Digital procurement – How successful implementation works
Proceeding one step at a time
The first step towards digital procurement is to develop a digitalisation vision. The central question should be: How can Procurement support the corporate goals and visions in the long term and what added value does it contribute to them? After that, one needs to determine the organisation's maturity, analyse processes and data stock as well as examine the tool landscape. Only after a thorough analysis can optimisation potential and the systems and tools required to achieve one’s goals be defined.
Looking to the past, it becomes obvious that many companies have started focussing on the digitalisation of processes as early as 20 years ago. They would first improve those processes that created the biggest problems for employees and the organisation itself and that would yield the biggest added value. According to our experience, those were process that concerned cooperation between entities within the organisation as well as with suppliers and customers. Especially in large companies, we often experience individual stakeholders along the procurement processes have well-established IT-based processes in their individual departments, but that optimisation potential exists when it comes to cross-domain cooperation. One would think that the topic would be easily solved with collaboration tools. But those fall short and by no means utilise digital procurement’ full potential.
Procurement departments, in particular, are full of repetitive processes that keep buyers from doing their core tasks. Experience has shown that there is a lot of potential for automation in this area to avoid unnecessary effort, such as entering the same data multiple times. With the help of modern technologies such as robotic process automation, good results can be achieved in this field in the short term.
Even more added value can be created if current processes are not digitalised, but completely rethought on the basis of current technology and the use of networks.
Boosting supplier cooperation
Supply chains are becoming more global and more linked. That’s why suppliers need to be integrated into process and tool landscapes. Their integration and the establishment of a supplier management system can massively accelerate and optimise sourcing processes and increase value creation along the entire supply chain. The goal is a 360-degree view of suppliers while taking into account internal data sources such as Production and After Sales as well as external ones such as financial figures and product-group-specific market information.
Unearthing a wealth of data
Almost every company possesses information and experience from the past. Sadly, this information is often hidden away in data silos and not even known. The challenge is to unearth this wealth of data and make it available to all people working within a company. Data is becoming the “gold” of the digital age by integrating it into new processes and tools.
Creating a road map
Road maps towards digital procurement are aligned with insights obtained in previous stages. Prioritisation takes place on the basis of impact resulting from analysis. What's important is that no activity must restrict future steps and that short-term decisions don't restrict the achievement of vision objectives. Therefore, when selecting a system, we recommend to not rely on monolithic, but specialised systems that optimally support your processes and to make sure that these support continuous data exchange.
Agile methods of software development have proven their worth when it comes to implementing new solutions. In brief sprints (two weeks), an inter-disciplinary team works on the respective project’s implementation. Every sprint is followed by a feedback loop and an adaptation of approach going forward. The goal is to provide a minimum viable product (MVP) for the entire process in the shortest possible amount of time. This addresses the crucial “pain points” and generates the largest part of the value. In later iterations, one uses the insights from live operation to develop the MVP further.
Focussing on the human factor
The focus of the transformation to digital procurement is on the people involved within the company's own organisation and at the suppliers’. The pain points of the employees and their share of non-value-adding activities show the potential for change that can be tapped into through the transformation. It is vital that employees recognise the benefits of digitalisation in order to be motivated to work on it and turn the projects into a success. It is about leaving one’s comfort zone and rethinking processes. Interaction and collaboration are given centre stage. The greatest added value can be generated if the requirements and ideas of employees are taken into account. However, digital transformation projects not only affect the company's own workforce, but all those involved in the overall process – from suppliers to customers.
Digital procurement requires a cultural change
Successful and sustainable digitisation projects require employees to identify with the targeted solutions and regard them as improvements. The more successfully all those involved in the process can be linked and integrated into the value chain, the greater the success of the project will be. We see the journey to digital procurement as an evolution, not a revolution. As an evolution that focuses on optimisation based on the experience and knowledge of employees and takes a holistic approach. Because focusing only on tools, technology and hypes will hardly lead to the goal.
Markus Vodesek, the author of this contribution, is the Manager Procurement Solutions at DCCS and accompanies customers during the successful implementation of digitalisation projects in strategic procurement.