How Digitization Will Change Procurement and the Supply Chain

I posed the following question to thought leaders from the practitioner, provider, and academic communities: “how will digitization change procurement and supply chain?”

In this full excerpt from the May 2021 magazine article (The Procurement, page 4), I share their insights. Please not that you can also view or download the actual article through my SlideShare account. – JWH

Digital Transformation, Robotic Process Automation (RPA), Artificial Intelligence (AI), and now Cognitive Procurement.

Sometimes it feels like we are being “digitally bombarded” with the transformative promises of emerging technologies that we lose sight of what it all means.

To help with unravelling the wondrous mysteries of the digital age and its impact on procurement, we turned to three industry experts.

Why three experts?

Usually, when we seek input from procurement industry thought leaders, we unintentionally limit our research scope to our “own” group. In other words, a practitioner will more likely heed the advice of another practitioner or someone whose experiences more closely align with their position and experiences. Once again, we are not suggesting that this siloing is deliberate – in fact, it is quite natural. However, it is limiting in that it does not provide a big picture view.

Today’s article aims to expand the horizon by posing the same question to thought leaders from the practitioner, provider, and academic communities.

Through their responses, you will discover both the differences and symmetries between each group. The benefit is that you will likely get the first coordinated view of digital transformation through the eyes of three different yet related areas of our industry, creating a unified path to digital success.

Bridging the Divide

“Interestingly though, a large percentage of companies that have fully implemented these modern technologies are not actually satisfied with the results.” – Deloitte 2019 Global CPO Survey

While there is warranted enthusiasm for what we will call the digital promise, the divide between recognition and realization of that promise continues to be elusive for many organizations.

The results are as disappointing as they are surprising, given that digital technology has addressed the technical issues of early generation ERP-based platforms. For example, there is no longer the need to invest significant sums of money and resources into overarching initiatives as the implementation of today’s “buy-the-drink” solutions occur in a matter of weeks, if not days versus months and years.

From a user standpoint, digital apps are user-intuitive, replicating our familiar ease-of-use buying from home experience.

So, what is the problem?

A good starting point is to understand how digitization will change procurement and supply chain organizations?

Expert Opinion

To answer this question, we interviewed three experienced and uniquely qualified individuals.

From the provider world, we turned to Pierre Laprée from Per Angusta, whose LinkedIn title Procurement Director Turned Entrepreneur, underlines his practitioner roots resulting in a “procurement for procurement” approach to technology development.

Speaking of practitioners, over her 31-year career with notable brands such as American Express and ACI Worldwide, Canda Rozier brings a wealth of experience and expertise to the discussion. An interesting side note is that before joining the profession, Canda spent ten years with Burroughs-Unisys in various technical and product management positions.

Hervé Legenvre rounds out our trio of experts. Holding various roles in academia, he is currently the Professor and Director of the Value Creation Observatory at The European Institute of Purchasing Management (EIPM). His primary mission is to deliver on EIPM’s commitment to be the “intersection of the business and the academic worlds, with an approach to education rooted in the reality of business.”

Digitization’s Impact

What impact will the digital era, and more specifically, digital technology, have on procurement?

As a provider, Pierre believes that digitization will change procurement in many ways, depending on how far you are down the transformation road.

When you look at the history of digitization, it started from the end of the supply chain at the transactional level by automating low-value, simple tasks in the 1990s.

Little-by-little digitization started taking on more complex tasks going upstream into the value chain in the 2000s and 2010s with eSourcing and sourcing optimization,

We are now at the point where once we have digitized the supply chain’s transactional elements, we also need to digitize how we manage the team. That is where we are today. You need human judgement and people to make difficult decisions leveraging technology. It is no longer a question of how we replace humans but augment their capabilities.

Evolution Versus Revolution

As a practitioner, Canda Rozier believes automation or digitization of procurement has been going on for a long time. The only difference, according to Canda, is that way back when we did not call it digitization.

That said, she does not doubt that this current incarnation of digital transformation – which includes intelligent automation, is having an accelerating impact on how procurement and procurement professionals work both now and in the foreseeable future.

While Canda believes that we still have a way to go before we realize the full digital promise, one thing is sure; digitization is making procurement more proficient and professionals more strategically focused. When she says “focused,” she means having the freedom from the mundane and lesser value tasks to focus on activities that deliver greater value.

The Three Streams

Hervé Legenvre views digitization in three separate yet related streams of change.

With the first stream automation and creating more efficiencies, replacing some of the functional or transactional tasks previously performed by humans is the focus.

The second stream centers on supporting strategic, problem-solving activities in which machines help people make more impactful decisions. One example is a soon to be published case study in the European Business Review. According to Hervé Vodafone uses machine learning to quickly scan electronic products in their design lab to build a full costing model for development purposes.

What about the third stream? Before COVID, companies used to make strategic decisions daily or quarterly with an eye on a longer-term 2-to-5-year horizon.

In the post-COVID world, they must simultaneously manage multiple time horizons, resulting in a repurposing of existing digital resources. Everything from stress tests on their suppliers to global contract reviews, companies are re-examining their existing digital assets to drive new opportunities that they did not previously pursue.

Conclusion

As you consider the above insights, perhaps the most important takeaway is how digitization is accelerating the necessary changes to improve and expand procurement’s impact on the modern digital enterprise.