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Will “Digital” Make Procurement Obsolete?

Will “Digital” make Procurement obsolete?

Like its forerunner “Transformation”, “Digital” is already an overused term. It means different things to different people in different ways. To some of us, it still just reminds us of a watch we got for Christmas in 1976 which showed the time in red digits and played the James Bond theme in a kind of Kraftwerk monotonous tone.

“Digital”, whatever you decide it means has some serious ramifications for Procurement and they have little to do with the technology that has fuelled the noise. We live in a World where there is a technology solution for just about anything we can think of and a good many that we haven’t yet thought of. So there is plenty of tech around to support our ambitions and we need to become technology agnostics. We don’t need to get hooked up on the tech, we need to get hooked up on what it could do to make our function relevant and valuable in the digital world. Once we understand this fact we can free ourselves from the endless search for the next tool, app or platform, and trust me, the tech will sort itself out.

Become a digital visionary.

One of my frustrations with many of my Procurement colleagues is the lack of vision that is shown in the way we look at technology enablers. I am constantly surprised at the one-dimensional view of technology enablers that Procurement see when they think about what they could do with digital in their functions, it nearly always boils down to managing tail spend suppliers, reducing transactional headcount and some kind of interactive supplier portal. All fine I’m sure but nothing really to do with “digital”. You need to start asking different questions, seeing your challenges is a different way and re-engineering the Procurement value proposition.

Digital is a way of working as much as a way of using technology to enable the working.

In a digital world we are more connected, we are more transparent (whether we want to be or not), we are more immediate and critically we are all more capable. So, before we worry about the technology, the transactions, the tail spend and the headcount implications, let’s think about how connected, transparent, immediate and capable impact the way we could re-look at Procurement.

Our personal experience informs our professional expectations.

As a function desperate to establish and maintain its credibility and value over the last 25 years, Procurement have tried to position themselves as gate keepers to the supply base. We insist on governance over interactions and transactions with our suppliers, that’s what we do, that’s our expertise. Right? Well possibly but in a digital World, suppliers are more accessible to everyone in our organisations than ever before. And, critically, ways of transacting with suppliers are also more accessible. “We want the Amazon experience”. I heard this from a senior executive in an MRO centric organisation recently. What he meant of course was that he wanted to go online, see what was on offer, chose, click today and receive tomorrow or perhaps even later today. He then wanted to be able to return free of charge if it wasn’t what he wanted or he just changed his mind. The veiled implication of his request was also that he was happy to go and do that himself if Procurement didn’t provide this service from one of our oh-so-precious preferred suppliers very quickly.

So, one of our first challenges in our new digital world is to re-think supply base eco-systems, how our business interacts with them and recognise that we cannot be gate keepers of suppliers in a transparent and connected World and nor should we try. We should also realise that our personal experience informs our professional expectations like never before. Thirty years ago we may have had a computer at work but we didn’t have one at home. Home computing was therefore informed by our work experience, indeed I suspect our early applications of home computing was a spreadsheet for the household budget and a word processor for our letters – basically work-like applications being used at home. Now we are more likely to have a much more connected on-line experience at home than we have at work, so the expectations shifted 180 degrees. The buying experience is of course one of our key interactions with technology. At home we buy and transact on multiple devices with multiple providers aka suppliers. We know how to do it, we’re confident and competent at doing it and it works. So naturally, we want what we so easily access at home, at work.

We can’t and shouldn’t stop anyone in our organisation connecting with the supply base. We should help them manage that connectivity in the right way and we should be the function that is encouraging our stakeholders to become procurement capable. It is foolhardy to assume that we can manage a global supply base efficiently and effectively through the small funnel of our function. It is also functional suicide to think we can ‘gatekeep’ in the same way as we did before. We will be spending all of our time defending these tactical plays rather than engaging with our stakeholders to find better ways to harness the connectivity we have to produce better business outcomes.

Here’s the next reason digital could make Procurement obsolete: Sourcing. That’s our thing isn’t it, that’s definitely what we do? Well of course but again, our ‘sources’ are all now just one click away. Doing business with many of them could be just three or four clicks away. So why do we need a sourcing process that often takes months and if sourcing is the process by which suppliers are identified, qualified and contracted with then surely this is now a totally digital activity done from a desktop in minutes (not withstanding the need for quality control activities of course)? And if that’s the case, then who needs a Procurement person to do that?

Digital will change some of our most fundamental processes. Take Category Management for example – a bit of a bug bare of mine I have to say. It really is time to re-think Category Management but that’s the subject of another blog or two methinks. However, think long and hard about why we have categories and what they mean. If you really look at it, they have become less relevant and deliver less value in part because their original purpose – clustering spend areas, managing similar supplier behaviours, finding aggregation points, slicing up spend into manageable chunks, building nice org charts – have all been superceded by the way everyone now engages with suppliers and by the nature of the suppliers themselves. Consider this: Amazon – a book store? A stationary supplier? An IT supplier? A tech company? All of them, right? Hmmm, so this fits in which category? A simplistic view I know and there is much more to why I see digital truly challenging this cornerstone of Procurement, but as I said, more later on this one but hopefully you can see my point.

I’ve reached a thousand words and note-to-self says no one is going to read more than a thousand words of anything I write, so I’ll close off but in summary consider these things:

1. Don’t worry about the technology, worry about what you can do with technology that will drive an exponential improvement in business outcomes.

2. Re-think your functional behaviour and the architecture that under-pins in. Design organisations differently to harness new skills and capabilities that can maximise digital value creation.

3. Go to your stakeholders and the supply base with new ways of working to maximise the value that a digitally enabled organisation can deliver, don’t wait for them come to you or worse still, do it without you.

4. Don’t hang on to out-moded processes and functional doctrines, challenge yourself to re-think them. Consider what connected, transparent, immediate and capable actually mean to Procurement.

5. Think enablement and capability not process and function.

What will connected, transparent, immediate and capable actually mean to Procurement?

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