Agility is vital to keep every business up and running. Procurement is one of the functions, which requires constant change. Today, procurement teams are expected to play a strategic and tech-enabled role. Before, procurement teams had two focuses: cost reduction and risk mitigation. The advent of automation and cloud services has led to more emphasis on efficiency, accessibility, and sustainability of purchasing decisions.
A 2018 Deloitte survey, ‘Leadership: Driving innovation and delivering impact’, gathered based on the views of 504 procurement leaders from 39 countries, representing organisations with a total annual turnover of $5.5 trillion, found that the digitization of procurement is helping overcome a number of key challenges. These include market volatility, collaboration and leadership.
While key findings discovered that 61 % of procurement leaders said they delivered better savings in 2017, 66 % predicted that digital technology would be responsible for the biggest changes in supplier management over the next five years. Half said they were using advanced analytics in a bid to help reduce costs. Since more and more organisations are embracing connectivity with an emphasis on efficiency and productivity, digital technologies are opening up new ways for them to respond to the needs of consumers and suppliers.
Here are five procurement technology advancements that organization can adopt to stay competitive:
Procurement is now moving completely to the cloud. According to a CPO survey, cloud-based procurement platforms are now mainstream. Since several traditional enterprise providers are embracing a cloud strategy and an array of new providers are entering the market, moving to the cloud is highly expected. With investment in cloud procurement rising up, the migration to the cloud is gaining momentum.
Lower barriers to entry connected with cloud technology have paved the way for a competitive and innovative yet disruptive market. Indeed, cloud solutions can provide significant opportunities for a procurement process, including cost effectiveness, energy efficiency, and a more coherent and navigable global supply chain.
According to a Deloitte Global CPO survey, analytics will have the greatest impact on the procurement process in the coming years. The survey highlights that analytics are used for cost optimization (50%), process improvement (48%), and management reporting (45%).
Analytics offer an innovative solution to tackle ongoing challenges like uncertain decision-making, the inefficient use of resources, and more. In fact, to get the most of out their procurement teams, businesses are finding ways to embed analytics into their decision-making process rather than treating analytics as a project. Previously, many procurement leaders had a tough time making the case for their role in strategic development. Data-driven insights from procurement technology allow procurement leaders to demonstrate more value and drive organizational change.
3. Machine learning
Reports show that machine learning is the most integrated and robust form of tech in procurement departments today. It is a form of mathematical modeling often used to build artificial intelligence (AI) applications. One of the key tools for speeding up procurement processes is machine-learning powered virtual assistants. Sometimes, in the form of chatbots or prompts within tasks, machine learning can help procurement officers push tasks forward, catching errors and inconsistencies as it goes. Rapid adoption and fewer errors lead to faster operations, which is a stepping-stone on the path to agility.
For instance, machine learning plays an essential part in maintaining supplier relationships as it predicts patterns within suppliers and the rates that they have been quoting in the past. This will help in negotiating better and comparing prices the suppliers have to offer. A lot of error is eliminated in this process and it helps in easier and faster decision-making.
4. Natural language processing
Natural language processing is another form of AI that can read text and decode meaning. Anyone involved in the procurement process will agree that it is full of text-heavy documents, agreements and conditions. For example, reviewing supplier contracts quickly is an important task needed to get goods moving, and language processing software can reduce this time by flagging suspect clauses.
Besides contracts, natural language processing can spot invoice anomalies and even sniff out fraud. The system is able to recognize that things are out of balance and can send an alert. Additional insights in the form of data are provided which effectively expand the cognitive power of a procurement team while speeding up the fundamental processes.
There is no doubt that various organizations are shifting their focus to automate all aspects of procurement. In fact, nearly two-third (63%) of procurement leaders deemed automation as a key priority. Having a fully automated procurement process will remove inefficient, time-intensive aspects of procurement, and make it more efficient. Automated procurement technology solutions provide organizations with an easier way to manage the myriad of information involved in the procurement process.
With procurement automation, organizations can:
- Spot business needs
- Eliminate repetitive processing
- Manage suppliers
- Track spend in real-time
- Monitor risks and
- Predict future demands
Procurement professionals are expected to level up their game by reinventing traditional processes and embracing new procurement technologies. Investing in procurement tools and technology leads to increased efficiency and productivity. In the end, it leads to a reduction in costs that allows you to put more of your resources toward strategic initiatives aimed at increasing company growth.