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Separating Hype from Reality in Procurement Technology

How procurement organizations can start building sound digital strategies by first understanding which technologies are—or aren’t—relevant to their core missions.

Figuring out which applications and tools make us more productive and efficient—and which ones just bog us down and take up too much of our time—is a persistent challenge in today’s technology-rich business world. Pummeled from different angles and by an array of vendors hawking the “latest and greatest” innovations, procurement is particularly prone to technology overload.

To avoid this overload and the related inertia, buyers need to step back and separate the hype from the reality when selecting new applications, devices, tools, and other innovations. This isn’t always as easy as it sounds.

“The dizzying pace of innovation, combined with rising market pressures, is creating a sense of anxiety about which technologies to pursue (and when),” MHI points out in its “2019 Annual Industry Report: Elevating Supply Chain Digital Consciousness.” The digital supply chain can be especially overwhelming for buyers, and particularly for those leaders and managers that don’t want to miss the boat—but also don’t want to over-invest in technology that won’t produce a return on investment (ROI).

“Ultimately, every company is unique, and its path will be strongly influenced by a variety of factors, including budget, customer demands, competitive insights, and available talent,” MHI states in its report. “Overcoming barriers to technology adoption is fundamental to success and must be effectively addressed in order to achieve the expected benefits of digital supply chains.”

Those barriers not only include workforce, business case, and ROI considerations, the organization points out, but also cultural barriers, lengthy implementation timelines, and competing business priorities. “One key to success is establishing a technical architecture that is flexible and agile enough to proactively adapt,” MHI concludes, “as the company’s supply chain needs mature and evolve.”

Building a Culture of Transformation

Despite the rapid adoption of many different procurement applications, not all of them are right for every company. In “Digital Transformation and Procurement: Hype vs. Reality,” JAGGAER’s Amen Reghimi says buyers who want to whittle down the amount of time and energy spent acquiring, implementing, and then rolling out the right technologies must understand that technology doesn’t innovate—people do.

“Real transformation begins with the right questions, and by building the culture of transformation,” he continues. “Digital transformation changes your corporate strategy, it changes your business processes, it changes your marketing capabilities, and it changes roles and responsibilities.”

While the economic and strategic benefits of digitizing procurement are very real, the proliferation of competing technologies has made it difficult for companies to figure out where to start,” Bain & Co.’s Coleman Radell writes, adding that the business case for digital procurement has become “increasingly clear as companies gain experience with these technologies and track their performance.”

Building a Sound Digital Strategy

The pace of change of acceleration that Bain & Co., is tracking means procurement professionals could soon find themselves filtering through even more technology options in the near future. For example, it says global investment in digital procurement (including venture capital, private equity, and other forms of investment) totaled $475 million in 2017, up from $378 million in 2014.

“The growth in funding and low barriers to entry have contributed to a proliferation of new technologies on the market,” Radell writes. To assess the opportunities and make the best choices, he says buyers should first understand how the technology supports three broad areas of change: automated processes, frictionless collaboration with suppliers and other stakeholders, and smarter procurement based on richer data sets.

“Procurement executives can begin building a sound digital strategy,” Radell writes, “by choosing two to four digital tools that have a proven track record in the market (i.e., those focused on supplier quality management, e-invoicing, transport optimization, and collaborative data platform). These are solutions that have a higher likelihood of successful deployment and can help build momentum for digitizing procurement.”

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