Mar 16, 2017

2017 is going to be a year of fundamental change for Procurement. But how? The Hackett Group has released its CPO Agenda 2017 - and if you haven’t seen it yet, you should check it out. It focusses almost exclusively on the digital transformation of Procurement. And it starts with an unpleasant shock!

Lack Of Confidence

It is clear that digital transformation is high up on the Procurement agenda. 84% of CPOs surveyed by Hackett believe that “digital transformation will fundamentally change the way their services will be delivered over the next three to five years”. So far, so good. The bad news is that only 25% say that they have the right resources and competencies to make this happen. Similarly, only 32% have a digital transformation strategy. A crucial part of the problem is that resources are very limited this year. Procurement is expected to deliver digital transformation, but “procurement operating budgets are expected to grow by less than 1%” in 2017.

Closing The Digital Capability Gap

To help guide digital transformation strategy, Hackett suggests four key areas to focus on to close the digital capability gap.

  1. Improving the stakeholder experience
  2. Orchestrating a procurement-as-a-service portfolio
  3. Setting a foundation of analytics-driven insights
  4. Leveraging technology to accelerate transformation

Of course, to read about all four priorities in detail, take a look at the Hackett CPO Agenda itself. In this post, we’ll talk a bit more analytics-driven insights.

Analytics Is The Next Frontier

According to Hackett, big data will help Procurement in its transformation “from transactional facilitator to trusted business advisor”. Certainly, Deloitte has found that 65% of CPOs see the biggest impact for technology in analytics. There are three ways organizations can move towards analytics-driven insights as suggested by Hackett. First of all, they can invest in training, which is key to maximizing impact by combining analytics technology with the talent that can use it. Secondly, organizations should seek to deliver new forms of market intelligence. Finally, they should invest in predictive analytics.

Deloitte finds that investment in predictive analytics and cognitive procurement is still low. However, Hackett sees it as the next frontier for Procurement technology. Specifically, it can be used to “evaluate commodity price volatility and model its potential impact on cost structure and profitability”. Procurement continues to be exposed to high levels of risk and market price volatility, so this capability is not just the next frontier, but overdue. POOL4TOOL offers the solid foundation of functionality in its Cost Breakdown, with commodity price change alerts and cost modelling. The goal of our company’s roadmap is true predictive analytics and cognitive procurement. So the technology market will develop in fascinating ways to deliver the agility required to achieve highly competitive, sustainable savings.

Where Do You Stand?

Only 32% of procurement organizations have a digital transformation strategy. With limited time and resources, where can you start? We have developed the Digital Procurement Checklist so that you can self-assess where you stand and look at where you can improve.

Download the Digital Procurement Checklist here:

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