Digital revolution is reshaping the future of procurement

Being so process-led, one area of the supply chain that lends itself to digitalisation more than most is procurement. The pandemic has made this even more so. 

The need to mitigate against disruption and the drive towards sustainability have made procurement more strategic in nature. This has led organisations to automate process-heavy work such as contracts renewals and invoice processing, to allow procurement people to focus on strategic tasks around supplier relations and ESG compliance – important work that itself requires technology for it to be executed effectively. 

PwC’s 2022 Digital Procurement Survey shows that nearly all chief procurement officers (CPOs) understand the power of digitisation, seeing digital transformation as second only to supplier collaboration as the most important procurement strategy. 

The survey shows that 77% of companies are already equipped with source-to-pay digital solutions, suggesting that the digitalisation of processes is no longer a nice-to-have, but an operational necessity. 

Leaders such as Jim Kilpatrick, Global Supply Chain & Network Operations Leader for Deloitte, certainly believe this to be true.

“It’s going to be increasingly difficult for organisations to remain competitive and agile if they continue to work in a nondigital model,” says Kilpatrick. “AI can sort through those paper invoices. It can identify problems and automatically resolve them with no humans involved.”

Kilpatrick was speaking to Harvard Business Review, as part of its paper called Digital Optimization Paves the Way to Strategic Supplier Management, which explores the supplier management challenges facing organisations, and the benefits of adopting the right technologies. 

It was sponsored by Amazon Business, which offers solutions that not only manage bulk purchasing and approval workflows, but also generate data that provides actionable insights.

The rise of Amazon Business in this area is a sure marker that procurement is becoming more heavily invested than ever in digital processes.

The need for procurement to be more strategic has forced the hand of many organisations on digital transformation.

Matthew Rose, Procurement Transformation Practice Lead and Partner at KPMG UK, says that in the early days of this trend, technology enabled organisations “to run leaner headcounts and focus the available talent on higher-value tasks”.

He cites as an example the use of machine learning (ML) to automate the purchase-to-pay process.

“The first wave of machines focused on repeatable high-volume tasks and lent heavily on robotic process automation and simple bots,” says Rose.

But he says that now, automation and AI is increasingly being used for higher value-added tasks. “This is illustrated by the explosion of available solutions on the market," he points out. “Collaboration, supply market research, sourcing and data analytics have all been targeted by new wave intelligence-enabling procurement technology.”

Rose stresses that, rather than replacing humans in these roles, technology increasingly is “seeking to augment human capability” by enabling procurement resources “to do more with less, or to uncover insights that would not readily be available to humans”.

According to Rose, the digital workforce is now a blend of human and machine resources meshed together in “a mutually dependent process”. He adds that, as with finding the right procurement staff, the challenge is “often uncovering the right technology to join the digital workforce”.

Because of this challenge, KPMG surveyed hundreds of technology providers, the aim being to identify the top tech for automating and augmenting procurement functions.

KPMG used its insights to help clients plan ahead so that they deploy the right platform for a successful digital workforce. 

“For example,” says Rose, “one of our global retail clients had a high volume of low-value purchases. Those purchases in the tail spend offered little payback on time invested by procurement team members. 

“The retailer chose to deploy automated intelligent negotiation technology to rapidly engage with vendors, negotiate terms and place orders. 

“The technology enabled the retailer to address third party spend that wasn’t being touched by procurement and unlock millions in untapped savings.”

Rose cites another example – that of a client in the oil and gas sector, whose procurement team KPMG helped deploy advanced AI-based decision-making tools.

“The solution helped it prioritise procurement projects and allocate resources effectively,” Rose says. “It also helped it determine where existing supply solutions might exist, and to prioritise this in the work stack, thus delivering high single-digit improvements in efficiency.”

The good news, says Rose, is that technology has the capability to deliver a welter of such opportunities for procurement, “be this driving more innovation from the supply base, orchestrating ESG in the supply chain or reducing risk back to source”.

He adds: “Whatever form that value takes, procurement will need to harness digitalisation and be a catalyst for change. It will also need to continuously learn, innovate and transform.” 

This, he says, has “fundamental implications” for the skills required in the future digital procurement workforce.