Angus Craig FCIPS is an interim procurement consultant who helps organisations improve procurement and supply chain performance. This often involves leading transformation programmes where critical IT systems are improved or changed.
Many people are sceptical of the benefits of new technology. In my experience procurement and supply chain professionals are doubly sceptical. They are trained to challenge suppliers’ and many have been burnt by new technology in the past. The implementation of ERP software solutions like SAP/Ariba and Oracle are expensive and leave many P2P customers disappointed. Furthermore, new technologies like collaboration software, peer-to-peer networks and RFID have not lived up to their hype.
So, if I said that procurement and supply chain technology was finally coming of age, I’d expect many readers to tune out. But bear with me. Here are 3 reasons why it’s different this time:
- In many ways, today’s procurement organisations resemble white-collar versions of manufacturing in the 1970s. Manual processes still prevail even as automation transforms other business functions. Few could deny that procurement is ripe for re-invention.
- The fourth industrial revolution is the next paradigm shift in manufacturing. Like other concepts developed in manufacturing, such as kaizen and lean, Industry 4.0 applies to services as well. The first industrial revolution saw steam power replace horses and the fourth revolution will see technology such as AI replace manual processes.
- The market has recognised the opportunities in procurement and given rise to a number of start-ups like Market Dojo. These start-ups challenge the incumbents like SAP/Ariba and Oracle and in some cases replace them.
Many sceptics ignore or underestimate the importance of the human element of new technology implementation. Technology providers are partly to blame because they describe their solutions as “intuitive” and are selective when presenting case studies. Customers are also to blame because they rarely provide enough resource to re-engineering their processes and support their staff through the change. So before buying new procurement technology take the time to fully understand the scope of the change:
- Compare the current process to the one embedded in the new technology. The processes may look similar at a superficial level but try to view it through the eyes of someone who has got to use the process every day. The manual and automated sourcing process, for example, may have the same number of steps, however, the way in which a Sourcing Manager communicates using email is very different from using a tool like Market Dojo, particularly, if an auction is planned.
- Consider all the benefits of implementing the technology. There is a tendency to focus on price reduction (Market Dojo state 20% saving) and time-saving (Market Dojo state an average of 30%). I believe management information is equally important because it can be used to drive better governance and more effective use of procurement resources. Sourcing projects, particularly for the more complex categories of spend, often stall because of poor specification and demand forecast. It is difficult for a CPO to keep track of all sourcing projects without regular system generated reports. If Sourcing Managers are tasked with delivering a certain number of sourcing projects every year, Procurement would be perceived as pro-active and there would be more opportunity to generate savings. Most sourcing tools provide complete transparency and detailed analytics so there is nowhere to hide.
- Recognise that we’re all different and that procurement is often complex. Ensure that sufficient resources – training materials, support and time – are available for users to become comfortable with the technology. And just because the software developer tells you their product is intuitive, it doesn’t mean that every user will agree.
So, stop spending time searching your inbox for that file attachment, updating that corrupt Excel tracker or cobbling together yet another presentation from various spend reports. Use the time instead to do the things you came into procurement to do, like talking to procurement technology suppliers, understanding their products and thinking about how they fit into your procurement strategy. If you don’t then you risk being left behind.
For further information visit www.craighallconsulting.com. Keep up to date with Angus on LinkedIn here.