Digitalisation of purchases: just a fad or the real deal?

Trends purchases digitisation
June 28th, 2018
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The digital transformation in industry, en route to "Industry 4.0", is having an increasing impact on purchasing. Expectations are high. Promises are bold. But will the benefits actually materialise? Or rather, up to what point are companies willing to transform themselves to take advantage of this global dynamic? Where do Purchasing Departments stand? Are the strategies clear? Have enough resources been allocated? And in the right area?

So many questions, to which the study commissioned by Jaggaer(1) provides a series of well-documented clarifications. The first part of the study, centred on the semantics and scope of the concepts, should help companies to realise the full extent of what is happening. There is still a long way to go! However, the most comprehensive part of the study states that all businesses consider data and its use as pivotal in understanding the digitalisation of purchases. Jaggaer's report concludes with some operational recommendations. This report could change the way you think!

Digitalisation of purchases: only total transformation is worthwhile

Confirming findings from other studies, the report states that only half of respondents consider that they have the knowledge and technology required to fully digitalise their purchasing. Furthermore, the same proportion claims to have laid the foundations for its move towards e-procurement. With help from experts and in light of the priorities and hierarchies indicated by Purchasing Directors, the Jaggaer report demonstrates widely differing approaches and very few established certainties.

Digitalisation of purchases: data, data, data!

No dispersion and a confirmed certainty: data control is the key to the digital transformation of purchasing. Only with this control can 100% digital purchasing be envisaged and implemented. Intelligent algorithms and the "big bang" of big data are only effective if they are well supplied. Most respondents of the Jaggaer study are fully aware of this, stating their preference for data investment in order to achieve a genuine breakaway. The most advanced companies are calmly considering taking on digital assistants, including conversational assistants (52%), and adopting robotic processes (48%). Meanwhile a third are even interested in blockchain technology.

The Cloud, the interoperability of systems, analytical tools and the spread of digital culture mean that more and more data is being collected by businesses in general and Purchasing Departments in particular. However, to benefit from an added value data stream for transformation, companies still need to ensure successful integration. Even though it is progressing, integration remains a largely manual process. Although ¾ of respondents said that they integrate their data and have overcome the silo effect, ¾ of integrators have not automated this integration. Even where data integration is at its most advanced, it often only includes internal data. External financial data, logistical risk scoring and costs related to non-recurring purchases are usually aggregated manually, when they are aggregated at all.

This discontinuity is an obstacle to agility and to rapid decision-making with all cards on the table. One of the strengths of the Jaggaer report is encouraging companies to "close the loop", highlighting in particular how the ability to relate predictive indicators to performance indicators is essential for agility and anticipation.

Digitalisation of purchases: further effort required

Only 2% of companies are currently using intelligent technologies, which improve purchasing decisions by highlighting actual uses and objectively considering the risks and uncertainties. Only the first step, the automation of tasks with a low added value, is actually undertaken according to the findings of the Jaggaer report. However, e-procurement cannot be limited to introducing technology into an existing process. Unless—to answer the initial question—it is just a fad.

To truly be the real deal for industrial companies, digitalisation must cover the entire purchasing process: staff, processes and technologies. Erase the lines between the real and the virtual. We need to acknowledge that no technology can function without correct data and that this is of growing importance as intelligence progresses. Easing the flow and sharing of high added value data is the key to successful digital purchase transformation!

(1)The 2018 Jaggaer study was conducted with BtoB procurement officers from across the world between August and October 2017. 168 officers who responded to the nine online questions were from industrial companies (73%) with a turnover of more than €50 million (76%). One in two respondents are based in Europe (47%).