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5 Ways Digital Transformation is Changing Procurement

A new report highlights the key digital procurement trends that are impacting buying organizations now, and that will enable and support them in the future.

As more buying organizations implement digital procurement tools, applications, and strategies, the benefits that come from doing so are becoming increasingly obvious. In its recent “Procurement and Supply Chain Management 2019” report, supply chain consultancy GEP discusses the rapid acceleration on procurement’s digital journey, with the key drivers being cloud computing platforms, associated disruptive technologies, and unified source-to-pay (S2P) applications.

“Recently, a ‘democratization of transformation’ effort has emerged,” GEP points out. “Digital enablement is more capable; easier to acquire, implement, and access; and more cost-effective than ever before. Larger companies with more budget and resources will no longer be the only ones that pursue transformation—small- and mid-sized companies will also seek change.”

Five Trends to Watch

Here are five more digital procurement trends that GEP is watching right now, and that electronics buyers should be aware of:

  1. Leading companies are pursuing “digital-first” strategies. According to GEP, this involves leveraging existing and rapidly emerging modern technologies such as artificial intelligence (AI), cloud-based solutions, advanced predictive analytics, cognitive computing, and natural language processing (NLP). “Technology will no longer be a tool for helping processes,” it says, “it will be the definer of new capabilities within the organization, such as advanced, best-practice processes in which manual ones are automated and some are eliminated entirely.”
     
  2. More companies will move applications into the cloud. “Most CPOs and CIOs are now aware of the disruptive nature of a fully integrated S2P platform,” GEP points out, noting that the companies it works with have already moved—or are in the process of moving most of their S2P processes—to cloud S2P applications. “High-performing organizations have made major strides in decoupling key procurement processes and data from their Enterprise Resource Planning (ERP) systems,” it adds, “and leveraging cloud-native S2P applications that can operate independently to store data and enable end-to-end process flows—from category strategy to invoicing.” Cloud is making its way into direct procurement and supply chain management, GEP adds. “We forecast that most companies will limit their ERP activity to core finance and manufacturing workflows,” it writes. “Cloud-based procurement solutions will expand into newer procurement areas including direct materials, item master, bill of materials, ordering, stock integration, vendor managed inventory, forecasting, and inventory management.”
     
  3. Organizations must accept that change is a constant. GEP expects cloud-based solutions and external services to continue making new functionalities and capabilities easier to acquire and adopt. “In turn, organizations will implement agile talent acquisition strategies including internal and external crowdsourcing options to source the needed talent,” the organization notes. “As we see in agile software development, procurement transformation pilots will drive learning, solution evolution, and acceptance.”
     
  4. Collaboration between procurement and data science teams will increase. Historical spending only provides a partial view of a company’s purchasing and supply chain activity. Add relevant data to the mix, however, and that view suddenly expands into a more meaningful, actionable dashboard. “We will soon start to see a new collaboration between data science and procurement teams,” GEP predicts, “applying machine learning (ML) and AI to shape unorganized data sets into actionable ones, recognize patterns in spend behavior, and forecast future budgetary trends. By combining cluster analysis with AI, for example, buyers can detect patterns in invoices, purchase orders, or master data—all of which can be “clustered” automatically, based on information contained in the text, GEP points out. “The clean data can then be used to standardize materials, change specifications, and benchmark prices from different suppliers,” it continues. “As a result, the buyers can make strategic decisions on how to allocate future spend across the supply base to mitigate future risks.”
     
  5. Disruptive technologies will continue to impact procurement. GEP expects procurement teams and procurement software providers to continue investing in or acquiring robotic process automation (RPA) capabilities in the near future. Used with AI, RPA can automate routine and repetitive tasks, driven by rules-based processing and business logic. “More sophisticated use cases will emerge by combining scripted RPA with AI and other emerging technologies,” GEP writes, pointing to smart contracts, smart sensors for forecasting, and smart sensors for asset management as just a few of the innovations that will enable procurements teams in the near future. “Robotic desktop automation (RDA) will continue to produce a different degree of automation,” it points out, “and will combine with natural language processing (NLP) capabilities to enhance S2P processes.”

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