Procurement Technology’s Future

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This is Part 3 in a three-part series exploring a brief history of procurement technology and how expectations and solutions have evolved — incredibly rapidly, we might add — to meet a changing set of procurement expectations and requirements. Today’s installment looks at where procurement technology is headed.

Part 3: Exploring the Art of the Possible                    

The building blocks for procurement technology are changing rapidly. One key element is the move that procurement organizations are making to adopt integrated suites, where the sum of the parts is significantly greater than the modules themselves. While there is no such thing today as a true single suite spanning all direct, commodity management, indirect, and services procurement (including contingent workforce, specialized categories, freelancers, freelance marketplaces, etc.) needs, despite what vendors may claim, we’re getting closer all the time to this goal.

Today, procurement organizations have access to technology suite adoptions with integrated capabilities spanning a broad set of source-to-pay requirements. These include spend/supply/procurement/AP analytics (yes, all areas matter), supplier information management and master data management, supplier risk and performance management, working capital management and expense management.

But it’s not just combined modules that matter; it’s how they work together. For example, this includes using master data across a suite so that supplier profile and questionnaire information (e.g., corporate social responsibility and risk data) is kept current and shared and managed across sourcing activities and transactional buying. Harmonizing master data across procurement activities and tying together integrated processes is important for procurement to prove its worth to the rest of the business.

For example, a procurement suite with harmonized master data and integrated processes can enable:

  • Finance/treasury/accounts payable teams to better manage payment terms and working capital
  • Supply chain organizations to manage total cost, including inventory carrying cost and logistics cost
  • Plant/shop floor users to deliver vendor managed inventory (VMI) and just-in-time programs (JIT) as part of lean initiatives
  • Human resources to ensure regulatory and statutory compliance requirements for contractors
  • IT organizations to provision new technologies and services to the business in an area of cloud computing
  • IT and procurement to create a common system of record of all supplier data that is updated in all relevant systems (including ERP)
  • Operations and R&D to bring products to market more quickly and to integrate supplier innovations into products on a consistent basis
  • Enterprise risk management to reduce supply disruptions
  • Regulatory compliance to introduce new products more rapidly in new geographies with specific requirements  

A Checklist: New Technology Building Blocks

So far in this series, we’ve explored a history of procurement technology and the building blocks of new types of integrated suites, as well as the types of results they are capable of achieving. But to stay current, it’s also important to think about new types of technology and technology approaches. While I can’t explore them in the level of detail necessary due to space constraints, I hope that the following areas will cause you to want to read our additional posts and research to learn more:

  • Integration and platform-based models. Basic API-based integration approaches are giving way to new platform-as-a-service (PaaS) based models that essentially externalize service-oriented architectures (SOA) models and make it easier for procurement and third parties to configure new capabilities in the form of “apps” that sit on top of existing systems, yet are fully integrated without requiring extensive customization.
  • Cloud models are blurring. This involves the ability to manage hybrid and customized capabilities, such as rolling out specific functionality and capabilities desired by an organization, managing data securely and in pocket/silos based on geography, permissions and other requirements, and enabling new secure forms of collaboration.
  • As we’ve noted before, spend analytics is morphing into “supply” analytics, which incorporates working capital, supply chain and related data sets.
  • Configurability (or even dynamic configurability, as some call it) is taking the concept of SaaS to whole new levels to provide customization without getting into code, enabling the ability to upgrade and change as business requirements evolve. And new workflow capability is increasingly supporting highly complex scenarios that are specific to targeted industries and organizational requirements.
  • Machine learning and artificial intelligence are starting to provide new approaches to data classification, recommendations, forecasting and predictive outcomes –– and making entire systems and their users smarter, continuously, as they learn.
  • Ecosystems and connectivity (not just static internal four-wall based architectures) are becoming as important as applications and modules themselves.
  • Apps are no longer “empty.” They are giving way to the expectation of best practices, templates, benchmarking, analytics and event contracts/pricing embedded in solutions.
  • Collaboration is taking on social paradigms, including sharing threaded discussions and commentary across procurement, suppliers and the business.
  • Emerging architectures such as blockchain are starting to bring new types of visibility, traceability, systems of agreement and systems of trust without a single intermediary or authority standing in the center of activity.

A Closing Thought: Purpose-Built Procurement Technology

In conclusion, it is worth noting that all of these technologies and advances are increasingly leading to a type of mass customization that takes advantage of economies of scale and standardized cloud deployment models, while at the same time enabling higher specific requirements by industry and even company.

So before you think about your next set of procurement technology investments, it is worth taking the time to understand how industry- and organizational-specific functionality (including preconfigured content, processes and workflow) can expand the value that your procurement organization can deliver.

Imagine a world, for example, where standardized procurement technology can enable manufacturers to source and manage the entire procurement lifecycle for bills of material, introduce new products and/or suppliers (e.g., NPI, PPAP) and drive performance improvement plans –– while managing standard indirect and services procurement purchases or “mundane” buys such as fasteners and MRO in the same environment.

Or consider a procurement universe where energy and process companies can manage complex field-level engineer and construction projects in the same procurement environment (including mobile enablement) as the rest of their purchases. Or turn to a new world where healthcare procurement teams can influence physician preference items with on-the-fly product substitutions, without having to restart an entire buying process (not to mention tracking complex pricing and SKU-level data and rebates from group purchasing organizations and internal asset utilization to maximize patient outcomes while reducing the cost to serve).

This is not just the future of technology. It’s the world of today for procurement organizations that are willing to roll up their sleeves and architect solutions to the types of business problems that change not just technology paradigms but also the overall function and role of buying within organizations.

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