Blog_-_consus_(2) - procurement digitization

PROCUREMENT DIGITIZATION IN POST – PANDEMIC ERA

The roadmap of digital transformation

The Case for Digital Procurement Is Stronger Than Ever

 

In just a few months’ time, the COVID-19 crisis has brought about years of change in the way companies in all sectors and regions do business. Almost all the companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations. Nearly all companies have stood up at least temporary solutions to meet many of the new demands on them, and much more quickly than they had thought possible before the crisis. Now companies expect most of these changes to be long lasting and are already making the kinds of investments that all but ensure they will stick.

 

Digital  Technologies and  Capabilities

 

Procurement technologies  are  advancing rapidly, moving through a regular cycle from emerging, to maturing, until widely adopted as core  (Figure 1). Most organizations  deploy  several  forms of  core  procurement  technologies.  These platforms usually  include  a  combination of  spend  analytics,  eSourcing,  contract management,  and  eProcurement  (eCatalogs, eInvoicing),  among  others.  These core systems have typically been characterized  by  deployments  requiring healthy amounts of capital spending and significant of systems integration work.

In contrast, today’s maturing and emerging solutions tend to be much quicker to deploy. Many use Software as a Service (SaaS) models, do not need significant preparation of data or systems, require no or light integration, and can produce results within days or weeks. The following digital solutions and capabilities have entered the maturing phase and will be soon turned into core procurement digital functionalities:

Cognitive computing and artificial intelligence:

Leverages  pattern recognition  software  and  iterative  machine learning algorithms to rapidly categorize unstructured spend, cost, contract, and supplier data (e.g., information like raw AP records or T&E systems extracts not within the traditional structure of an enterprise resource planning system) to deliver  new  insights  and  opportunities.

Intelligent  content  extraction ( OCR):

Uses learning algorithms to read unstructured documents such  as  PDFs  of  contracts, specification drawings, and Bills of Material,  and  rapidly  extract  critical  pieces of data like pricing tables, payment terms, and termination clauses that would have taken days or weeks to assemble.

Predictive and advanced analytics:

Combines modeling,  statistics,  machine learning, and artificial intelligence with multiple third-party data sources to predict most likely scenarios for cost/price fluctuations,  demand,  supplier/country risks, etc. and enable proactive decision  making.

Visualization:

Transforms data  into user-friendly,  executive-friendly,  visual formats that can simplify decision making by  organizing  information  and  delivering fresh insights and recommendations.

Collaboration networks:

Platforms  that provide  buyers  and  suppliers  with  visibility into all elements of their joint value chains. Users  can  maintain  supplier  information  in the cloud; measure, analyze, and manage supplier  performance;  uncover  joint process  improvement  opportunities;  and identify, monitor, and escalate supplier  risks.

Crowdsourcing:

Through the capture of large and diverse inputs (e.g., data, sentiment)  and  usually  leveraging  mobile technology,  organizations  can  monitor trends  and  events  impacting  supply  chains and supplier performance.

3D printing:

Additive  manufacturing,  or 3D printing  technology,  can  quickly  make a physical object from a digital model by laying down (i.e., adding) layers of a material. Currently used mostly for rapid prototyping of goods, the technology has the potential to eventually eliminate some kinds  of  stocking  activities  for  low-volume items, replacing them with on-demand production.  Rapid  prototyping  will  become an  integral  part  of  the  strategic  sourcing process for direct materials.

Robotics ( RPA):

As it relates to procurement, Robotics Process Automation is software that recognizes and learns patterns and can perform rule-based tasks. This process is used to automate multiple repetitive manual tasks (e.g., some P2P tasks), driving efficiency and reducing errors and risks in execution. Four additional emerging solutions are expected to impact procurement in the future, and procurement leaders should be educating themselves and preparing for adoption:

Blockchain:

This  cryptologic  data structure uses a trusted peer-to-peer network to create digital transaction ledgers which can verify and validate transactions in the P2P process (or any other supply chain process) and then be used to trigger automated payment

Sensors  and wearables:

Devices  that detect, capture, and record physical data. These  devices  can  note  the  movement  of goods  and  inventory  levels  for  reordering, and enable audit tracking during site visits.

Cyber tracking:

Real-time  tracking  of online or physical activity can be used to provide proactive monitoring of supplier  behavior  and  performance. When combined with third-party data, the technology can deliver trends and predictions on supplier (or supply chain)  risks.

Virtual  reality  and  spatial  analytics:

Detecting events or changes of status using video, location data, or pattern analysis,  and  conducting  supplier  visits or audits can empower procurement professionals to do more with less. As  a  stand-alone  deployment,  each  of the  solutions  mentioned  above  brings additional value to procurement. However, organizations  that  combine  multiple technologies  and  solutions  could  see the  value  of  their  deployments  grow exponentially.

Given the pace of change, procurement leaders should take every opportunity to expose their organizations to these disruptive technologies and to consider their applicability  within  their  own  organizations.

 

Today’s digital technologies, and the degree to which the capabilities are being deployed in procurement

 

 

fig.1

 

 

Procurement Digitization a paradigm shift

 

Most areas of business are being impacted by digital transformation. As a result of this digitization process, the procurement mandate has radically shifted from having a purely ‘transactional’ focus to a ‘strategic’ focus. The expectation has shifted from tactical KRAs (i.e. achieving cost-effective purchases with the help of low-risk suppliers) to highly strategic ones (i.e. providing high added value through high-spend visibility, real-time analytics and intelligence, eliminating unnecessary tail-end spend, and aiming to improve savings targets while reducing cost-to-serve).

According to a new McKinsey Global Survey of executives, the pandemic has brought not only  the multiyear acceleration of digital, but the crisis has brought about a sea change in executive mindsets on the role of technology in business. In McKinsey Global Survey of executives 2017 survey, nearly half of executives ranked cost savings as one of the most important priorities for their digital strategies. Now, only 10 percent view technology in the same way; in fact, more than half say they are investing in technology for competitive advantage or refocusing their entire business around digital technologies .

Executive mindsets on technology’s strategic importance have changed radically during the crisis

 

 

FIG. 2

 

Today, purchasing is the function with the most external and internal interfaces. These include partners and a wide range of suppliers around the world, regulators and internal compliance, R&D, finance, production, logistics and, of course, customer management – all of whom are connected to procurement via physical and digital transaction and communication . The complexity and diversity of this environment, the large number of transactions and the large amount of data make purchasing a central player in the corporate transformation. Now  procurement the opportunity to position itself within the organization as a provider of business insight and business foresight – thus having a significant impact on the overall performance of the company. However, better and more precise decisions, strong operational excellence, quality, compliance and cost reduction are only fully possible if a holistic approach is followed. This means focusing on the entire process landscape of purchasing, leveraging the full spectrum of IT tools and executing a mind shift in the procurement organization.

 

 

Building the roadmap for  Procurement Digital Transformation

 

In the new remote work era, it is imperative to have business applications that an employee can use from anywhere and at any time. Procurement is no exception. When operational challenges arise, many organizations do not have the right tools and technologies to help manage their financial and procurement functions away from their office desks. The use of physical papers, whether it be mail, invoices, or even cashing checks, creates avoidable inefficiencies and costly errors. Companies can no longer afford a slowdown related to purchasing and AP functions.

Digitizing and automating the procure to pay process can greatly benefit organizations, even once they resume business as usual. Digital procurement allows you to track numerous assets, such as spend, PO, invoices, goods, supplier data and more, all in one convenient and easy-to-use platform, ensuring spend visibility and transparency. Armed with a holistic view of operations and properly managed spend, procurement leaders can make smart, informed financial decisions both immediately and into the future.

We need to analyze the impact of procurement digitization initiatives on overall procurement processes and take a decision on the digitization journey.

The impact of RPA /AI varies across the procurement value chain

 

fig. 3

 

 

Stages  in Procurement Digitization

The value-adding use of AI in purchasing requires a solid technological foundation, which must first be created. Following is the multi-stage process to create maturity in the procurement organization,

  1. Digitization

The typical problems, such as fragmented IT systems, data silos or poor quality, can be mastered with modern tools and systems  . Initially, this means making the right data accessible across the entire procurement organization. As a first step organizations needs to target all manual procurement processes e.g. sourcing, supplier information management, contracts repository etc. These processes are managed outside the ERP and hence its difficult to get visibility and data around the same. Implementation of Online SRM, e- sourcing & e-contracts will help us digitize the processes.

  1. Workflow Automation

In the next step, the focus will be on the basics of workflow automation, whereby a combination of (cloud-based) ERP systems and state-of-the-art SRM suites usually makes sense.

  1. RPA (Robotic Process automations)

On top of these standard applications, robotic process automation can be used to quickly automate repetitive tasks without a lot of programming effort.

  1. BIG Data & AI

Once these foundations have been put in place, the platform is created on which truly cognitive artificial solutions can be used. In particular, it is about the interaction of big data and AI to provide support for complex, strategic issues. Even without the use of AI, the analysis of large amounts of data can add value – be it in forecasting processes, in issue predictions, in scenario development or in risk management.  Leverages pattern recognition software and iterative machine learning algorithms to rapidly categorize unstructured spend, cost, contract and supplier data (e.g., information like raw AP records or T&E systems extracts not within the traditional structure of an ERP system) to deliver new insights and opportunities.

 

 

tabela -fig. 4 - PNG OFC

 

 

How Procurement Can Get Started on the Digital Journey?

With so many digital procurement solutions coming online, many procurement leaders struggle to determine their strategy in light of other legacy investments.

This can be simplified , if we understand the current adoption of digital procurement within the organization

Laggards :-

Organizations with minimal investments in core technologies can find value in maturing solutions that eliminate the need to make certain core technology investments (the leapfrog approach).

Recommended Processes for Digitization :-

  1. Sourcing
  2. SRM
  3. Contracts management
  4. Spend Analysis

 

Early Adopters :-

Organizations with a moderate level of existing investments often can use targeted investments to plug gaps.

Recommended Processes for Digitization-

  1. Automated Supplier performance Evaluation
  2. Catalog Procurement
  3. PR- PO automation
  4. Post Order collaboration

Leaders :-

Those organizations that have made substantial investments in core technologies can utilize emerging and maturing technologies to accelerate the capture of value and help differentiate their teams.

Recommended Processes for Digitization-

  1. Supplier Risk Analysis
  2. AP Automation
  3. OCR
  4. Advance Spend Analytics

 

Approximate timeline for implementation of digital solutions

 

 

tabela -fig. 5 - PNG

 

Digitalization Initiatives – Case Study

 

  1. E-sourcing
    fig. 1 - CG - CONSUS
  2. Supplier Information Management
    fig. 2 - CG - CONSUS
  3. Contract Repository
    fig. 3 - CG - CONSUS

    RPA – Case Study

     

    1. PR – PO Automation
      RPA – Case Study - 1
    2. Automated Supplier Performance Evaluation

 

 

BIG Data / AI – Case Study

 

  1. Inventory data rationalization
    BIG Data AI – Case Study - 1
  2. Item Master Cleanup
    BIG Data AI – Case Study - 2

 

 

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