How technology will change procurement functions

How Will Technology Transform Procurement Operations?

New research claims Automation and Internet of Things (IoT) will have biggest technological impact on the function.

How technology will change procurement functions

In its third set of results from its 2015 Global Procurement Study, Xchanging assesses the impact new advances in technology will have on procurement.

Technology Adoption

Savings tracking (77 per cent) and spend analytics (76 per cent) technologies are the most widely implemented, in the context of a tough economic climate where spending cuts and streamlined processes remain top priorities for businesses.

This mirrors respondents’ answers about the KPIs on which their procurement functions are measured – the top four all being cost related (47 per cent cite cost savings realised as their most important KPI, 19 per cent revenue impact, 16 per cent cost savings identified and 14 per cent cost avoidance). 

Over half of companies questioned also already have automation (68 per cent), reporting dashboards (68 per cent), contract management (67 per cent), supplier performance management (64 per cent), market intelligence (60 per cent), eSourcing (59 per cent), predictive analytics (54 per cent) and Internet of Things (54 per cent) technologies in place.

In general, the organisations most likely to have the above solutions in place were:

  • In the U.S.
  • Larger, with 3,000+ employees
  • In retail, consumer goods or manufacturing industries
  • That outsource parts of their procurement operations

U.S. companies are 8 per cent more likely to have all of the listed technologies in place than those in mainland Europe.

Overall, supplier performance management software and predictive analytics are the technology solutions most likely to be implemented in the next two years (both cited by 12 per cent of respondents), whereas 46 per cent claimed they are unlikely to ever implement online auctions.

Technology Impact

Predictive analytics and the Internet of Things (IoT) are expected to be the most revolutionary technologies for supply chain operations, with eight in 10 respondents (80 per cent/79 per cent respectively) stating they will have an impact, and nearly a quarter (23 per cent/24 per cent) expecting them to have a major impact.

A report issued by DHL and Cisco in April this year estimated that by 2020, 50 billion devices will be connected to the internet – an increase of more than 300 per cent from today’s 15 billion – and that IoT will generate $1.9 trillion across the supply chain and logistics operations industry, with warehousing and freight benefitting the most.

Luke Spikes – Xchanging’s Procurement Technology spokesperson, provides the following insights on the research:

On high technology adoption rates:

“When analysing the data, it is key that we consider how ‘technology’ is being interpreted by respondents. It’s surprising that over half of all companies surveyed said they already have the majority of the listed technology solutions.

“A notable 76 per cent reported having spend analytics technology, but we need to question what technology they are actually using. Are they really utilising a solution that analyses all spend data – how much is spent, on what, with whom and by whom – and transforms this data into actionable business intelligence? Or are they simply using Excel spreadsheets?

“It’s also important to note that there is a big difference between having the technologies in place, and using them to their full advantage, to enhance performance and improve the bottom line. There needs to be a drive on education around technology applications for them to deliver real benefits.

On IoT, predictive analytics and future technologies:

“The supply chain landscape is increasingly global, and IoT can enable businesses to track the exact whereabouts and the condition of goods in transit, automatically monitor inventory levels to manage cash flow more efficiently, and remove human error from the process.

“Predictive analytics will drive a far more strategic approach to sourcing – for example, enabling hedging on the price of raw materials to become a daily part of the procurement process – as well as creating further opportunities for automation to increase accuracy and efficiency.

“Procurement leaders ignore technology-driven progress at their peril. If they don’t seize the opportunity, they will quickly fall behind their competitors. The adoption of new technologies – alongside a continued focus on the value and expertise of procurement professionals – will ensure the function remains a strategic, indispensable part of their organisation.”

The study is a major international project that surveyed 830 procurement decision makers across the UK, Europe and North America.