Procurement executives are a smart group of people. They see the transformative force of digitalization all around them, reshaping industries, anointing winners and altering the familiar landscape of business. And, they know procurement needs to be part of the change.
Our recent study, CPO Survey 2018 – What’s the Next Big Thing in Procurement, looked at attitudes toward digitalization among procurement, finance and supply chain organizations. A resounding 83% of respondents thought digital transformation would impact procurement, supply chain and finance more this year. Likewise, 63% of participants believed automation is important, and they have defined a roadmap. Only a small number of five% of respondents confirmed that they have already achieved a high level of automation.
Tools for digitalization in procurement
Among the elements of digitalization that procurement organizations are exploring are big data, advanced analytics tools and robotic process automation (RPA). Many organizations are already beginning to embrace big data and analytics on the path to procurement performance improvement. CPOs have recognized how powerful these tools are, providing a rich environment for making data-driven decisions while also generating fresh insights that can help strengthen the strategic role of procurement throughout the supply chain and with every part of the business. With these capabilities, product availability and cost will gain context and depth while a high-resolution view of the whole business will come fully into focus. In practical terms, this means existing procurement teams will have the information they need to accurately predict demand, lead times, risk, quality, and other factors. And this “knowledge-is-power” breakthrough also positions procurement to achieve optimal results in pricing.
RPA, which has already made substantial inroads in financial processes, allowing rule-based activities to be successfully automated, is coming to procurement, too. Analyst firm Grand View Research sees the global RPA sector growing at better than 31.1% compound annual growth rate (CAGR) through 2024, based on projected revenues. That’s not surprising given that 20% of those we surveyed are planning RPA investments. Furthermore, our survey showed that 19% of CPO respondents have already invested in RPA and another 9% have made moves in artificial intelligence and cognitive computing.
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While there are no cyborgs sitting at desks with RPA, the effect is just as profound – it truly is an automation of human capability. RPA software can be trained, or in some cases can learn semi-independently, to master many of those office tasks that remain labor-intensive, tying up the talents of much of the organization. RPA means dramatic changes are coming. Innumerable processes within procurement are ripe for this RPA change. Best of all, while the pioneers in this area have mostly been larger firms, the technology is becoming less complex and more affordable, allowing even small and mid-size procurement organizations to embrace RPA. Of course, it’s important to note that RPA does not mean the elimination of human jobs – it means freeing up human talent to focus on more strategic and value adding tasks.
Improving – not replacing – procurement jobs
Some CPOs are looking a little further into the future and recognizing that digitalization is not just a single technology or even a group of technologies – it is a rethinking of how procurement works. The technologies are the tools. The skills that make your organization a success still matter – in fact, they matter more than ever. But, by harnessing artificial intelligence and machine learning, big data, RPA and more, savvy CPOs realize they will make their talented people smarter and dramatically more efficient.