Melani Flores on Digitalization of Procurement – Highlights from BravoConnect 2017

Melani Flores heads up the Procurement Advisory Practice in EMEA for the Hackett Group. She gave the closing keynote at last week’s BravoConnect 2107 event in Madrid, with some thought provoking suggestions around how we handle digitalization in the procurement world.

She started by describing the key forces in the evolving business environment - disruptive innovation, intensifying global competition and margin pressure, the ”age of the customer”, the  digital imperative, and finally the “insight” imperative.

Digital technologies are positioned for growth, including smart automation, the connected supply chain, blockchain, and virtual/augmented/mixed reality. However, real adoption appears to be slow but the percentage of organisations planning to implement over the next few years is high. In a Hackett analysis, 84% agreed that digital transformation will fundamentally change the way procurement services are delivered over next 2-3 years. However, only 32% of organisations actually have a strategy.

Similarly, 89% said that this will require a change in talent management and leadership but only 25% felt they have the right resources in place today. So, the clear conclusions are that people see opportunities but aren’t ready yet to make it happen, and that there is a real talent issue.

Then Flores took us on into her thoughts on the “Future of Procurement”, not too different from ours although she is perhaps slightly more optimistic! Procurement will continue its evolution, she said, but we’ll move from “procurement only” thinking to an “integrated supply chain” function, being more integrated with other parts of the business.

What about the key digital opportunities for procurement? There will come in a number of areas. Productivity will improve as we adopt and use automation and productivity tools. Procurement can become better aligned with stakeholders and be perceived as trusted adviser (I’m not clear exactly how digital really drives this, worthwhile goal though it is). Company buying behaviour will improve with stronger compliance allied to a better buying experience

Digital will provide rapid decision support, with new insights and intelligence to accelerate decision making, bringing additional value. Supply relationships will be collaborative and data driven, as organisations seek to be a customer of choice and capture innovation. And disruption from new innovative solutions to address todays challenges will be driven by developments such as blockchain (particularly in logistics and supply chain management).

If this all sounds long-term, Flores then had five more immediate opportunities for us – a checklist, if you like, of areas that procurement can start considering now. Firstly, analytics. There are opportunities for example to bring many sources of market intelligence together now from both internal and external sources to drive better procurement decisions.

Secondly, we can improve stakeholder experience, automate low value work and develop a business partner role for procurement, using technology to give a better user experience in areas such as ordering.

Then we have the “digitally enabled workforce” and the issues around talent. Flores gave us quite a long list of the skills needed in the new digital world - people need to understand business, be strong at relationship management, manage risk, be capable in savings and financial analysis, and so on. We do wonder if it is realistic to expect all this in a single person – maybe we will have to think about segmentation in terms of roles and the related skills?

The last two points were “smart orchestration of source to pay services”, and “unlocking value through the ecosystem of networked solutions”. That was the cue for Flores to present the eco-system of available procurement-related technology solutions at different levels of maturity.

So, what can we take away from this? Becoming digitally savvy starts at the top, she says, which must be right. Understand your “customers” (external and internal), consider piloting initiatives, learn from success (and failure) and understand your talent situation in the light of digitalization.  Not many organisations are currently approaching this in a structured and positive manner; but there is no reason why yours can’t be one of them.

(PS You can see the short round-up videos I did in Madrid for each day of the event here, along with a couple of short interviews with speakers. Here is a taster).

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