The COVID-19 pandemic highlighted the importance of digital technology in Procurement's ability to diversify the supply base and secure supply lines for critical goods and materials. But the pandemic also revealed that the function is on the verge of change once again.
What began with cost-cutting measures and a shift in work models has resulted in an increased push toward digital transformation. This has combined with the long-term transformation of Procurement from a cost center to a strategic partner at the organization.
At many organizations, Procurement leaders now play an integral role in strategic-level decision-making. With their new technology capabilities, they now have an unprecedented opportunity to secure their place at the table through the delivery of vital business insights.
"Spend analytics can provide a rich source of new insights and opportunities that together create new forms of competitive advantage," says a recent article by McKinsey & Company. "For example, in the procurement of selected minerals, predictive analytics can already be used to integrate information including mining activity, shipping data, weather, and economic indicators—and it can even analyze satellite images of at-port stockpiles to give a much more accurate prediction of market prices."
Procurement has already successfully found its place at the strategy table. The next step is likely for Procurement leaders to fully leverage the technology tools they have in place, fulfilling the promises they made during the initial pilot phases of their deployment.
Procurement as a Technology-Enabled Strategic Partner
Procurement departments that have realized digital maturity in their operations are discovering that they can deliver new insights to key decision-makers at an accelerated rate, proving once again that Procurement can not only help the organization endure a crisis, but thrive in a new and rapidly changing business environment.
In the coming years, we will likely see Procurement taking on new challenges within the organization. This time, the function will be empowered by technology-driven insights, new operational processes, and a set of hard-earned lessons from the previous year.