In recent years, the digital revolution has profoundly changed society, the economy, and the world of work. Digital transformation is having a particular impact on public and private companies, regardless of their sector of activity. It has even become a key element of business strategies, so that they can remain competitive in the long term. In this respect, the procurement function is no exception. Having initiated this digital shift, procurement decision-makers are now fine-tuning their investments while preparing themselves to meet future challenges.
What is digital transformation?
Today, the world is experiencing its fourth industrial revolution. After the advent of the steam engine, assembly line production, and the computer, the arrival, development, and use of new digital technologies (i.e. the Internet of Things, Artificial Intelligence, cloud computing, Machine Learning, Big Data, etc.) are paving the way for Industry 4.0. These new technological tools reinvent, and for the most part improve the way enterprises work, conduct business, and interact with stakeholders (customers, employees, suppliers, etc.).
Also known as digitalisation, digital transformation is central to this new era. By definition, this digital transformation consists of integrating new technologies in all aspects and at all levels of the organisation. This applies to its operational efficiency as well as its corporate culture and value creation system. In other words, it requires a global company transformation strategy, resulting in the evolution of business processes, products and services offered, and even the economic model.
In today’s particularly complex and uncertain environment, companies are aware that they need to change; to modernise their existing processes and systems to become more resilient, competitive, and responsive. Digital transformation strategies are a direct response to this need, making it an unavoidable part of business operations.
Digital transformation central to the procurement function
Like all other professions, procurement departments are fully involved in a company’s digitalisation. This is now an integral part of their business models. According to a recent study conducted by the consulting firm PwC about the digitalisation of procurement, 18% of procurement departments worldwide consider digital transformation a strategic priority for the coming years. In fact, they’ve seen it as the third most important issue for several years now. For them, the main drivers of this digital transformation remain improving the efficiency and transparency of their processes to promote growth and build success while simultaneously reducing costs.
Procurement departments have worked in stages to initiate their digital transformation, starting with the digitalisation of their processes. According to the PwC survey, today, 90% of companies are equipped with Source-to-Pay and/or Procure-to-Pay solutions (with the entire e-procurement share). It has almost become essential, especially for large companies.
With all the major pressure on prices and supplies today, procurement departments have reviewed their expectations and strategies. In fact, emerging technology (Artificial Intelligence, robotics, or the blockchain) are less present in investment plans. Today, decision makers want to focus on immediate challenges with mature technology. This is why they prioritise concrete use cases that have already demonstrated their added value.
After digitalising processes, their focus is on:
- Data analytics and real-time viewing;
- Automation of administrative tasks;
- Supply chain traceability and supplier knowledge.
To take full advantage of these solutions, companies must profoundly change their businesses, both in terms of structuring and processes. Please note that the main digital transformation success factor is not just innovation, but to involve internal stakeholders by conducting a real change in management strategy.
H2 – The challenges of digital transformation
The digital transition also raises new challenges for companies, and more particularly, for procurement departments.
Cybersecurity
Digital transformation has revolutionised the ways information and data are accessed, for instance via cloud technology, which has led to cyber risks, and an interest in cyber security. Whether it is a question of possible cyber attacks or technological dependencies, procurement departments are just as concerned as other departments. In this respect, the PwC survey highlights that 90% of procurement departments are concerned about cyber threats and almost a third admit to having already been hacked. This is why the procurement function must ensure that the entire IT chain is secure and that everything in it (data and tools) is mapped.
Sustainable development
Procurement departments are also increasingly involved in the Corporate Social Responsibility (CSR) strategy. In addition to deploying responsible procurement policies, they intend to bring down their suppliers’ carbon footprint. However, they are still hampered by the lack of framework and resources in the market at the moment. Given the increasing regulatory and social requirements in this area, it is only a matter of time
The evolution of the profession
The digital revolution is transforming the procurement profession. From now on, procurement departments must encourage continuous learning for their employees, and be open to other approaches to develop their talents and take ownership of this digital transformation (coaching, mentoring, experience sharing, etc.).
Thanks to digitalisation and automation, buyers can gradually focus solely on tasks with higher added value. This is why they must increase their skills in the areas of know-how (becoming an expert at different types of technology, in sourcing innovation, in their knowledge of the internal customer, and their analysis of the vulnerability of supplier networks, etc.) and interpersonal skills (communication, influence, adaptability, etc.). One thing is certain, the customer of tomorrow will have a strategic role to play in improving their company’s competitive capabilities.
Through digital transformation, procurement departments intend to gain agility and efficiency in their activities as well as visibility. This fundamental strategy will require them to take a holistic view of a project of this magnitude, aligned with the company's strategy, especially if they want to learn and guarantee greater future success.
