Looking to digitise your procurement function? Technology should be your least concern.
In the age of digital transformation, it is easy to jump on the annual technology trend (cloud, blockchain, IOT, ChatGPT...) and excitedly pull together a business case to implement the latest fashion. While these innovations may bring efficiencies to the procurement process, it is crucial to not overlook the three elements that truly drive successful procurement systems: people, process, and data. Focusing on these areas will lead to better outcomes than merely chasing after the latest tech.
People: The Heart of Procurement Success
One of the biggest misconceptions about procurement is that technology alone can solve all problems. However, the success of any procurement system ultimately depends on the people involved. Here's why:
- Collaboration: Procurement professionals need to work closely with stakeholders, suppliers, and other teams to ensure a smooth and effective procurement process. No technology can replace the importance of fostering strong relationships and open communication - allow for this. Technology should replace non value adding processes, but don't remove the need for great relationships and collaboration.
- Great user experience: We're no longer using mainframes so why are user interfaces so complex? Look for tech that is easy to use and adoption will follow. Get feedback from users and those who know nothing about procurement.
- Change management: Effective change management ensures that teams can transition to new processes, systems, or strategies while minimising disruption and resistance. By fostering clear communication, stakeholder engagement, and employee training, change management helps create a culture of agility and continuous improvement. Don't forget this step!
Process: The Backbone of Effective Procurement
A well-defined and streamlined procurement process is vital for achieving efficiency and reducing costs. Here's why focusing on the process is essential:
- Standardisation: Standardising procurement processes helps create consistency, clarity, and transparency across the organisation. This leads to better decision-making, improved compliance, and reduced risk. Get your processes right before adding technology - delete steps rather than simply automating everything.
- Continuous improvement: Regularly reviewing and refining procurement processes ensures that they remain effective and relevant. This iterative approach can help identify inefficiencies and areas for improvement, leading to a more efficient and cost-effective procurement system.
- Integration: A well-designed procurement process should be seamlessly integrated with other business functions, such as finance and operations. This fosters cross-functional collaboration and drives better overall business performance. Tech needs to stitch disparate areas together to reduce manual hand-offs.
Data: The Fuel for Informed Decision-Making
Quality data is the lifeblood of any procurement system. Here's why data should be a top priority:
- Visibility and transparency: Access to accurate and timely data allows procurement professionals to monitor and analyse supplier performance, pricing trends, and market dynamics. This enables more informed decision-making and better risk management.
- Analytics and insights: Leveraging data analytics can help procurement professionals identify patterns, trends, and opportunities for improvement. This can lead to more strategic and targeted procurement initiatives that drive greater value for the organisation.
- Data accuracy: This is crucial for maintaining compliance, reducing risk, and benchmarking against industry standards. Inaccurate data can lead to misguided actions, missed opportunities, and increased operational costs. Ensure that your tech can verify your data, reduce manual input and assure quality.
While technology is undoubtedly an essential enabler in modern procurement, it should not be the sole focus. Procurement should remember that people, process, and data are the most important considerations when implementing new technologies. By doing so, procurement teams can unlock greater value, drive efficiencies, and ultimately contribute more to their organisations profitability.
Where have you seen this done right - or done wrong? Let me know in the comments.
Procurement Wingman | Tech Entrepreneur | Author
1 年Digitizing procurement does not just bring efficiency, it is good for the earth
Business Logistics expert at Freelance
1 年Every professional? ?must be highly knowledgeable enough in respective field of specialization, so as to quickly? learn? and adapt? the right? technology to be applied? and effectively utilize?
Practice Leader, Financials @ Workday | Creating Value for CFOs | Transforming Finance w/ AI Solutions
1 年Good post Rich. I don’t see many technology decisions made in a vacuum, in fact the most successful projects I’ve been involved in have addressed each of these key components in parallel. On the other end, I’ve seen organizations spend years trying to “perfect” the people, process and data pillars before looking for new tech. They get stuck forever in the planning stage and achieve very little. Have to balance planning and execution!
Serious about managing your vendors and their contracts better? Let's Talk.
1 年To flip this though: How do you get good, clean, enriched data without tech? I don't think you can. If you're trying to get a decent dataset, Excel is often the last place I'd expect to see it. And on the process side - if you take a manual way of working and try to bring that into tech, it doesn't work. Tech allows new avenues, so treating the process with a digital-first mindset is the way to do it for me.
Highly experienced and motivated senior procurement leader for more than 30 years. Still improving myself, and always seeking to make procurement the best it can be for all.
1 年Thank you Richard, I’m seeing a lot of CPO’s who keep saying get with ChatGPT and seem to be ignoring all of its failings. I’m all for A.I. That is supplemental and supports our teams. Recently it was suggested to use ChatGPT to brainstorm for negotiations. For me, it I want to brainstorm I’m going to ask my colleagues, not an A.I. That’s had another American textbook on negotiating as it’s basis for advice. There has even been suggestions of using it the manage contract management and SRM. This for me is a dangerous vision, as it implies we cut our teams to have A.I. Manage critical aspects of procurement. Yes we need dedicated tools like Purchase to Pay, Contract Lifecycle Management, Matters Management and asset management. All of these require people and discipline. We as procurement work in a people, process and data world. Ultimately it’s the strong relationships that help us deliver…..