The Digital Transformation of Procurement is a Must for the Resilient Enterprise

The Resilient Enterprise | The riskmethods Blog
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July 2, 2019

Whether you’re working in a procurement organization or simply have a procurement department within your business, it’s essential to understand the importance of giving this role the digital tools it needs to do the best and most effective work. Let’s talk about 3 tips you should keep in mind when digitally transforming procurement. 

by Jan Theissen, targetP!

 

 

First things first, I want to get one thing out of the way: It’s time to dismiss the question of whether procurement needs to undergo a digital transformation. This is no longer a debate. The amount of information, the pace at which the world moves and the global nature of supply chains simply require it. Whether you’re talking source-to-pay, supplier collaboration, risk management or any other element of procurement, here’s the bottom line: What worked 10 years ago (or even 5 years ago!) just does not do the job today.

But digital transformation is about more than just keeping up—it’s also about moving ahead. Digitalizing your supply chain network creation and management processes enables your procurement organization to establish powerful networks that will drive value. Internally, a digital transformation project gives you the opportunity to connect decentralized global teams and category networks, helping you to leverage and bundle volumes, know-how, responsibilities and activities. Externally, there’s even more opportunity for value creation: You can better connect and integrate business partners on both the supply and the customer side, and with faster processes you’ll have be able to benefit from shorter reaction and lead-times, an agile work environment and a faster time to market.

If you want your organization to be competitive and prepared to bounce back from unexpected surprises, it’s going to be a lot easier with the right tools—and this is as true for procurement as it is for any other part of the business.

So what’s next? Here are my top 3 tips for going digital with procurement.

#1: Digitalized dirty data is still dirty data.

One of the challenges—but also one of the benefits!—of a digital transformation project is that it involves cleaning up your data so that you’re working with the right information in the right places. Digitalized dirty data is still dirty data—so you want to make sure you address those data problems before you even start going digital.

For example, if you implement a tool to prevent and mitigate supply chain disruptions, you’re going to need some key pieces of data to do it well. Is your supplier list up to date? Do you keep track of your suppliers by business units, and is this information current? What about suppliers for different categories and product groups—do you have these lists maintained?

Use a digital transformation project not just to go digital—but to make sure your new digital world is nice and clean!

#2: Digitalization requires new skills.

Anyone running a procurement digital transformation project needs to realize that new skills are going to be required. If you think you can implement tools and technology that are going to make your business processes faster and more efficient without training your team—or hiring new people—to manage these tools effectively, you’re making a huge mistake.

If this sounds daunting, don’t let it be. The time and money you invest in training your procurement organization to learn new skills will pay back tenfold. And imagine the alternative: You spend the money to implement a new tool, and then nobody uses it—or everybody uses it wrong. Trust me: You won’t be sorry that you built training into your digital transformation plans!

Want to know more? For a deeper dive into the digital transformation of procurement, check out the riskmethods paper on this topic.

#3: Not all tech is transformative.

Digital transformation always intends to bring the organization ahead, with goals like increasing value and implementing new business models. Indeed, digitalization often enables and supports these goals, and may even be required for certain business models. However, it’s important to realize that, despite this, not all tech is transformative to the degree you want it to be. In other words: Don’t just think that because you’ve implemented technology, your business is going to be automatically transformed.

The key to making sure that your digital transformation is actually transformative is to choose your tools and technology wisely. When you source for a new supplier, do you just pick the first one you find? Of course not. You do your homework. And the same must be done for tools and technology. Research your options. Talk to potential users about what kinds of capabilities they expect and need. Ask hard questions of the companies you might give your business to.

When you do choose a technology, here’s another piece of advice: Don’t skimp. Saving a few bucks to get less than best-of-breed functionality is, in the end, going to cost you more than the good tool would have in the first place. Would you choose a supplier with low quality goods just because they’re way cheaper than the competition? Hopefully not. Because you know that, in the long run, that decision is going to hurt you more than it’s going to help you. The same principle applies to choosing technology.

If you’re reading this, it must be because you’re looking to get started on this exciting journey—so I hope these tips have given you some of the ammunition you need to get rolling! 

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jan-theissen

Jan Theissen

Procurement Transformation Consultant & Creator Digital Supply Chains, targetP!

Jan is an expert on procurement digitalization at TargetP!. For more information about how digital transformation can reduce supply chain risk, drop us a line at om@riskmethods.net.

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