CPO visions give us a view into agility, cognitive analytics, and artificial intelligence. Get ready for Procurement 3.0.
If you haven’t seen it yet, Deloitte has published The Deloitte Global CPO Survey 2016 - the survey covers the opinions of 324 CPOs from 33 countries across a wide range of industries from consumer and manufacturing to media and the public sector. Deloitte surveyed the CPOs about everything from their market outlook to talent management. The survey is really broad, but they’ve made the data digestible with a lot of infographics, so I recommend browsing through it here.
In this post, I’d like to focus on CPO thoughts about procurement technology and their digital strategy. What’s really clear is that what Procurement organizations need from technology is developing in parallel with the changing market and business landscape they find themselves in. This promises some exciting prospects for the future and what Procurement tech will be able to do.
Procurement tech has its roots in the ecommerce and marketplaces of the 1990s and the dotcom age, when it was largely aimed at reducing the load of paperwork intensive processes and reducing transactional costs. You can read post we did about this really interesting story here. According to Deloitte, in the last three years, “CPOs have been focussed on ensuring these core capabilities are in place and appropriately integrated across the enterprise”.
Technology is now so ubiquitous in our private and business lives that the great majority of people will expect to use technology for a wide range of essential functions. More than that, technology is encouraging us to become more ambitious and to expect more - instead of relieving the burden of processes that were there before, we fully expect technology to enable us to go much further and do achieve results and insights we otherwise never would have had.
Deloitte envisions us at the cusp of Procurement 3.0 - the digital tipping point that has the potential to revolutionize Procurement entirely. This is certainly an exciting prospect. There are three stories about the future of procurement technology I’d like to pull out of the Deloitte survey and highlight.
The Rise Of Agility
Deloitte puts this in clear terms: “Even the largest businesses strive to be increasingly agile and more effectively respond to volatile market trends and shifting consumer preferences. Having to engage with a rigorous process in order to buy something seems like a nuisance at best and a threat to profitability at worst.”
Agility requires that technology automates processes for speed and flexibility. Even more than that, agility demands that information be available fast, when and where you want it - possibly in places you didn’t even know you needed it. This includes in-house knowledge from within the company and among colleagues, and also external information about developing events, situations, and potential supply chain bottlenecks in real-time.
Analytics & Cognitive Procurement
The survey puts Spend Analysis at the top of the list of CPO tech purchases over the next 12 months, and Deloitte definitely states, “the message from non-procurement stakeholders to the CPO is clear and consistent: deliver more insight on demand to inform my most strategic decisions”. The survey sees existing technology as a foundation for evidence based decision making and advanced artificial intelligence.
Certainly, technology is making and will make it easier to build the big data required to run intelligent tools. To build on that, there is great scope to develop algorithms for prescriptive Procurement, providing everyday suggestions to a buyer based on big data in line with corporate strategy, and inform strategy with a solid foundation of evidence. This will mark a shift from big data analysis that informs human predictions about the future, suggestions, and decisions to big data analysis that informs artificial intelligence predictions, suggestions, and decisions good enough to play a genuine role in strategic Procurement. We could say that it is when we reach this summit that we’ll know that we’ve got to Procurement 3.0.
Artificial Intelligence & Sensors
The Deloitte study focusses on the use of robots in procurement functions: while this might conjure nightmarish images of your entire Procurement team being replaced by robots, in reality, this is actually Procurement functions fueled by artificial intelligence performing operational processes following defined process steps, freeing up staff time and resources for strategic functions and other activities.
What’s really exciting for Direct Procurement, particularly in manufacturing and consumer goods, is the expanding deployment of robotics and sensors. Manufacturers are already installing sensors in the assembly lines of their suppliers, creating new levels of supply chain transparency in production capacity and quality management. This provides a rich source of data not just for engineering, but also for Procurement at product development stage.The need for agility provides new potentials (and necessities) for Procurement to be more involved than ever in product development and build close collaborative supplier relationships. This promises great potential for new Procurement tech functionalities and integrations for real at-your-fingertips transparency.