3 Technologies Leading Transformation for Procurement and What the Future Looks Like
It’s no secret that technology has the capability to make many areas of business operations much easier, faster and better. In recent years, procurement has become more complex than just risk mitigating and cost reducing. Now everything must be more efficient, accessible and sustainable, to meet the ever increasing customer expectations.
The evolution of customer service encapsulates expectations well, and as with many other areas of your business, procurement needs to evolve to exceed these values as well.
Whilst there is some debate about how over-hyped technology within procurement is, 504 procurement leaders from organisations with an annual turnover of $5.5 trillion argue that the digitisation of procurement is helping overcome a number of key challenges including: marketing volatility, collaboration and leadership.
From purchasing to processing tenders to invoice management; technology can feature in many different forms to make procurement more agile, cost effective and integrated with other areas of your business. Here are three key technologies leading digital transformation for procurement departments and what you can expect to see in the future.
Microservices are coming into the picture
They say the age of all-in-one suites are behind us. Is technology becoming more about utilising systems that work effortlessly with one another? Microservices certainly seem to think so!
Creating microservices is a new way of application building that breaks up apps into smaller independent parts or functions. They are changing the Application Programming Interface (API) environment and are likely to have a big impact on the procurement function of a business.
For example, making it possible to order coffee for your meeting or a taxi for your guest through Amazon’s Alexa. Introducing AI and Robotic Process Automation (RPA) to create an app that runs its own workflow from start to finish.
They are flexible, agile and can easily be changed or amended to fit their purpose as microservices are not married to a specific language or platform. Unlike traditional all-in-one solutions, microservices operate through an architectural approach that work as a suite of small services, each running in its own process and communicating with lightweight protocols.
In procurement, these microservices could translate into a fully interactive application that notifies you when you’re running low on commonly purchased items. It could even go as far as to create a purchase order for the item with your permission and notify your suppliers. Making purchasing repetitive items an easily replicated microservice application and saving on your human resources required for this procurement process.
Order automation platforms for accelerated business growth
Automation has begun working its way into procurement processes. It’s a technology that has the power to speed the processes up by freeing employees from the menial work. Key procurement activities like purchase requisitions, purchase orders and invoice approval can be automated using Robotic Process Automation (RPA). Enabling headcounts to be redistributed across the business towards more business critical decision-making and strategising. Sounds good, huh?
RPA is workflow technology that imitates the activity of a human carrying out a task with a process. Minimising human touchpoints throughout the process, reducing the chances of mistakes occurring and orchestrating complete events.
In the past 6 months, one of the largest construction companies in the world has experienced growth of over 20 fold on their online sales channel after implementing automated ordering. And this dramatic growth in orders has shown no sign of slowing.
Prior to having the platform the company was facing having to rapidly increase the number of procurement agents to manually transpose the numerous incoming customer orders and place supplier orders back out to respective suppliers. Just in time purchasing and delivery is vital in the construction industry.
The order automation solution has automated thousands of procurement transactions. Considerable recruitment and training cost savings have been made along with the time and money saved in having a lot less errors than when the process was handled manually.
Orders are placed from numerous contractors on an automated system that places the order of the supplier, who then notifies of timely delivery direct to site. Contractors can order just the quantities required, reducing waste and ensuring the project keeps moving forward.
It has taken away key potential issues for them and provided them with a robust, scalable platform, which interfaces directly with their ecommerce platform and all its sales channels, as well as growing a strong supplier base. A perfect example of how the automation of procurement processes can support accelerated business growth.
Blockchain will transform the way procurement handle contracts
When you think blockchain you might think Bitcoin, Litecoin and Ethereum, however there’s more to blockchain than just the cryptocurrency it underpins. It’s a fairly recent technology developed in the digital transformation race but there are many opportunities for procurement departments in blockchain.
We’re not going to get into the technicalities of blockchain in this article but, it is important to have a top-level understanding of what it is. It’s essentially a technology that allows digital information to be distributed, but not copied. Meaning that every single piece of data can only have one owner. Often, it’s described as a distributed ledger.
Unfortunately, as technology evolves, so does the sophistication of hackers that try to take your business data. With blockchain, you can trust the data because when it is shared amongst parties (publicly or privately) it cannot be changed by anyone.
Smart contracts are among the newest applications that are becoming available with the help of blockchain. They are self-executing contracts with the terms of the agreement between the buyer and seller directly written into lines of code.
Use of smart contracts within procurement areas of the business will mean increased efficiency, autonomy, trust, savings and most importantly safety. No more lengthy processes for supplier contracts, just a simple way to share and complete the documentation safely.
The future of procurement
It’s clear that technology will have a big role to play in the future of procurement. With new transformative solutions always being developed, procurement will become an increasingly collaborative job function and the emphasis will be placed on building long lasting, close relationships with suppliers.
Automation is likely to be the first go to solution that procurement departments adopt. At least 60% of existing procurement processes could be automated within the next three years. It’s a high value area that reaps immediate tangible benefits from cost saving, efficiency, headcount redistribution and service improvements. You only need to look at the example given in the previous section of the article to work out that it’s worth it! And let’s face it, no company in existence wants to sit back and watch their competitors reap those benefits.
The war for talent will start to intensify as increasing amounts of processes are automated by RPA meaning that lower level procurement roles are replaced by technology. Employees just starting out on their procurement journey will experience a higher-skilled career than their predecessors.