Digital Technology transforming the Procurement process

Rapid advancements in digital technology are remaking the way the supply chain is viewed and are poised to transform the business’s bottom line through continuous innovation. A combination of technologies-‘Big, data analytics to 3d printing is revolutionizing the way traditional business models work. Such cutting-edge technologies are upending core business models and industry dynamics by creating new channels for customer and partner interaction, making companies see their viability and relevance under fire. This disruptive technology has also been imbibed in procurement, creating a true digital procurement. True digital procurement makes transferring goods and services across boundaries feasible, with procurement becoming a fully transparent practice for all the stakeholders involved. They help increase information availability and efficient vendor management, maintain collaboration and integration among partners, and optimize inventory management for a business firm.

A true digital procurement infuses data models to enrich day-to-day operation, equips stakeholder across the business with real-time access to insights and analytics, and boost efficiency by automating repeatable tasks, potentially driving down time and cost required in the traditional procurement process. Several digital drivers were identified that firms could predominantly use to change the conventional procurement practices in an organization.

1)???Internet of Things

It is a system of interrelated computing devices supported by ubiquitous sensors offering the ability to transfer data without human intervention. It brings out real-time responses by recognizing business trends and provides valuable information for strategic decision-making. Procure-to-pay is one of the areas where IoT can make a significant impact. Its application can be leveraged to enhance the traceability of products and materials across the entire supply chain by recording the product's location, state, and quality as they travel from the source to the factory. As IoT platforms are enabled to read data from various devices like NFC, RFID, and different smart tags, it allows the system to track and monitor sensory data like temperature, humidity, speed of the vehicle, geo-location, etc.

2)???Cognitive Technologies

Cognitive technologies are technologies aided by the autonomous capabilities of artificial intelligence. It brings the capability to ingest all structured and unstructured data and understand its meaning and reason to generate hypotheses, conclusions, and even recommendations. The automation forms a predictive model to help the team make better, more informed decisions. It can smoothen workflows like purchasing order creation and invoice creation. It can act as an intelligent buyer-facing system that automatically provides correct vendor and contract data for swift and optimal purchasing. The AI can be trained to eliminate rogue spending and block fraud invoices. As per a Deloitte survey, automation and robotics will significantly impact the procurement function over the next five years by more than 58%.

3)???Blockchain

Blockchain creates a decentralized record of all transactions in a network and can be managed by more than one member at a time. It provided a secured method of tracking a transaction product from source to acquisition to payment. It also can be used to eliminate paper processes, accelerating settlements. The technology implemented would increase trust among clients and vendors through shared public IDs and a simple and fair referral mechanism. The accumulated, stored history of transactions would also build transparency in the procurement process. As all the partners are registered in the ledger, transactions are held, and tamper-proof audit trails are maintained. This type of end-to-end visibility in procurement creates a well-established practice in the supply chain environment.?

4)?????Big Data

In a firm supply chain, massive data is generated from upstream to downstream in each operation. The provision of those real-time data helps professionals to respond to supply chain issues proactively. Procurement is in charge of upstream suppliers and global sourcing. A large number of transactions in procurement results in a complex web of transactions with internal and external members increasing company costs. There is ample opportunity for companies to leverage big data by providing procurement trends. Such trend consolidation and pulling off prevailing volume would give strength in bargaining, negotiation, better lead times, and finally, better plant efficiency. Another use case of big data is increased accuracy in forecasting. Data analytics can tie recurring and unexpected environmental factors together to improve accurate demand forecasting. It can also be used for effective contract management, optimizing discounts, and forecasting liabilities.

?5)???Simulation Tools and Modelling

The problems faced in public and private are quite complex, necessitating rigorous and representative models. Models are needed to understand a system, predict the behavior, and develop meaningful solutions to accommodate the changes in the system. Supplier failure is identified as one of the top supply chain risks today. It increases acquisition costs and excessive downtime of production resources leading to poor customer service and loss of market share. Simulation can be a valuable tool for planning, optimization, evaluation, and risk management in a supply network. The ability to manipulate time and space in a complex web of networks allows a firm to capture and learn the cause and effect interdependencies spread over time. The design results can be used to identify the best purchasing policy for the firm while being adaptable to supplier uncertainty.

?Firms must leverage autonomous technologies to stay competitive and flexible in an ever-changing supply chain. The above-mentioned digital technologies are part of Industrial revolution 4.0 also termed I4.0. Procurement 4.0 is a part of I4.0 which connects all supply chain upstream partners and enables dynamic and quick coordination beyond organizational frontiers. It means developing new value propositions, meeting business needs, and integrating data across functions and value chains.?

An Agile approach focused around short, iterative sprints can be quite effective in delivering digital projects as paybacks in an organization is often measured in weeks or months rather than a year. Organizations wanting to become digital procurement ready should start the digital journey by prioritizing projects based on impact, cost, and speed of implementation. Defining an ambitious but realistic digital chain comes down to answering two questions “What do we want to achieve” and “How do we realize it.” The “What” refers to the set of distinctive digital elements to be invested by the organization. This includes investing in people and leadership development, building digital culture, and collaboration among suppliers to digitalize the procurement process. The “How” is how senior management does strategic change in the organization. This includes crafting an effective and holistic transformation roadmap and communicating it among all the stakeholders.

“In crux, digital procurement process enables an “amazon” like experience employees now want in the workplace”