The latest research from The Hackett Group reveals that procurement teams optimising their technology adoption will be 68% more productive. Despite this, digital transformation remains a challenge for most procurement teams, requiring teams to establish highly interdependent digital capabilities. According to the JAGGAER 2019 Digital Procurement Report, of the 54% of organisations that have started the process of digitising and automating procurement processes, only 2% have achieved their digital transformation goals.
In their latest report, Digital Continuous Improvement: Value Creation at the Intersection of Smart Automation and Advanced Analytics, The Hackett Group argues that “the combination of smart automation, analytics and digital continuous improvement represents the next frontier of value creation in procurement’s digital transformation journey.”
Gartner defines advanced analytics as “the autonomous or semi-autonomous examination of data or content using sophisticated techniques and tools, typically beyond those of traditional business intelligence (BI), to discover deeper insights, make predictions, or generate recommendations.”
Smart automation refers to advanced technologies that can be programmed to perform a series of tasks that previously required human intervention. Gartner reports that smart automation costs approximately one-third of an offshore employee or one-fifth of an onshore employee.
Procurement will deliver greater value in 2025
Smart automation and advanced analytics will enable procurement to further evolve into a value-adding function by 2025. According to McKinsey, statistical models and advanced analytics alone could help procurement departments achieve cost savings of 3 to 8 percent, in comparison to traditional pricing models. The Hackett Group predicts that aided by these technologies, procurement teams will:
- Align and integrate operations more closely with the broader supply chain
- Eliminate rule-based, routine transactional processes
- Automate routine, process-based roles, such as supplier onboarding, in order to focus on more strategic activities
- Use cognitive capabilities to predict activities, suggest opportunities and recommend strategy
- Use data and advanced analytics to increase compliance
- Decrease the rate of head count growth, which will bring knowledge-based roles to the forefront of talent requirements
- Employ smart engines to predict disrupting events to the supply chain, allowing the organisation to better plan for and limit disruptions
These capabilities will help procurement teams drive efficiency, enabling them to react quickly to changing environments, deliver insights to the business and position the function as a strategic advisor to the business.
Making the business case for smart automation and advanced analytics
JAGGAER’S survey revealed that procurement’s top priorities for investment are predictive analytics, the internet of things (IoT) and robotic process automation (RPA). But, in order to make the business case for new technologies, procurement executives will need to provide use cases that demonstrate the value in the intersection of smart automation and advanced analytics. The Hackett Group gives the following examples:
1. Supplier on-boarding
Combining smart automation and advanced analytics will remove a lot of the manual effort from supplier onboarding and screening, document collection, creation of supplier composite risk scores and supplier selection.
2. Contract life cycle management
The technologies will enable procurement to automate document workflow and retention, make intelligent risk assessments and automate notifications of out-of-compliance contracts and/or expiring contracts/renewals.
3. Sourcing events
Analytics-driven market intelligence, including tariff changes or other fluctuating market conditions, can be used as input for automating sourcing event creation and workflow.
4. Guided buying
Using market intelligence from advanced analytics with a cognitive tool, buyers can be guided through an advanced process that accounts for factors including supply chain disruptions. Advanced analytics can also help predict buying behaviours, which will shorten the process and increase stakeholder satisfaction.
Combining smart automation with advanced analytics
In order to extract the most value from these technologies, and digital transformation as a whole, it is crucial for procurement teams to align their strategy with the overall business strategy. Here are The Hackett Group’s recommendations for procurement to begin creating value with smart automation with advanced analytics.
- Employ a full life cycle framework to guide planning to ensure that critical interdependencies are considered.
- Use established diagnostic tools to assess current capabilities, which will pinpoint areas of greatest need and opportunity.
- Benchmark performance externally with other procurement organisations
- Analyse elements of work when building use cases for smart automation and advanced analytics. Factor in the value of digital continuous improvement.
- Prioritise the acquisition and development of acumen in areas such as data science, social media, strategic thinking, design thinking, customer experience and process excellence.
- Tap established expertise, particularly during the early stages of transformation. Initially, procurement may lack the kinds of skills required to deploy smart technology. Working alongside experienced advisors can help accelerate transformation.
Read the full report from The Hackett Group here.