Getting Procurement Out of The Digital Transformation Rabbit Hole, e.g., Cost Savings and Digitalization

Posted on October 24, 2022


Editor’s Note: Inspiration comes from many places. For example, the inspiration for today’s article was a LinkedIn post from Drasko Jelavic, who asked the question: Is procurement about to fall into the rabbit hole again by focusing on cost savings and digitalization? Below is my answer.

A great and timely post Drasko, but what do you mean again?

Point #1 – Going back to my 2008 & 2014 posts, McKinsey & Company survey of CFOs found that the C-Suite did not believe that procurement was delivering savings or value to the overall enterprise. In short, by focusing on savings, the wrong practices and buyer behaviors were rewarded, e.g., beating down suppliers, vendor rationalization etc. 2008/2014 posts –

Point #2 – According to the 2019 Deloitte Global CPO Survey, most CPOs were disappointed with their digital transformation strategy results. After 40 years in the high-tech industry – and almost as long in procurement, I can tell you that, unlike the early ERP-driven procurement tools, the problem isn’t with today’s technology. Besides talent issue, we also have a significant issue regarding data quality – or, as Rob Handfield rightfully put it, digital transformation is impossible without clean data –

Point #3 – According to Spend Matters, between 2013 and 2018, most CPOs did not believe their teams had the required talent to deliver on their strategic objectives. However, here is the contradiction, during that same period, organizations progressively cut their investment in education and training. What is worth noting is that back in 2007, the executive participants in a CPO Agenda Roundtable said that one strategic sourcing professional is worth ten run-of-the-mill buyers. That said, the question we must ask is, what have organizations invested in developing someone from a run-of-the-mill buyer to strategic sourcing professional? Also, what buyer behaviors have they rewarded? Reference Link: Geraint John, Kate Vitasek, Geoff Talbot and Dawn Tiura

So, what does this all mean?

As I wrote in a white paper in early 2000, they need to follow a people (training), process (right incentives & clean data), and technology (vertical versus horizontal digital transformation) framework to achieve success.

Do you agree or disagree with the above assessment – share your comments below or on LinkedIn.