If AI is the light at the end of the tunnel, why are there so few success stories to be found? How do we enable smart procurement?
Success with today’s broad set of complex objectives requires Procurement leaders to think strategically and process ever greater volumes of diverse information. Unfortunately, this is an area with significant room for improvement at most organisations. A survey of over 400 procurement leaders by Forrester found their top priority to be “improv[ing] business insight on purchasing activity through reporting and analytics.”
The obstacles to more informed, strategic decision-making are quite consistent. The study, entitled “Enabling Smarter Procurement” found three common issues
1. Firstly, despite efforts at automating processes, too much capacity is still consumed by operational or manual activities. Teams must free capacity to work on new projects, conduct analysis and plan, but are struggling to do so.
2. Secondly leaders struggle to access relevant insights when and where they are needed. The volume of information now available is of little help if not digestible, simply leading to information overload.
3. Compounding this, respondents also cited poor data quality as a key challenge. Duplicate supplier records, inaccurate data and poor integration between systems all were cited as sources of data quality issues.
Fortunately, new technologies are available that can empower procurement to address these and other challenges and rise to the occasion. AI in particular is finally coming of age and often viewed as the answer to many of Procurement’s challenges. The same survey found that 71 per cent of business leaders plan to adopt AI in procurement over the next 12 months. Yet if AI is the light at the end of the tunnel, why are so few success stories to be found?
A key reason is the approach taken to implementing AI solutions to date. As vendors struggle to burnish their innovation credibility, there has been significant marketing ahead of capabilities which has led to unmet expectations post implementation. As capabilities are now coming in line with past marketing, this problem will subside. Of greater concern, the innovation race has led to nearly an exclusive focus on the algorithms, leading to poorly designed implementations. Less innovative but equally important areas, especially data quality, are being ignored. AI relies on a solid foundation of data, in terms of volume and quality, so solutions that offer clever applications alone are sure to disappoint.
To remedy this problem, organisations must implement AI in conjunction with cleaning up their data, rather than using poor data quality as an excuse for inaction. Source-to-Pay suites that are built upon a unified data model partially address the challenge by generating clean data that can be mined by AI applications across all processes. For example, suites with a single supplier record can provide true 360 degree visibility of supplier performance and activity, and enable AI applications to predict potential risks.
That still leaves issues with existing data or data in other systems. Here, master data management solutions should be leveraged that can actually fix issues in back end systems, linking vendor and item master records across systems. This further improves visibility and the potential for new and better insights.
Empowering procurement to make more informed, strategic decisions is no longer an option. There is simply no other way to effectively meet the broad set of objectives now expected. Fortunately, new technologies are finally reaching the level of maturity where they can have a transformative impact. By implementing AI applications in parallel with initiatives to improve their data foundation, leading organizations are both enabling smarter procurement today and ensuring they are well positioned to leverage tomorrow’s innovations.
Ivalua sponsored today’s London CPO roundtable. If you would like to attend or sponsor a Procurious roundtable please contact Olga Luscombe via [email protected]
Are we facing a future where automation displaces the human mind and traditional procurement and finance careers?
Technology is used to consolidate and analyse all finance and procurement information. It also offers insights to the new generation of professionals in their decision-making process and tasks that require abstract thinking rather than computation.
The worlds of finance and procurement are about to change forever, and we are now at the turning point of this revolution. Often regarded as the most conservative echelon of the modern enterprise, today’s CFOs and CPOs are embracing new technologies, deploying automation, deep analytics and machine learning techniques to simplify financial and procurement operations and spend smarter.
As technology advances into the workplace, the traditional roles of finance personnel are changing as more processes are automated and data “crunching” takes the heavy lifting out of day-to-day routines. The change challenges professionals too, whose previous core competencies are now the primary remit of AI algorithms.
The concern for many is whether we are facing a future where automation displaces the human mind and therefore the traditional careers within finance. A major challenge for the modern CFO and CPO is to transform teams to take advantage of these new technologies. Employees in our industry are concerned that jobs are threatened, but the upcoming era of artificial intelligence will enable a new partnership between mind and machine that liberates humans’ natural skills through superior intuition and decision-making.
The concept of Superfinance looks to the visible horizon of the future and defines a modern finance and procurement function that is based on a Mind-Machine partnership. Here, technology is used to consolidate and analyse all finance and procurement information. It also offers insights to the new generation of professionals in their decision-making process and tasks that require abstract thinking rather than computation.
Humans remain valuable because of our ability to reason in a way that goes beyond executing calculations on available data. Many examples exist where this new combined man-machine hybrid has been more powerful than either human or computer alone.
What we can do that computers can’t is combine information from AI with the information coming from the real world, apply creative and critical thinking, make decisions and take care of customers.
Making better decisions
So, the combination of Mind and Machine holds considerable potential to expose, streamline and automate financial operations from their current state, from purchasing to payment, and offer new levels of competitive advantage.
Of course, digitisation of business processes isn’t anything new and has been around for some time now. It has already dramatically changed how businesses operate and professionals perform. Finance and procurement functions have already been permanently affected by this change. So, what does the future of mind and machine really look like and what should industry professionals do now to prepare for the evolution?
Digitisation of finance and procurement is evident within distinct phases:
At the heart of financial digital transformation is, of course, data. By consolidating procurement and finance information into the cloud, the power of machine learning can be deployed to create impactful results. This data provides the foundation for automation. Many businesses have already embarked on this journey of standardisation, simplifying and outsourcing financial processes for greater efficiency and cost savings.
The final step involves insights-driven Purchase-to-Pay: Here, the result of automation is aggregated data from the entire Source-to-Pay business process, which is changing the trajectory of finance and procurement.
We are now entering the phase of cloud-based big data, predictive analytics, artificial intelligence and machine learning. Professionals are already equipped with the timely, accurate and complete data they need to make better decisions and support business agility.
So, with the era of data-driven finance already here, does the increased amount of information really help us make better decisions?
Even with the advantage of data at our fingertips, our human condition can still get in the way when we approach decisions, and we may often look for confirmation instead of confidence. Our gut feel is so real it can often override data-driven insights and enable us to make important decisions instinctively, and then retroactively fit information to support our conclusions.
This behaviour hampers business results more than we are willing to admit. So, to make data-driven finance real, professionals have to become behaviourally aware and refrain from asking for the wrong answers from AI. AI can arrive at different results than we as humans would from the same data. Our role therefore is to try to connect the real-world phenomena into the results provided by the data, and make decisions that best benefit customers, as well as the business itself.
While the data era is making big promises about what the future may hold and what people and companies can do with the unlimited power of information at their fingertips, there are still many unknowns about what this will look like in practice.
But there are areas where finance and procurement professionals can focus to begin preparing for this future and developing our uniquely human talents. To achieve true Superfinance, finance teams need to upskill and develop in three specific new areas:
From a technology perspective it requires Automation through data, analytics, AI and machine learning. In terms of skills, behavioural awareness, data analysis and new job requirements are needed, before considering the final element of ‘Transformation’, which includes managing change, cultural shifts and talent development.
On a more granular level the following is a good roadmap for the transformation:
Improve data: Collecting and aggregating 100 per cent of financial data is always the first step to being ready for the future, as emerging technologies feed on that data. But presuming you’re doing that today, the next steps are cleansing and augmenting that data. This includes purchase orders, invoices, collaboration between suppliers and customers, and supplier information. All of this data can be improved by creating a team structure for data ownership, delegating maintenance to the data owners and augmenting the data sets with third party data for completely new insights.
Leverage cloud solutions: As businesses get a unified and accurate view of their data, they will be better equipped to answer new questions and challenge their colleagues with better reasoning. You can build confidence using cloud-based solutions so that procurement and finance professionals rely on their data and analysis of that data to make decisions and recommendations.
Become a business partner: Having data is one thing – using it effectively across the business is another. Data must be properly analysed for the right insights before collaboration across finance, procurement and business units to effectively deliver that information in a meaningful way – building and nurturing relationships across the business to hit strategic goals.
Make unbiased decisions: People often interpret information in a way that confirms their preconceptions today. It’s important to educate your teams to be aware of their biases and the right way to approach data analysis. This involves applying scrutiny and objective reasoning to the data-driven insights.
Manage talent: Moving from siloed execution to collaborative data-driven finance requires proper development and management of the right skills. You need to systematically manage talent, endorse an analytical mindset and improve financial processes and job descriptions to put data at the core.
Nimble and adaptable businesses that follow these steps will thrive, having rapidly sensed and responded to opportunities, and seized the advantage in the AI-enabled landscape.
Over the next decade, AI won’t replace people, but people who use AI will replace those who don’t. The future will transform us through organisational change, digital operations and better human capital management. Following these steps is a good start to building the foundation for a mind-machine partnership of the future, and hopefully making data feel inspiring as we celebrate the benefits of being human in an automated world.
This article, written by Louis Fernandes, VP & UK Country Manager, UK & Ireland – Basware was originally published here.
Are marketplaces the future of procurement? What are the pros and cons? We discuss in new Procurious webinar.
In the late 1990s and early 2000s, B2B e-marketplaces were hyped up as the next big thing. For a while it seemed these were going to transform the lives of supply chain and procurement professionals forever. But they never quite took off perhaps because they were too far ahead of the technology and change-management requirements of the time. Indeed, most of the public and consortia marketplaces failed and of the 1,300 that were launched, fewer than 50 exist today.
Fast forward 20 years and, as consumers, we’re all enjoying, and heavily relying upon, the benefits of consumer companies with marketplace models such as Uber, Airbnb and Amazon.com. And whilst the B2B marketplace model might not be expanding with such speed, it is being applied to more diverse industries and with more success than previous models.
If you’re struggling to get a hold on your organisation’s maverick spending, concerned about disruption and risk mitigation within your supply chain or in serious need of a larger supplier pool, a marketplace might just be the answer to your prayers!
In our latest webinar, sponsored by Amazon Business, we explore the evolution of procurement marketplaces and their prevelance in organisations today, the pros and cons of using a marketplace and what the future holds for procurement if this trend continues.
Who is speaking on the webinar?
Molly Dobson, Head of Amazon Business Accounts – Amazon Business
Molly Dobson is the Head of Enterprise Customer Success for Amazon Business UK. Prior to her role with Amazon Business, she was Head of Buying for European Business, Industrial, and Scientific Supplies and Category Leader for Amazon’s Luggage and Travel business. Molly has her MBA from London Business School and has also worked for Marks & Spencer, Coca-Cola, and Gap Inc.
Mary Hetherington, Director of UK Group Procurement – AXA
Mary Hetherington is the Group Procurement Director for AXA UK. Mary has worked in the Insurance Industry for over 30 years managing a combination of Finance and Procurement functions. She has led several large multi-company third party programmes focusing on outsourcing, divestment and acquisition activity and GDPR. As part of a broader initiative to bring more agility to Procurement processes, Mary is currently focused on the Implementation of Coupa and an effective purchase to pay strategy.
What will be discussed in the webinar?
How can marketplaces help CPOs and their teams control maverick spend?
Are B2B marketplaces the future of procurement?
How can procurement teams incorporate marketplaces into their business strategy?
Why are some procurement professionals reluctant to adopt marketplaces?
The evolution of marketplaces and their prevalence in society today
How do I register for the webinar?
Registering for Going to Market (place): The Future of Procurement couldn’t be easier (and, of course, it’s FREE!)
I’m already a member of Procurious, do I still need to register?
Yes! If you are already a member of Procurious you must still enroll to access the webinar. We’ll send you a email with a link to the webinar platform in the run up to the event.
When is it taking place?
The webinar takes place on 13th November at 11am GMT. Sign up or log in here and we’ll be in touch ahead of the event to provide details on how to join the webinar live.
Help! I can’t make it to the live-stream
No problem! If you can’t make the live-stream you can catch up whenever it suits you. We’ll be making it available on Procurious soon after the event (and will be sure to send you a link) so you can listen at your leisure!
Can I ask a question during the webinar?
If you’d like to ask one of our speakers a question please submit it via the Discussion Board on Procurious and we’ll do our very best to ensure it gets answered for you.
Going to Market (Place) : The Future of Procurement goes live on 13th November. Sign up now.
Can leadership be automated? Will AI soon take over procurement negotiations, communications and problem-solving? Once thing is for certain – no skill-set will remain uniquely human forever.
What is your human advantage?
With 42% of the average workload in procurement expected to be automated by 2030, now is the time to take stock of our skill-sets and focus on what makes us uniquely human.
Today, the automation of core procurement skills such as data analysis and market research is well underway. Lines are being drawn between those skills that AI has already mastered, those that will be automated in the future, and – critically – the areas where humans still have the advantage over machines … and that’s where soft skills come in.
However, categorising procurement skill-sets into 1) core skills for AI and, 2) soft skills for humans oversimplifies the issue. It ignores the fact that the creeping wave of automation increasingly includes soft skills such as communication and problem-solving.
Avoid the trap of thinking there are particular skills that AI will never be able to replicate. Surprising results in this research, for example, reveal that very “human” skills such as negotiation and even leadership are seen as likely to be automated. Robots are currently being trained to read and respond to the subtlest of human facial expressions.
With this in mind, our research identifies core procurement and soft skills where – for the foreseeable future – humans hold a unique advantage. The ability to influence others, build relationships and think creatively have emerged as stand-out skills that will enable us to future-proof our careers on the cusp of the robotic age.
Level One of this four-part series by Procurious and Michael Page UK examined the forecast for procurement and the threats and opportunities facing the profession. Level Two shifted the focus to the practicalities of procurement and supply chain management’s evolution against the backdrop of a technological revolution.
This report, Level Three, dives into the core procurement and soft skill-sets to understand exactly which parts of our roles are expected to be automated, and offers advice on the skills that top CPOs will be hiring for by the year 2030.
AI and Core Procurement Skills
Determining customer needs, developing supply strategy and delivering stakeholder value are not only considered to be the most important core procurement skills, but also the least likely to be automated.
Procurement professionals who wish to develop their skills in determining customer needs (both internal and external) should work to improve their ability to build relationships, listen carefully, challenge assumptions, and always look for opportunities to connect the dots, help others and add value.
AI and Soft Skills in Procurement
Among the top four soft skills nominated as most likely to be effectively automated, problem-solving, leadership and negotiation have emerged as unexpected results. Robotic problem-solving is an entirely different concept to human creativity and innovation. AI has the superior ability to search and analyse data – for example, the answer to an engineering challenge may already exist in your files, but has been forgotten by human staff. Given the right search parameters,AI can identify the solution.
Would you feel comfortable reporting to a machine? Robotic leadership is a fascinating concept. Robots may very well have the ability to check your work and track your KPIs, but are not yet capable of motivating or inspiring others, or picking up on the human nuances that are a part of powerful decision making.
Negotiating robots already exist, and may soon be considered very useful for conducting low-level, emotionless negotiations that involve no ambiguity or complexity. For strategically important negotiations, however, human skills such as awareness, empathy and flexibility will always have the advantage.
Interested In Learning More?
This content-packed report also contains links to relevant thought-leadership from Procurious and Michael Page UK, including videos, blog articles, podcasts and webinars.
And don’t forget … part 4 of the Procurement 2030 report will be released before the end of the year!
CLICK HERE TO DOWNLOAD PROCUREMENT 2030: LEVELS 1 to 3.
Who does procurement better – the public or private sector? Is there any reason we all can’t do better together through sharing knowledge and experience? Much depends on the professionals involved.
You could argue that an uneasy relationship exists between procurement in the public and private sectors. On one side, there is full accountability and audit trails, scrutiny over every penny/cent spent and the need for what is, from the outside at least, an almost impenetrable set of regulations and documents that have to be completed.
On the other side, it’s just as accountable and auditable, but there’s more freedom in the process, things happen quicker and there’s more time for the good stuff like contract management. I think it’s fairly obvious which is which…
Accept What We Cannot Change
To stop this becoming a lengthy piece on which is ‘better’, public or private sector procurement, it’s important to separate what could be done better from what we cannot change.
Regulation and Legislation
Yes, the public sector is highly constrained by regulations, leaving it more inflexible and giving less freedom in the process to procurement professionals. But beyond getting better at working within the regulations, there’s not much to be done about it. Even post-Brexit, there will still be substantial regulation governing procurement and procurement process, even if it looks slightly different to what it is now.
Yes, budgets in the public sector are being squeezed. Hard. But no, this is not going to change any time soon. What both the public and private sectors need to do is be savvier with how the available money is spent and how they can maximise what they get from a contract with less money to spend.
Let’s knock this one on the head straight away. Public sector procurement receives the level of scrutiny it does as it is spending the general public’s money. To ensure everything is above board and audited this needs to continue. And the private sector will only face increased scrutiny in the coming years, so there’s no escaping on either side of the fence.
Lend a Helping Hand
However, there’s nothing to say that the public-private relationship can’t be better. Both sides could teach each other a thing or two about the procurement process and how to make it better or more efficient. After all, at a time of squeezed budgets and regulatory pressure (not to mention Brexit and trade wars), why wouldn’t we all want to work together to make our lives and jobs easier?!
In this article, we’ll be looking at three key areas in which the private sector can help the public sector and at some point in the near future, we’ll look at this from the other side.
Some of this is based on what has been written about both sectors in the press and in thought leadership papers. The rest of my advice, to paraphrase Mary Schmich and Baz Luhrmann, has no basis more reliable than my own meandering experience. I will dispense this advice now…
In the private sector, procurement professionals have the opportunity to negotiate at any stage in the process. Indeed, they may even choose to negotiate at multiple stages in order to get the best deal. Opportunities are more limited in the public sector, meaning more contracts are awarded without negotiation, or negotiation at a stage where the deal is almost done.
However, even these could be maximised to produce a better deal and this is where private sector professionals could help. Who better to assist with a negotiation than someone who is practised, skilled and used to carrying out the process? Swapping notes on good negotiation techniques and where savings have been found in contracts for similar goods or services could provide some much needed wins.
Longer Contracts and Relationship Management
You know the score – you spend months painstakingly putting a contract together and awarding it, only to come back to the same contract 18 months later to tender again. The limiting factor here is the length of public sector contracts in many cases, but could this be a valuable knowledge sharing opportunity?
Crafting long-term contracts, aimed at longer than 5 years (for the right goods, services or works), is a skill. Maintaining the right balance between getting a good deal on both sides, opening up avenues for innovation, while at the same time knowing that come year 5 any prices are still competitive, is something that the private sector has greater experience with. By putting heads together, this could also be passed into the public sector.
A Strategic, Value-Adding Profession
Are you in a senior management or executive level role in procurement? What do you think your organisation views procurement as – a tender machine for purchasing or a strategic partner for adding value? Some argue that in the public sector, the former is much more common. When there are savings to be made, procurement is the one tasked with delivering, but is left out of the loop when it comes to bringing the value to the top line.
Leaders can help drive a change in this view. If private sector procurement leaders have been able to make this leap already, then using a tried and tested approach may help gain the necessary traction in the public sector.
Share Your Thoughts
These are my thoughts on what the private sector has to offer the public sector in the overall procurement process. None of them represents a quick fix in terms of greater efficiency or costs savings, but done properly, could provide these benefits in the long run.
It would be interesting to hear from professionals on both sides of the fence on this too. Would you be willing to work closely with the public/private sector? How would you facilitate this? Are there other areas you think you could help with, or have greater priority? Let’s get the conversation started – you never know where it’s going to take you and the profession.
AI has the potential to shoulder a vast amount of the #procurement workload. But machines can only do the work for you if you capture all the data in the first place.
Last month Procurious hosted the very first Procurement Thought Leadership Forum in Chicago to discuss the evolution of procurement; what the future holds for the profession; how we can effectively determine the size of the global market; the importance of professional associations and maturity levels across the globe.
The event, sponsored by Basware and attended by a number of the world’s leading procurement consultants, sparked some fascinating discussion and debate.
Dealing with Data
Remember that Tom Cruise movie – Minority Report? Eric Wilson, SVP Basware North America, certainly does. “In the movie Tom Cruise swipes things on a giant screen, he then predicts a crime and the team prevents it before it happens. It was pretty cool. Especially, back in 2002 when we didn’t even have touch screens on our cell phones and artificial intelligence (AI) was in the realm of science fiction.”
Of course, today we all use AI in our daily lives, whether we realise it or not. As Eric asserts “AI is the new electricity. When we replaced steam powered machines with those using electricity, we transformed transportation, manufacturing, agriculture, healthcare and so on; increasing efficiency tremendously. AI has the same, huge potential, but nobody truly knows yet how it will change the world.”
Indeed, as Eric pointed out it’s difficult to think of an industry that is not being impacted by AI; IT, FinTech and Healthcare, to name just a few, are all being totally transformed. Self driving vehicles is an industry that is built entirely on AI.
But holding the right data is critical in order to harness the benefits of new technologies. If an organisation can turn all the data they hold into tangible customer value by leveraging machine learning and AI they can actually begin to benefit from these technological advances in the market. But to do so relies on having the right volume, quality and completeness of data .
“If you don’t have a view to the future when you are evaluating automation options, not only will you not achieve your business case for today, but three years from now, your system will be obsolete,” states Eric. “It will be obsolete because it did not capture all of the data in the first place.”
In Eric’s mind there are no two ways about it: you can’t use AI if you don’t have the centralised data for those machines to learn from. “And so, my key takeaway now and always is: when you are putting together your RFPs for systems, data better be first and foremost on your mind!”
The conversation century
Elizabeth Linder, Founder and CEO of The Conversational Century joined Youtube in 2007 and often thinks back to that year, a significant time for Youtube, in order to understand the social media space.
It was an exciting and life-changing time for skilled amateurs. A time that had millions of people singing in their bedrooms or racking up millions of video views for a commentary on something they would never otherwise have been considered an expert in. Youtube ultimately offered them the opportunity to be heard.
Elizabeth is a strong believer that the internet is the best place to build trust. “The people” ( i.e. you and me) have already got this all figured out. But the reason so many people still believe the internet is destroying trust is that our leaders are still so far from getting it right! We simply don’t have leaders at a political level that have invested in a voice on social media.
Some key things to remember when trying to start conversations online:
Most leaders fear that they have to move at an increased pace because of today’s internet culture. You don’t. Go at your own pace but keep people informed as you do it. It’s ok to communicate to people that “the discussions are still in progress” or “we don’t have information on this yet” so long as you’re communicating something!
Believe in the power of primary sources because the public certainly do. Hearing directly from the source rather than a paper adds a lot of value to your communication. If you’ve ever been quoted in an article, blog or feature you’ll know the producer of that piece never quite gets to the meat of what you were trying to say because youdon’t own the conversation or drive the discussion – they do!
Embracing in the hacker culture, i.e. making it up as you go along, is key. EU politicians, for example, only see social media as a tool for outbound communications and not for their inbound policy making. Hacker culture dictates that they need to consider the latter.
Elizabeth’s take away advice on owning the social media space? “Be yourself online and talk to people in a way that lets them in but not in a way so casual that you’re treating them like family.”
The value of professional certifications
Rick Blasgen, CEO – Council of Supply Chain Management Professionals (CSCMP) and Tom Derry, CEO – Institute of Supply Management ISM led a session on the evolution of procurement and supply chain and the value of professional certifications.
Both leaders are very optimistic about what the future holds for procurement and supply chain professionals . “I think [these professions] will be an embedded feature of every competitive global company around the world because they see so much of what goes on,” argues Rick. “We see it really growing into the fabric of successful companies.”
And Rick believes professional certifications “are a normal part of continuing to educate yourself and continuing to be knowledgeable about such a dynamic and ever-changing field.”
“One of the things important to CSCMP is to advance the logistics, supply chain and procurement professions and the careers of those working in them. The only way we do that is by being thought leaders and thinking about using the new technologies and tools that have never before existed.
“Our certifications will educate you on these things and then test that you have the understanding and can utilise the complexity within them.”
“An association used to function as the place where people felt obliged to belong,” says Tom. But nowadays he doesn’t believe professionals feel such a sense of needing to belong to an association just for the sake of belonging “They need value for money and they expect a professional body to provide tools and skills that enable them to be successful at a critical moment in their career.”
Sizing up the procurement market
Braden Baseley, ProcurementIQ Analyst discussed the size and maturity of the global procurement market, revealing preliminary insights from their specially commissioned research report.
The research reveals…
There are 554, 560 procurement pros working in the US, which make up 0.4 per cent of the workforce
The average salary for a US procurement professional is $72,199, which is pretty good considering the average US salary is approximately $55, 000
California, Texas and New York employ the largest number of procurement professionals
The report will also explore how procurement skills are changing and evolving and the skills that are most desirable in procurement teams.
The Procurement Thought Leadership Forum was sponsored by Basware.
Only 7 per cent of procurement functions are perceived as ‘maturing’ in terms of digital transformation and a mere 38 per cent of teams have the capability to meet the challenges of Industry 4.0. Find out how to address these challenges in our latest report: Procurement 2030: Level 2.
Without careful preparation, revolutions fail.
From Spartacus’ slave rebellion in Ancient Rome, to the Satsuma Samurai uprising in Imperial Japan, to the Boxer rebellion in colonial China, history has shown that a revolution cannot be powered by enthusiasm alone. Successfully landing a change of any significant scale requires strategy, planning, and no small amount of determination to see it through.
The Fourth Industrial Revolution (Industry 4.0) is now upon us, and its effects can be seen in the assembly lines and offices of companies around the globe. Game-changing technology such as 3D printing, the Internet of Things (IoT), and Blockchain will super-charge the supply chains of many organisations, but need to be implemented with care.
Level One of the four-part “Procurement 2030” series by Procurious and Michael Page UK examined the forecast for procurement and the threats and opportunities facing the profession. The latest report, Level Two, shifts the focus to the practicalities of procurement and supply chain management’s evolution – against the backdrop of a technological revolution.
Our survey of 590 global professionals revealed that there is a great deal of preparation to be done before the majority of procurement functions will be equipped to take full advantage of Industry 4.0, particularly in the areas of strategic planning, creating a roadmap that gives priority to the most impactful elements of the digital revolution, and (crucially) having the right talent on board.
Our survey revealed that only 7 per cent regard their procurement functions as ‘maturing’ in terms of digital transformation. The factor holding back this maturity would appear to be a lack of support from the wider business, with comments such as:
“Management is not interested in a digital transformation journey.”
“Our desire to transform is not matched by the business, who do not see the value.”
“Digital transformation of procurement is not even on the agenda.”
Some steps that might be taken to improve this situation include:
Do your homework and build a rock-solid business case that supports digital transformation. Alarmingly, 43% of survey respondents indicated they do not have a formal digital transformation strategy.
Ensure you align each step of your digital transformation journey to an enterprise-level objective.
Find a sponsor (a senior person in the organisation) to support your proposal.
Have the courage to take a risk – have confidence behind your ideas and be prepared to stand up for them.
What do you regard as procurement’s greatest weakness? This research reveals that a narrow focus on cost savings and a lack of influence in the wider organisation are two stand-out factors that are holding procurement back.
HSBC CPO Jan Fokke Van Den Bosch shared his opinion of procurement’s greatest weakness in this video interview.
What’s Your Priority?
Moving systems into the cloud and leveraging big data analytics are by far the two most likely technologies to be implemented within the next 24 months by surveyed organisations.
Although AI and cognitive procurement are perceived as two of the most difficult-to-implement technologies, they are also expected to have the greatest impact on organisations. Other high-impact technologies include big data, cloud computing, and robotic process automation.
When prioritising these technologies to create a digital transformation roadmap, take the following factors into account:
Enablers – which technologies need to be implemented first to enable others to work successfully?
Impact – which technology will make the greatest positive impact on your wider organisation’s goals?
Costs and benefits – what is the long-term ROI on this investment? What are the benefits beyond cost savings?
The Right Team For The Job
Our survey-takers believe that on average, only 38% of their colleagues heave the capability required to meet the challenges of Industry 4.0.
For procurement functions on the cusp of a major digital transformation, now is the time to examine the team’s attributes and capabilities and, if necessary, bring in fresh talent with the ability to drive change and reap the full benefit of enabling technology.
While digital skills are a must, candidates should be screened for attributes such as a willingness to embrace change, agility, and the flexibility to make use of new behaviours and technologies.
Another solution to the perceived capability gap is to embrace the gig economy. The future of work will be project-based and outcome-focused. From the employer’s perspective, it will become increasingly important to bring in the right team for the right project.
A higher percentage of contractors in procurement will enable project managers to scale up and down as necessary, with results revealing that employment of contractors is expected to nearly double by 2030.
Interested In Learning More?
This content-packed report also contains links to relevant thought-leadership from Procurious and Michael Page UK, including videos, blog articles, podcasts and webinars.
And don’t forget … parts 3 to 4 of the Procurement 2030 report will be released in the coming months!
The benefit of AI for procurement is clear – the question, then, is what will it take to effectively put it to use?
Over the last year, machine learning and artificial intelligence (AI) technologies have graduated from the class of “emerging tech” – they’re here now, they’re increasingly sophisticated, and their adoption will only continue to accelerate.
We’ve seen machine learning and AI go mainstream in consumer tech environments, and they are rapidly shifting from hype to reality in enterprise environments as well; however, enterprise executives are still working to understand how AI applications can move beyond specific product features to influence broader business functions and strategies.
Let’s take a look at the procurement department, for instance. Procurement and purchasing professionals have a lot to gain from leveraging AI. In fact, AI has the potential to completely transform how organisations manage their spend, from automating invoice coding based on learned criteria, to predicting potentially fraudulent transactions, and preventing rogue spending before it happens.
The benefit of AI for procurement is clear – the question, then, is what will it take to effectively put it to use?
Gartner’s report, “Start Preparing Now for the Impact of AI on Procurement,” states that “technologies’ need for data will force application leaders in procurement to ensure access to the necessary internal and external data sources.”
Essentially, the first step to getting predictions out of AI is to capture all data – internal data, external data and third-party, public data. Furthermore, procurement professionals should be asking themselves if they have the volume, the quality and the completeness of data needed to leverage AI within their department.
Ticking each of these boxes can feel like an arduous process, but a good starting point is to hone in on three particular sources of data that provide the greatest visibility into spend:
1. Supplier Data: This means capturing data from 100 per cent of suppliers in the procurement system. Not just the largest multi-national suppliers who use sophisticated EDI or XML formats, but the whole tail. This should include mid-tier suppliers that may be using online portals or emailing PDF invoices, all the way down to the smallest “mom and pop” businesses, who continue sending paper invoices. Using an open commerce network that accepts and supports all invoice formats and requires no changes on the supplier’s end enables 100 per cent supplier onboarding and captures all transactional data. To gain true visibility and power future platforms, procurement and finance leaders must aggregate as much financial data as possible beginning with supplier data.
2. User-Driven Data: The ability to capture user-driven data–specifically, buying insights that track 100 per cent of all purchasing requests that run through the system, is vital. Visibility into employee spend ultimately depends on how user-centric procurement tools, technologies, and processes are designed. The bottom line is: procurement systems shouldn’t be designed for the procurement department. They should be catered to potentially thousands of employees around the world that are buying things in their organisation.
Searching for orders, dynamic routing and approvals, and guided buying, for instance, should be easy to navigate and fit seamlessly into the way employees already work. The key is to create a system that users adhere to not because they have to, but because it’s the easiest way to get what they want from preferred vendors at the negotiated price, providing another layer of spend visibility.
3. Invoice Data. By nature, the accounts payable function is primed for intelligent automation. There is a huge opportunity to use AI for things like improving processing efficiencies and reducing costs, increasing discounts and eliminating late payment fees, for instance.
But, these enhancements can only be achieved if the invoice data feeding into AI is complete. That means procurement needs to capture 100 per cent of invoices, irrespective of format (paper, PDF, electronic) and irrespective of invoice type (PO-based, non-PO based, invoices for direct spend, for indirect spend, for facilities and utilities, etc) – truly, any and all. Whatever the invoice, it should be captured.
These three particular sources of data can truly position a company to take advantage of all the benefits AI promises just over the horizon. Elements of machine learning, AI and predictive analytics already exist within procurement today. Forecasting budgets for approvers, alternative cost-effective suggestions during a user’s shopping experience and intelligently aggregating POs based on purchase trends are just a few commonplace applications. But to take advantage of any of these applications, and future opportunities to gain a competitive advantage, data is an absolute prerequisite. Only when armed with data – especially from suppliers, users and invoices – can procurement make the most of their investment in AI technology, enhance spend visibility and optimisation, and ultimately, boost the organisation’s bottom line.
Given the inevitability of emerging technologies transforming businesses, how can you prepare your company for AI’s impact on procurement and mitigate employees’ fears?
Artificial intelligence (AI) has begun to infiltrate all areas of businesses – and procurement is no exception. In fact, studies show that 88 per cent of business leaders believe automation will significantly impact the procurement space within five years.
The biggest projected impact that advancements in AI technology will have on procurement is increasing the number of activities that can be automated within this space. It’s expected that 60 per cent of source-to-pay processes can be fully or largely automated using emerging technologies, including AI.
The promise of AI technology and automation in the procurement space is exciting – it offers opportunities for increased efficiencies, greater visibility, fraud prevention, cost savings, and more. However, it also induces a level of fear and uncertainty around how it will impact the role of procurement professionals.
Given the inevitability of emerging technologies transforming businesses, how can you prepare your company for AI’s impact on procurement and mitigate employees’ fears?
1. Distinguish “tasks” from “roles”
When AI and automation enter conversations about how work can be transformed, they bring with them a sense of fear and unease. It’s only natural that people begin to ask themselves, will there still be a need for manual and human skill? Will my role be replaced by a machine? Will I soon be out of a job?
Easing these concerns will require focusing on what exactly will change. AI, as the building block for automation, fundamentally affects how tasks are performed. That’s why companies should emphasise automation’s potential on impacting tasks within procurement, rather than looking at how roles themselves will change.
It’s hard to say which – if any – roles will go away over time due to automation. However, it is safe to say that every role will likely still exist in some capacity, but that certain tasks within each role will be automated, thus redefining existing roles and opening the door for employees to focus on higher priority responsibilities.
Rather than allowing employees to become fearful, help them prepare for change by empowering them to understand which tasks and activities in their roles are and are not likely to be touched by automation. For example, the majority of tasks within the vendor selection and negotiation process can and will be automated, meaning that role will shift to incorporate other tasks that couldn’t have been part of the role before, given the volume of manual vendor selection tasks.
Moreover, identify the skills that will be required for employees to excel in their shifting roles – such as data analytics and collaboration skills – and invest in training employees on those skills. This will ensure that employees can work effectively with AI and automation technology, and ultimately feel prepared for the inevitable shift.
2. Stress the importance of human critical thinking
Another way to prepare your company and its procurement professionals for AI and automation is to turn the definition of AI upside down, taking negative assumptions about how this technology impacts professional roles and asserting a more positive interpretation and understanding of this change. Instead, business leaders should discuss how AI will be used to augment their own intelligence.
While employees may wonder whether they will be replaced by AI and automation, it’s important to stress to them that people will continue to play a critical a role in whether these technologies can even be successful. For instance, while AI can make recommendations around business decisions and procurement processes, the AI is not responsible for executing these recommendations – people are.
To help employees overcome fears around AI and learn to better work with this technology, companies must place an emphasis on the importance of the critical and systemic thinking. By teaching people how to recognize biases and heuristics in their own decision-making, employees will be well-positioned to critically review AI’s suggestions, and connect information from the real world to make optimal judgements. AI will not replace managers – but managers that use AI will replace those who don’t.
3. Go beyond the business case
The business case for automating procurement with AI is already there – that’s why 51 percent of today’s accounts-payable organisations are already prioritizing the link between procurement processes and associated automated systems. What’s important now is getting your employees to buy-in and fully embrace AI to ensure successful implementation of and execution with this technology.
While initial reactions may be full of fear and skepticism, business leaders must remember to communicate with employees empathetically, helping them understand anticipated changes, investing in preparing them for these changes, and re-positioning the impact of this technology more positively so that it becomes something employees can get excited by.
By getting procurement professionals ready for AI’s impact, business leaders can empower them to do their jobs better and grow with the company as it undergoes this inevitable transformation, all the while setting their business up to reap the benefits of AI and automation.
92 per cent of respondents believe that by 2030, procurement will look very different to today’s profession. But what exactly will this evolution look like, and how do we get there? Download the Procurement 2030 Report!
Procurious and Michael Page UK recently surveyed 590 procurement and supply management professionals from around the globe to uncover the facts about the outlook for the profession, the threats and opportunities facing procurement, and perceptions of procurement. Here’s what we uncovered in our new report, now available for download.
Procurement is expected to evolve
All but 8 per cent of survey-takers roundly rejected the suggestion that procurement in 2030 would be similar to today. This stands to reason, given the transformation the profession has undergone in the past 10 to 15 years from back-office function to an influential and highly-visible part of the business that’s increasingly focused on driving innovation and generating value.
Here’s the result when we asked respondents what they expect procurement will resemble in 2030:
Just over half of our respondents believe procurement will evolve into “an agile group of strategic advisors”. But what does this actually mean? It could refer to Agile (with a capital A) work practices that are sweeping through many of the world’s top organisations, or perhaps it means that procurement will evolve into a high-value team of experts who will move around the business to give advice at the highest levels and solve specific challenges.
To use an analogy from the gaming world, this evolution is a bit like moving from a Space Invaders-style “mission-control” approach where you are dealing with a never-ending stream of issues from the bottom-up, to the approach taken in 21st-century games such as Fortnite or Call of Duty, where a highly cooperative group of professionals with different areas of expertise parachutes into a certain area to solve a problem before moving on to the next mission.
The word “strategic” is also key here. This report discovered that an incredible 49 per cent of procurement’s current workload is regarded as “tactical”. Filtering by role and seniority revealed that:
Survey-takers with “junior” roles identified 59 per cent of their workload as tactical in nature.
Analytics professionals have the most tactical tasks (57 per cent), followed by supply chain professionals (56 per cent).
The tactical workload of category managers sits at 46 per cent.
Concerningly, 57 respondents who identified as Chief Procurement Officers indicated that 40 per cent of their workload is tactical on average, despite having what is regarded as a highly strategic role.
It’s also worth noting that two persistent concerns about the future of procurement have also been dismissed by survey-takers. Only 3 per cent believe the profession will be completely outsourced, while 9 per cent believe procurement will be completely automated by 2030.
Procurement professionals remain optimistic about the profession, despite the rapid development of ever-smarter AI and media coverage of white-collar job losses to automation. In fact, optimism about the future has climbed by four points since this question was first asked in 2017.
Similarly, job security is relatively high. Only 9 per cent of respondents report a lack of confidence that they’ll be able to keep their role of the next 24 months.
While the profession itself is confident about its future, the task at hand is to broadcast this positivity to the wider organisation, other functions, and to suppliers. Building upon the brand of procurement will enable us to:
change the face of the profession from the inside out
overcome outdated stereotypes, and
educate others on the full value-offering of the profession.
Threats and opportunities
When we asked survey-takers to nominate the greatest threats and opportunities for procurement and supply chain management, we were surprised to discover that the top two threats are also seen as the top two opportunities.
“Not keeping up with technological advances” is seen as the biggest threat, while technological advances are also seen as the number one opportunity.
Being unable to recruit and retain top talent is seen as the 2nd-biggest threat, while recruiting and retaining top talent is also seen as the 2nd-biggest source of competitive advantage.
Organisations must therefore retain their focus on investing in top talent, even while they are investing heavily in technology. It also follows that procurement functions with leading-edge technologies will be more attractive to top-tier candidates.
Prisoners of our own perceptions?
We know that the profession wants to evolve into an agile group of strategic advisors by 2030, but what’s holding us back? In one word: perception.
Less than a quarter of respondents say their organisations have a strong understanding of procurement’s value, while 21 per cent have “little understanding” of procurement’s value-offering.
Procurement’s own perception of its purpose needs to change if it is to expand its value offering and transform into strategic advisors and commercial leaders. At present, 38 per cent believe cost reduction is procurement’s main purpose, followed by risk management.
The good news is that by 2030, the main purpose is expected to shift to two high-value tasks: “driving supplier innovation (29 per cent), followed by “driving sustainability” (25 per cent). Both of these revised areas of focus will also support procurement’s core capability of cost reduction.