The day procurement became digital

The vertiginous advances of Digital Technology are changing the way in which organizations and their Supply Chains compete in search of greater market shares and, of course, are changing the ways in which the Procurement function adds value to the organization and society. The development of low-cost technologies (IT) has made connectivity a rule while the proliferation of sensors has changed along with the Internet of Things the way we take advantage of devices and equipment.

The implementation of these technologies allow access to a large amount of information that was previously not available, helping to much more complex analyzes, real-time situations and risk assessments, as well as, to improve the efficiency of operations. In other words, Digital Technology makes Strategic Sourcing more predictive, Procurement to Pay more automated and Supplier Management more collaborative. While in the past the digital transformation of the Procurement function was more complex, today is much cheaper, requires much less integration and the return on investment (ROI) can be measured in months.

Fig 1. Digital Procurement

The development and evolution of digital technologies in the Procurement function can be gathered in three (3) groups:
Core: Base solutions that are currently fundamental in Procurement.
Development: Technologies that are currently part of the digital transformation of Procurement and that have shorter implementation cycles.
Arising: Digital technologies that could significantly impact the Procurement function in the future.

 

 


Fig 2. Digital Technologies in Procurement

The development and implementation of these technologies in each of the phases of the Procurement function will impact the process of Strategic Sourcing (Sourcing to Contract) making it more predictive allowing employees to make their processes more transparent with their most important suppliers. The process of Procurement to Pay (Transactions) will be fully automated, freeing up resources that can be dedicated to activities of greater added value and, finally, the Supplier Management process will be completely interconnected and collaborative, mitigating supply risks and promoting innovation in the Value Chain through the early incorporation of the Suppliers in each of the projects of the enterprise.

The digital technologies that will have the greatest impact on the Procurement function are:

Blockchain: Undoubtedly one of the highest expectations about its contribution in the Procurement function and in the Supply Chain is its application through intelligent contracts which will allow their automatic execution without the participation of any intermediary and even allowing to automate the process of invoice-payment without the intervention of banking entities.

Sensors & Wearables: The inclusion of sensors in the entire Supply Chain will allow to know with exactitude of place, time and condition the movements of each one of the goods, finished or not, within the Supply Chain, thus allowing robust analyzes of the operation that will lead to higher levels of efficiency.

Virtual Reality: Perhaps one of the digital technologies that will add more value in the entire Supply Chain allowing the Procurement departments to make visits and / or virtual audits to their suppliers; optimization of MRO purchases for production lines due to preventive maintenance that in addition to the analysis of historical data about the replacement of pieces and parts, will include technical elements of each of the pieces, etc.

Artificial Intelligence: Artificial intelligence is nothing more than the ability of computers to perform functions analogous to the learning and decision-making processes of human beings. That said, the Procurement function will be impacted by intelligent Sourcing processes that will be able to warn the enterprise and suppliers of potential supply risks, risks in the fulfillment of digital contracts and even with the identification and alert in possible frauds.

As we have seen, Digital Technologies impact on the three (3) basic functions of the Procurement process and this impact is given in the improvement of the input information, as well as, in a substantial improvement in the decision-making process and in the efficiency of the operation. The process of Digital Transformation of Procurement represents a challenge for the leaders of the organization who must realize the adequate strategy of the company with the advantage that these new technologies will adapt without major problem whatever their digitization level is.

 

Source: medium.com – 13/03/2020 – Amintore Confalonieri , This article was published in The Procurement Italia Magazine | www.theprocurement.it