Asha Ambike, Director – Intelligent Enterprise Solutions Management, SAP
Money saved is money earned. This is true more so today than ever for procurement and supply chain leaders. Increasingly they’re expected not just to reduce costs, but also fund innovation and future business growth.
Procurement leaders must increase savings – without sacrificing supplier performance and delivery risks.
Supply chain leaders need to manage costs, but also ensure continuity and responsiveness of their complex, multi-tier supply chains.
While spend management is a clear priority across all these functions, it’s complex and easier said than done.
Spend typically happens across the organization from individual employees to multiple, siloed business units and functions across geographies. There is lack of transparency in spend data across categories, suppliers, and facilities. The procurement workflows are often manual and disjointed. Building and managing supplier networks is just plain hard.
AI and Technology Can Optimize Procurement Spend, But Adoption of Digital Technologies Ranges from Moderate to Dismal
According to a recent 2019 CPO survey by University of Mannheim, 83.9% Chief Procurement Officers (CPOs) consider digitalization important to improve procurement performance, yet the adoption of digital technologies is anything from moderate to dismal.
Only 65% of respondents are leveraging cloud solutions, and only 15% are leveraging emerging technologies like Machine Learning (ML), blockchain, predictive analytics etc., yet the business value of using digital technologies is undeniable:
- Automation: Simply digitizing sourcing and procurement workflows using Cloud solutions can dramatically reduce cycle times and operating costs. For example, Deloitte is looking forward to saving 10M per year in procurement in just UK by simply implementing a Procurement Cloud solution. San Francisco 49ers are implementing a slew of Cloud solutions from travel to HR to finance to become “smarter, faster and more efficient”.
- Intelligence: Layering the digitized processes with intelligent technologies can deliver the next level of business outcomes. Organizations are using analytics, machine learning to gain a firm-wide view of spend across categories, suppliers and facilities, and using the insights to add millions to their bottom-line. Alpiq and Eagle Industry are using machine learning to automate invoice matching and payment processing to drastically reduce accounting effort. Bumblebee Foods is successfully using blockchain to enhance transparency, trust and efficiency of its supply chain for yellowfin tuna.
- Experience: Finally, a stellar buyer and supplier experience can deliver a step change in process efficiency and productivity. Accenture has implemented a user-friendly, intuitive, ‘Amazon-like’ buying experience to their employees worldwide, while also providing the company a way to achieve contract compliance and savings. Deutsche Bahn is transforming supplier relationships and collaboration through cloud, including handling 500,000 e-invoices completely touch-free, while making procurement easy and cost-effective for the organization.
All-in-all, organizations implementing these best practices have been observed to derive significant business outcomes of 2-6% savings in sourcing, 60-70% reduction in non-compliant spend and 40-50% reduction in procurement operating costs (SAP Value Management 2018).
The Future of Technology in Procurement
The pace of change is relentless. While organizations find their way to best-in-class spend management, new technological advances are already well underway.
The earlier part of the decade was characterized by simple digitization of sourcing and procurement workflows, as the latter part saw the advent of intelligent technologies like AI, ML, RPA, and blockchain delivering the next level of business outcomes for procurement.
In the future, procurement will evolve to be more autonomous – where strategic and operational procurement processes will function autonomously driven by a combinatorial use of advanced technologies.
No matter what pathway organizations adopt, it almost always involves understanding key business challenges in the source to pay process, identifying opportunities for innovation, prioritizing quick wins, and defining a vision and roadmap to ‘best-in-class’ spend management.
The bar for spend management is constantly being reset – and the time to act is now. Learn more here.