Adopting digital transformation (DX) leads to significant growth for organizations when compared to their lagging peers, according to McKinsey and Company research. McKinsey suggests that there are five approaches to plan for and incorporate into any digital transformation (DX) project: ensuring lean process design, digitizing the customer experience, selective process outsourcing, incorporating analytics to aid with decision-making and using intelligent automation for non-core human tasks.
These five approaches make sense; however, there are many speed bumps along the way that will amplify the risks of any DX undertaking. The reality is that few organizations are ready to attempt such an endeavor. The obstacles are enormous. Mapping and documenting processes, culture and change management, access to data science skills, access to the data itself, and managing many moving parts of an implementation are just a few of the complex tasks that an organization must tackle.
As a result, these capability problems have led to a change of thinking both on the part of enterprises and by the organizations that provide services to them. It is critical to examine the key challenges along with potential strategies to resolve these problems.
Greg Council, Vice President of Marketing and Product Management
Negotiation is a fundamentally human act between two or more people. When it comes to vendor negotiations, this is driven by the prior (and future) relationship between human counterparties. While digital processes can support this mission, if a key decision maker involved in a vendor negotiation goes on vacation, changes jobs or gets hit by a bus, the negotiation will stall or scramble to reach a conclusion. It’s a good reminder that no matter what role artificial intelligence (AI) plays in a negotiation, the negotiation process and award decision are driven by humans.
For those participating in the vendor negotiations, it is likely that their companies book travel through a digital app that aggregates and discounts airline tickets. It is also likely that the hotel and ride to the meeting are also booked via digital apps. Thus, the technology stack that supports this “in-person meeting” is being mediated by a variety of digital apps (many of which already leverage AI), apps that support (rather than displace) the crucial in-person business negotiation by reducing the number of low-value transactional tasks and phone calls.
In 2019, global supply chains are focused on technology and innovation. Today’s global supply chains are often complex, with many moving parts. However, procurement professionals are facing increasing pressure to manage them with efficiency and transparency. Creating a successful supply chain requires building a sustainable foundation. Though technology mobilizes supply chains to compete faster and better in today’s global economy, having a strategy to optimize your talent is just as important. Technology that gives business users more autonomy and security are reflected in a positive impact on your organization’s bottom line.
Based on my experience, many businesses have separate initiatives that fragment their supply chains and could benefit from pooling resources and aligning different stakeholders to the same common goals with the use of technology. For example, many businesses have separate supplier diversity processes. They have supplier diversity experts who don’t collaborate with their larger procurement teams. Sourcing and procurement professionals are often incentivized differently and often don’t communicate nor see eye to eye on the same overall strategy. With collaboration, your organization can streamline its supply chain and build a stronger foundation for process-driven results.
In today’s market, you can no longer ignore the rapidly changing landscape of digital transformation. Companies that are reluctant to embrace the technologies that bring better visibility and security to supply chains risk being left behind. To avoid that fate, here’s what companies can do in 2019 to improve supplier diversity and overall supplier relationship management process.
Daryl Hammett, CSMP, CSP, General Manager/Chief Operating Officer at ConnXus
Another year has rolled by leaving the same writing on the wall, only this time it’s louder and clearer: Digital transformation has well and truly arrived at procurement’s doorstep.
But up until now, it has merely received a lukewarm welcome.
In 2019, that could change. The winds of digital transformation are slowly but surely turning the wheels of procurement and savvy procurement teams are beginning to acknowledge its benefits. This is evident from how procurement teams are beginning to perceive digital transformation.
Consider this: A recent Hackett Group study titled, 2019 Procurement Key Issues, has revealed that digital transformation is a critical goal for a majority of procurement departments in 2019.
That’s because over the years digital transformation has moved its way up the ladder in the procurement department. In 2018, more than 90 percent of procurement professionals said they believed digital transformation will fundamentally shift the way procurement services are getting delivered within two to three years, according to a Hackett Group survey. Compared with 2017, this is more than a 10-percent increase.
Remarkably, the percentage of organizations that have a formal strategy for digital transformation more than doubled in the last two years, from 32 percent in 2017 to 66 percent in 2018. In the same period, the number of organizations indicating they have the resources to handle the transformation also increased, from 25 percent in 2017 to 46 percent in 2018.
This is a clear indication that in 2019 the gap between the promise of digital transformation and leveraging it to its full potential will narrow.
At the same time, the gap between CPOs who haven’t yet embraced digital transformation and high-performing procurement organizations that have already gained a first-mover advantage will widen. They’ll have a lot of ground to cover to keep pace with the latter.
Shopping, buyers, shopping carts, savings, back office, JUST STOP DUMBING US DOWN!
As many of you know, my passion is to help elevate the sourcing industry to receive the attention, seat, respect (and yes, pay) that it deserves. So why do sourcing professionals keep self-sabotaging by using the term BUYER to describe ourselves? The only time this is a sexy title is perhaps if you are the buyer of fashion who attends runway shows and hobnobs with designers. Buying is what I do when I “shop,” like for groceries. We as sourcing professionals are NOT shopping.
So onto my next pet peeve, why do we have cute little icons that look like grocery carts to check out within our tools? Yes, it makes it seem like an easy process when pushing it out to our internal customers, but it connotes “shopping,” which, as we have just discussed, we are not doing. We are selecting items from a carefully sourced category after a lot of thoughtful processes have taken place. Why can’t we use an icon that better showcases the importance of this role?
Alexander Beck, PhD, is a data scientist with a demonstrated history of utilizing machine learning and data science in the financial sector, especially asset management. Alexander has a 10-year track record in business applicable artificial intelligence research, including in the fields of financial markets and customer analytics.
Data scientists analyze and interpret mountains of complex digital data to inform decision-making and strategic processes. When it comes to digital procurement and supply chains, data scientists can automate workflows and employ predictive analytics to more accurately forecast demand or disruption.
IBM predicts that demand for data scientists will increase by 28 percent by 2020, with Finance and Insurance, Professional Services and IT generating the most demand. This role often requires an advanced degree, such as a master’s or PhD. For those who are looking to add data scientists to their teams or want to learn how to best work with data scientists, Alexander shares insight into his function, how he assists the business to make informed decisions and automate workflows, and highlights some common misconceptions about data scientists.
Procurement has evolved to become more strategic and collaborative and has moved from an isolated, back-office function to a boardroom partner. While the procurement function must continue to drive hard savings, manage suppliers and mitigate risk, it must also pivot to look for opportunities to deliver future savings and innovation.
“Procurement is at an inflection point,” said Dr. Marcell Vollmer in an interview with SIG CEO Dawn Tiura. “Procurement needs to transform into a value-added function focusing on strategic tasks.” How can procurement teams do this?
For all the great advancements that technology brings, it requires people to manage the technology. Oxford Economics’ survey among procurement executives and practitioners found that the top three investment priorities include new talent recruitment, training/upskilling programs and procurement/supply-chain technology.
Ryan A. Murray is the First Deputy Director in the Mayor's Office of Contract Services for the City of New York. He manages an oversight and service agency that was responsible for $21 billion in procurement in FY17. New York City operates a federated model with an estimated 2,000 staff and evolving technology landscape. Mr. Murray leads the people and change practice, serves as the chief strategy officer and guides the legislative/policy agenda for the Mayor's Office of Contract Services.
What kind of transformation did you help the Mayor’s Office achieve and how was success measured?
Doing business with the City should be easy and internal city procurement operations should be efficient. Disparate practices across industries, a federated model, rigid bureaucratic rules and heavy reliance on paper processes impede the realization of quality experience by vendors and agencies. That’s why we are implementing a multi-year project to overhaul operations. In 2017 we reached the first critical milestone by launching the Procurement and Sourcing Solutions Portal (PASSPort). Together with our technology and implementation partners, we introduced centralized supplier management, moving a cumbersome vendor disclosures process online, establishing a shared platform for data sharing across agencies and allowing vendors to access contract performance data in the same portal. This success enables us to develop and launch requisitioning, sourcing and payment modules in the next two years.