Author: Dr. Marcell Vollmer, Chief Digital Officer, SAP Ariba
Only a few years ago, the notion of procurement and what that role and function entailed was daunting. Words like “compliance” and “processes” came to mind. Even the simplest transaction was riddled with paper trails, endless negotiation and frustration. But times have changed. Thanks to technology, buying things at work is as simple as buying them at home. Procurement has entered the digital reality and businesses are about to reap the benefits big time. Here’s how.
Intelligent technologies such as machine learning, artificial intelligence and cognitive capabilities have the potential to make procurement smarter and more intuitive. In embracing them, procurement organisations can perform transactional activities at much greater speed, lower cost, and higher accuracy. More importantly, they can make smarter, more informed decisions and operate in more efficient, collaborative and data-driven ways that deliver value to the business beyond just cost savings.
The most intelligent enterprises are built on smart, sustainable supply chains. Leveraging intelligent technologies – think SAP Leonardo and IBM Watson – companies can combine insights from procurement data and unstructured information to predict and respond more effectively to customer and market demands. They can also open new approaches to connecting people and information – all of which will fundamentally change how buying and selling get done.
A digital procurement assistant combined with machine learning, for instance, can completely transform sourcing events by helping with tasks such as defining the correct Request for Proposal type, identifying appropriate suppliers to participate based on commodity category, region or industry and delivering intelligence on market signals and pricing pressures to optimise results.
Contracting can also become more intelligent, intuitive and more comprehensive with applications that automatically identify relevant terms and conditions matched to legal library and taxonomy, uncover similar contract terms for a specific commodity by industry or region based on benchmarking data and suggest optimal prices to target based on expected volume and contractual discounts.
The road to intelligent procurement has been paved and companies that get on can drive real value. But doing so will require change. Procurement will fundamentally need to rethink what it does and how it does it. Procurement professionals will need to more closely align with business teams, and their work will draw heavily on analytical insights. All of this will require newer skills in data science and analytics, risk management, and collaboration.
Beyond saving money, procurement will improve lives
Digitisation has given procurement the tools to create totally new levels of supply chain transparency. And procurement will use them to act in ethically responsible ways that make the world a better place. Leveraging historical and real-time purchasing data and supplier intelligence in conjunction with applications for data analysis, for instance, they will shine a light on the materials, regions, and industries that are most likely to have forced labour and take action to combat it. Through business networks, they will connect with a wider pool of minority-, woman-, LGBT- and veteran-owned businesses and enable global supply chains that are more responsible, sustainable and inclusive.
The journey to digital procurement is different for every company. But it all starts with process automation. In digitising things like sourcing, ordering and invoicing, companies can drive between 10 percent and 15 percent savings on average. When intelligent technologies that enable companies to dissect their data and make more informed decisions are brought into play, another five percent to 15 percent in savings become possible. Add in the efficiency and effectiveness that digitisation brings and these numbers sky rocket.
Intelligent procurement is today and tomorrow’s reality. It’s more than just a buzz term and it is an absolute necessity for success. Embracing intelligent procurement goes beyond adopting technologies to improve efficiency and drive fiscal results. It’s adopting the digital mindset behind it and operating in ways that can improve not only your business but also the world around you.
SAP Ariba is how companies connect to get business done. On the Ariba Network, buyers and suppliers from more than 3.4 million companies and 190 countries discover new opportunities, collaborate on transactions and grow their relationships. Buyers can manage the entire purchasing process, while controlling spending, finding new sources of savings and building a healthy supply chain. And suppliers can connect with profitable customers and efficiently scale existing relationships – simplifying sales cycles and improving cash control along the way. The result is a dynamic, digital marketplace, where over $1.7 trillion in commerce gets done every year. To learn more about SAP Ariba, visitwww.ariba.com.