As previously discrete procurement activities converge onto unified, cloud-based networks—tying together sourcing, purchasing, payment and contract-management functions—many professionals in the field are no longer asking when or whether to embrace such systems, but which ones? Appreciating the value that networks can unlock for buyers and suppliers, procurement professionals need a set of criteria for selecting the digital solution best suited to their needs.
Exploring a few key questions can dramatically simplify what can seem a daunting, complex task to define and evaluate which source-to-pay solution will be the best for the future of your company.
How can you implement a strategic, value-oriented procurement function to focus on supplier innovations, risk management and a sustainable supply chain?
As it turns out, procurement is undergoing substantial change. Transactional and operational tasks are rapidly becoming automated. Strategic activities, including category and supplier management, are becoming much more important and might be the core value proposition of the procurement organization of the future.
When you look at key activities like driving supplier innovations, you need to define the right platform to connect with your suppliers. Business networks are one very efficient way of doing that; eBay and Alibaba are two B2C examples.
Searching, finding and connecting with the right suppliers can be the key differentiator to drive impact for an organization’s lines of business. Look at the iPhone glass (Gorilla Glass), invented when Tim Cook was the chief supply chain officer at Apple and running procurement. No company has all the odds to develop and to create every component on its own. You need to partner and bring innovations to your organization to ensure your company has competitive products in the future or can define new business models. An example of the latter is coffee capsules, which were invented by Nestle with a supplier for the right machines and is now a multibillion-dollar market.
What are the benefits to focusing on collaboration between buyers and sellers?
Networks like Facebook or LinkedIn are so successful because people love to connect and communicate. How can you stay informed about your friends and business partners, latest trends in technology and your industry news? A highly efficient way is social media and networks. You can search and connect to people, receiving the latest updates in real time. You can discuss topics in groups and create a space to collaborate. The great success—and 2 billion users on Facebook and more than 450 million users on LinkedIn—speak for themselves.
By linking together the right stakeholders with key operational data across the value chain, a network can open up broad visibility into the interconnected operations of buyers and suppliers. This heightened transparency, augmented by cloud-based technologies such as artificial intelligence and machine learning, yields valuable insights from immense troves of previously unexamined data. These cognitive insights arm businesses with the foresight to prevent bottlenecks in the supply chain before they arise, thus ensuring smooth operations and enhancing customer satisfaction.
Meanwhile, as automated procurement solutions take on many of the function’s day-to-day tactical activities, they free up professionals in the field to focus on strategic priorities, such as shoring up supply chain resilience, shielding the brand from third-party risk and spurring new sources of innovation. As digital technologies reshape the way businesses work together, procurement is evolving from its historic role of generating cost-savings to fostering collaboration and, ultimately, driving much of the strategic value that fuels growth.
Does the proposed network approach provide an intuitive user experience, requiring little or no training for the procurement professional and novice alike?
Think about the brands in our lives that represent elegance of form and simplicity of function. Which ones spring to mind? The titans of consumer technology loom large: Apple, Facebook, Uber, Tesla. For too long, however, business-to-business offerings have lagged behind. Some of the most sophisticated (and costly) enterprise systems can be remarkably confusing to use, even for veteran technologists.
Fortunately, some business networks are beginning to narrow that gap as they emulate analogous consumer platforms, such as eBay, Amazon, PayPal and Alibaba. That’s because superior functionality alone, while important, falls short of delivering the rich, dynamic user experience that business professionals—particularly those raised on smartphones—expect in 2018. Today’s professionals, in procurement as elsewhere, demand intuitive design and ease of use from a business network just as they do from a social or consumer-oriented one. A procurement network should be as simple to navigate for the purchasing professional in search of 1,000 laptops as it is for the intern in need of a box of paper clips.
The key is Apple-easy and Google-fast solutions, which millennials, but also Generation X, Y or Z, are used to in their daily life. All are using smartphones, shopping online and using tablets for private and professional purposes.
How well does a business network integrate with existing enterprise systems?
A stand-alone procurement system, no matter how elegantly designed or intuitive to use, offers limited value if it fails to “talk” to the enterprise resource planning (ERP) software running alongside it. For large organizations, it may even be insufficient. A business network for procurement must be nimble enough not only to “talk” with one ERP system but to carry on multiple “conversations” simultaneously, with different ones managed across far-flung business units.
Procurement professionals typically grapple with a range of unique constraints—some organizational, others regulatory—requiring that the networks they rely on be customized to exacting specifications. Any source-to-pay system needs to be versatile enough to operate in concert with disparate (and even dissimilar) enterprise systems, yet flexible enough to tailor to a business’ complex (and, at times, conflicting) requirements. Some organizations boast over 100 points of integration between procurement and ERP systems. A customized digital solution built on a cloud-based network aims to achieve a snug fit between them all.
How long does implementation take?
I wish I could say you can simply log on and start, but let’s be fair and look at the reality. It depends. Time to implement is a crucial factor in deciding on any software solution. The key is to have a modern user experience, ideally intuitive enough that you don’t need training and can find what you’re looking for fast.
Yet the complexity of an implementation with deep integration in one or multiple ERPs varies widely according to an organization’s unique objectives, the number and nature of its points of integration, and the internal change-management efforts needed to promote adoption. The best way to gauge the time horizon for a proposed implementation is by insisting on regular, candid dialogue with the software solution or business network provider to manage risk, define successful outcomes and ensure satisfaction.
What about price? How much is a digital transformation of procurement likely to cost my organization?
As with time to implement, cost varies in relation to an organization’s unique requirements. Yet, it must, of course, be competitive. Just as important as the cost of implementing a procurement network is to factor in the short- and long-term savings that accrue after doing so. The savings can be substantial and enduring, and the effect can transform the role of the procurement professional, newly armed with the data-driven insights that propel organizations forward.
Dr. Marcell Vollmer is chief digital officer of SAP Ariba and the former chief procurement officer of SAP.