Inside view: Enhancing procurement processes using technology
Making the shift to digitalising procurement processes is a worthwhile transition, but one that requires significant thought and strategic planning.
We interviewed four procurement leaders for our recent study, “Procurement 2025: Is digital transformation driving more effective procurement?”, conducted in collaboration with Cranfield University. Here, they talk about their experiences of using technology to enhance their procurement processes and the challenges they encountered.
Colum Colbert, head of procurement services, Paddy Power Betfair
When I joined PPB’s European procurement function in early 2017, our technology footprint was limited. It was confined to tools for purchase order generation, contract management and supplier credit risk assessment. I was given the task of devising a technology strategy that would help us achieve procurement excellence.
I started by researching the areas of procurement activity for which there were already technologies on the market. Then I identified which of these we actually needed and which providers’ solutions would best suit our requirements.
One of my first learnings in this process was to only invest in technology where our existing process is mature enough for systems to be used. Our biggest fear is wasting money by buying something that is not really appropriate or needed and then left unused. Hence, we’re not spending ‘big money’ on a large-scale ‘ERP-style’ procurement system whose functionalities are not all required or suitable. Rather, we’re very selective in our approach, cherry-picking what we wish to invest in and when. In some cases, we simply buy a single licence to test a standalone package for one year before deciding to expand our investment.
By mid-2018 we had extended our systems investment to the following areas:
- Spend analytics: we now have analysis of spend not just for Europe but also for our global operations in Australia and the US
- Market intelligence
- Category management
These systems were all standalone, off-the-shelf packages that didn’t require huge outlay. Yet they are all being used to help develop our global category management and savings strategies. As such they show how diverse, low-cost systems can be leveraged cohesively to further strategic objectives.
As we near the end of 2018 our journey is continuing. We are currently building an integrated contract approval and management tool. We intend for this to support our objective of strong spend governance, ensuring spend happens correctly in a manner that doesn’t present risk to PPB and achieves value for money.
Craig Hill, head of procurement, HSBC, UK
It is the technology advancements outside of procurement that are really driving us to think differently about how we deliver our core services. Our internal business partners want engagement with procurement to be simpler and more efficient. This is driven by many factors, but mainly by how they use technology outside of work and their everyday life. For example, at home they can purchase something in one or two clicks, but when they come to work they don’t get the same seamless experience and that can lead to frustration.
For procurement there are some innovative tools that we’ve seen and some we are trialling, but generally it feels like procurement technology options are lagging when compared to the advancements we see elsewhere.
It would be good to see some of the new procurement technology options challenging the status quo – for technology to question some of our historical procurement processes rather than simply digitalising what we do now.
Our department has invested in systems to reduce manual, paper processes and improve audit and accountability trails for purchase orders and invoicing. It has also streamlined due diligence and risk controls on suppliers to create a single platform that is adopted globally.
Another consideration when looking at your technology strategy is to ensure that whatever solutions you choose, you understand how you can connect them and get the best out of the data. It’s a mistake to buy a solution and expect it to do everything; you also need to invest in software and people that can pull the data across disparate systems and report it in a way that helps drive faster business decisions.
The ability to extract and present this data in a timely, relevant way helps procurement get to its end state of being a strategic business partner.
Jason Busch, founder of Azul Partners and co-founder of Spend Matters
In the year 2000, sourcing technology did not exactly work ‘as sold’. Since then, procurement technology, especially strategic procurement technology such as spend/procurement analytics capability, has come a long way. But there are huge differences between providers and what makes them suited to you or not.
Let’s first consider the ‘demand’ side of the equation. There are also different groupings of buyers for strategic procurement technology today. The first – and best kind – is someone who has put together a business case and determined they need x, y, z. Unfortunately, they are in the minority. Most people buy sourcing technology to solve a particular problem. For example, they say: “I don’t have visibility over my spend and I need basic insights to develop a category strategy.” But not having even basic visibility is probably a symptom of something else. Spend analysis can do a lot, but if you can’t get to the root cause, you won’t get the whole picture and fix it for the future.
Another aspect that can lead to disappointment is ignoring implementation costs, such as those associated with change management. You may have the right tool but the wrong implementation model.
There’s also often a disconnect between buyers and suppliers: people selling the technology are not necessarily trained in figuring out the best solution for you, procurement professionals are not technologists.
Overall, this is a really big and complex sector. Even what we call best practice organisations are generally early in their digital procurement journey. While they might have some great tools at their disposal, they haven’t yet mapped all of those original needs to the capabilities of the current supply market and aligned their requirements and buying personas with an optimal set of providers.
Now, more than ever, consulting is important to help unpack those issues before jumping to technology. If you back up and ask all the right business questions you can pinpoint the best opportunities. It’s almost like doing a category analysis from a sourcing perspective – you need to identify all the nuances of that category to identify where best to focus your efforts and identify
the best-fit suppliers for your needs.
But there’s good news. It is the golden age to buy technology if you’re an informed buyer. Even if you spend a few hours getting smart on the supply markets that comprise procurement technology from different sources, you’ll have a good sense of where to get started and how to accelerate your journey.
Tim Coles, commercial and procurement director, Thames Water
Over the past 18 months we have been making significant investments in both technology and people as part of our digital transformation journey. On the technology side we’ve moved beyond tech-enabling our spend analytics and benefits tracking to more mature, sophisticated activities such as tracking and forecasting commodities and other indices to understand what is driving costs, and how. This will help us to decide more intelligently whether to potentially hedge or bulk-buy. We’ve also recently used technology to help us with a large multibillion pound demand forecasting review, something we previously did using offline tools.
When it comes to our people, we have developed new skills and capabilities within the team to help turn the large amount of data that exists in the company into insight, then action. We are looking at things in new ways and trying to overlay different types of data. One of the biggest killers of innovation is lack of time, but by taking a step back, providing insight, examining if things could be done differently and opening doors to new areas, we are starting to overcome this.
The concept of digital is very exciting but relies on everyone in the supply chain operating in a certain way and supporting each other. Digitalisation can’t just exist in one pocket of an organisation. Our whole company is on one big digital journey. To really unlock benefit you need the entire business with you.