Reinventing Procurement with Technology in 2022

This article is authored by Ashwani Narang, Vice President and Country Head, Intelligent Spend Group, SAP Indian Subcontinent, and published in partnership with BloombergQuint Brand Studio

For supply chains in India (and around the world), 2020 was a year of disruption. Severe price erosion and rising international trade tensions saw procurement locked in a seemingly endless struggle to ensure business continuity. Moreover, nationwide lockdowns and restrictions on the movement of non-essential goods had dealt a brutal blow to an already strained supply chain network.

But these weren’t the only challenges that supply chains were facing.

For a while now, digital immaturity has been a source of pain for procurement functions in India. In fact, a recent survey report by SAP, powered by the Indian Institute of Materials Management (IIMM), revealed that 69% of Indian companies have automated less than a quarter of their procurement function. Over the past decade, several roadblocks to digital growth have emerged. These include limited internal user adoption, inadequate investment, and lack of awareness of the advantages that digital technologies offer.

These challenges largely stem from the fact that procurement function has often been overlooked from an innovation perspective. Despite being a powerful data generating engine, in most cases, it was deemed as functional (and tactical), rather than a strategic unit.

The Demand for Technological Re-invention

Reports and studies that cite the challenges of transforming procurement are abundant. But data also suggests that the tide is turning. The pandemic and contemporary trade uncertainties have pushed procurement to the forefront of strategic discussions and boardroom agendas. As a result, more organisations are focusing on digitally enhancing procurement as a practice.

According to the IIMM & SAP joint survey, more than 30% of SAP procurement customers are considering increasing their technology spend in 2022. When seen in the context of Industry 4.0, procurement is a prime candidate for a digital overhaul. With an abundance of automation-ready processes, procurement functions stand to benefit greatly from real-world data integrations.

But it’s not just technological readiness that’s driving digitalisation of the procurement function. It’s also the need to mitigate supply chain disruptions. In the two years since the onset of the pandemic, my interactions with procurement decision-makers always seem to circle back to this idea. Today, an agile procurement function that relies on fit-for-purpose digital tools could help organisations standardise and centralise supply chain networks. This is especially true considering the complex nature of modern supply chains. And as with any other function, this boils down to leveraging new-gen technologies like cloud, AI and machine learning (ML), IoT, and analytics.

Unlocking Possibilities through Digitalised Procurement

Digitalising the procurement value chain is not a recent concept. In the early 2000s, organizations were warming up to the idea of eProcurement. It was around this time that procurement was witnessing the rise of niche ideas like e-catalogues, spend cubes, e-RFX (e.g.: RFQ, RFP), and reverse-auction platforms. But to integrate Industry 4.0 with procurement, organizations will need to tap into the largely untapped data pool. And as I mentioned earlier, there is no dearth of data in procurement.

This is where data analytics could play a critical role. Procurement consists of multiple functional areas such as sourcing, compliance, and category management. Each of these functional areas have a unique use case for analytics. Take the instance of category intelligence. By leveraging category and supplier analytics, procurement organisations can identify the right suppliers, mitigate supplier risk, and curb unauthorised spends. Similarly, for compliance, analytics can help reduce purchase price variance, enable access to accurate vendor records, and detect fraudulent suppliers.

The reasons to implement analytics in procurement are overwhelming. But to realise the full potential of analytics, procurement teams must consider improving their data maturity. This means breaking down age-old data silos. Because with analytics, as with any other technology implementation, greater value lies at the top of the maturity curve.

One of the ways organisations could achieve this is cloud data streaming. Dependence on on-premise architecture is one of the primary causes for data silos. Moving to a cloud-based procurement system could help create a more collaborative environment. Moreover, API integrations could help procurement sub-functions to talk to each other.

The good news is that organisations have already begun capitalising on this potential. According to the IIMM & SAP joint survey, cloud is one of the top priorities for procurement leaders in 2022. AI/machine learning is the other.

The application potential of AI and ML in procurement is limitless. At the moment, however, intelligent automation seems to be emerging as the next frontier. With autonomous, intelligent bots leveraging RPA capabilities, most routine, repetitive tasks are easily automated. Cognitive virtual assistance, on the other hand, can help enterprises negate manual errors, reduce turnaround, and operate round-the-clock.

The Road to Recovery and Beyond

Procurement has played a critical role in recovering from past crises. And the Covid-19 pandemic is no different. For future-facing companies, reimagining the procurement function could deliver enhanced value and pave the way to pre-pandemic continuity. Eventually, the digital transformation of procurement could see organisations investing in stronger, future-ready practices and capabilities. The result: procurement emerging as a centre of strategic innovation.