What’s the next big thing in procurement?

SAP Ariba

Dr Marcell Vollmer, SAP Ariba

The Internet of Things, robotic process automation, and … purpose.

SAP Ariba recently released new research, ‘CPO Survey 2018: What’s the Next Big Thing in Procurement’, the result of a collaboration between Dr Marcell Vollmer, chief digital officer at SAP Ariba and Professor Karsten Machholz from the University of Applied Sciences, Wurzburg-Schweinfurt.

Among the key findings of the study were:

  • 83 per cent of respondents believe digital transformation will be impactful but only 5{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} of respondents have highly automated processes;
  • Financial services, consumer products and retail have the least automation;
  • IoT is the largest current technology trend but robotic process automation and artificial intelligence are the future;
  • Analytics/data quality and budget restrictions are the largest roadblocks to achieving functional efficiency;
  • Hard savings, cost avoidance and compliance are the top KPIs to measure procurement performance;
  • 88 per cent of respondents have purpose objectives defined for procurement and see the value; and
  • Corruption and child labour are the largest purpose-driven risks managed.

We sat down with Vollmer to go deeper on some of the results they uncovered.

ISAP: How will digital transformation impact on the procurement function?

MV: I think everyone is in agreement that digital transformation will heavily impact all the procurement, supply chain and finance functions. Eight-three per cent are absolutely convinced it will impact more in 2018 than in 2017. The follow-up question was, ‘Have you already highly automated your core systems to ensure that you can be ready for digital transformation?’, and only 5 per cent confirmed with a clear ‘yes’. Sixty-three per cent are saying they have it on the roadmap, and driving more automation is a priority. It definitely indicates they see the change, they are now acting on that, but basically it takes a little more time than expected.

ISAP: You mentioned there are a lot of positive intentions about adopting technology to streamline procurement processes, but not a lot of action. Where are you seeing that there might be barriers for companies on taking that action?

MV: The barriers are definitely business cases which are not necessarily clear for everyone – how to really implement certain technologies like artificial intelligence. What can I use? Does it really fit for the information, the data, what I have? Can I connect it to the systems I have? So people have a lot of questions about how to really use the technology. We also find it’s definitively a question of budget. A third area is the skill level available in a procurement/supply chain organisation. We you talk about artificial intelligence, big data, predictive or prescriptive analytics, you might not necessarily have the people in your organisation who can really help you to implement, to adapt, and then to drive projects with the new technology.

ISAP: What did the research tell you about where we will next see growth in technology adoption?

MV: It was a little bit of a surprise that the Internet of Things (IoT) was rated number one as the most commonly used technology, closely followed by robotic process automation. It makes sense because the supply chain is using so many connected devices, so therefore IoT is definitely the technology for that.

In terms of what technologies chief procurement officers are looking into now, the two most commonly nominated technologies are robotic process automation, and artificial intelligence (AI). Robotic process automation is only basically automating the things that you can teach a system, but AI is different, in that it provides access to unstructured information. Basically you can upload all your contracts and come up with the most common terms and conditions you have used, these are deviations in this type of paragraph, or in this kind of contract. In this way, artificial intelligence can help you to drive much more automation, but also use the information with the data to derive intelligence from that.

ISAP: How do you see the procurement function changing as a result of these technology innovations?

MV: Due to automation or by continuously investing in robotic process automation as one example, operational, tactical tasks will disappear to a very large extent in the near future. The procurement function of the future will be much smaller, because you simply don’t need people any longer processing purchase orders, or doing menial tasks, which is still happening in shared services. That’s basically something that will disappear.

Procurement is also asked now to think about how to contribute to the big things. It is figuring out how to drive impact – for example, how to really become a fully strategic procurement function, including securing a sustainable supply chain. When you do that, and when you drive the transformation, you also need to think about how do you define your KPIs to measure procurement’s performance?

The majority of people that responded to the survey already have purpose objectives for their procurement supply chain function integrated. I was really amazed about that, because the term, ‘procurement with purpose’ is fairly new.

What it means is people are now thinking about, ‘What do you really buy, and how can you impact with your production?’ There is no better place than procurement to focus on that. Because procurement owns the entire supply chain, and when you do that, basically you can decide you want to work with suppliers focusing on sustainability in areas we agree on. So it is great to see companies not only preventing corruption, but also focusing really on everything is important. This is really where procurement can make a difference.

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