digital procurement: trends shaping the future of source to pay

Trends Shaping The Future of

Procurement

Patrick Connaughton, Senior Research Director

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contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group.

Copyright © 2015 The Hackett Group, World-Class Defined. All rights reserved.

3© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2016 The Hackett Group

The key takeaways from last year’s Procurement 2025 webcast

The shift in workforce demographics is a reality. The Millennial generation wants more from work than just a

career at a good company. Commitment to sustainability, fun and work-life balance makes a difference in

recruiting and retention.

Training strategies will need to be modernized to productively integrate Millennials into the workforce.

The success of this integration will be one of the biggest determining factors for how well procurement is

positioned to take advantage of social, mobile, analytics and cloud technology. Millennials will be the catalyst for

rapid technology adoption and change.

However, as data and devices proliferate, so does risk. A new breed of supplier lifecycle management

solutions will be required. Enterprise social networking will play an important role in this evolution.

Ultimately, SRM will transition to Network Relationship Management, encompassing a broader range of

trading partners and third parties where knowledge becomes currency.

To prepare for the global/digital/networked economy, our research is showing early indicators of

reshoring and insourcing activity. This, coupled with the creation of dedicated innovation and analytics teams

and emerging technology (ex. 3-D printing) will change the face of procurement service delivery (i.e. location,

team structure) as we know it.


However, the rate of change caused by digital disruption is accelerating much faster than anyone predicted…

Intensifying competition

Disruptive innovation

Customer as King

The Insight Imperative

The Digital Imperative

The Five Forces Of Change


The digital imperative/digital transformation has been the biggest catalyst for change

“When the wind of change blows, some people build walls, others build windmills.”

How can companies take what they do and reimagine it in the digital world?


Today’s session – Trends shaping the future of procurement

In this is webcast, Hackett will share its predictions on the trends to watch which will have the

biggest impact on how procurement does its job in the future. Central to this discussion will be

Hackett’s new framework for digital transformation in procurement. This framework for digital

transformation embodies five key characteristics: a multi-channel stakeholder experience, a

digitally enabled workforce, pervasive smart process automation, highly network-enabled trading

partners, and a future-looking/predictive insight-driven enterprise.


Four pillars support

procurement’s

digital

business strategy

Data and analytics

form the foundation

Let’s talk about what digital transformation really means to procurement… five characteristics of a future-proof procurement organization

The Digital Business Strategy

2Omni-channel,

personalized

stakeholder

experience

3Digitally

enabled

procurement

workforce

4“Smart”

orchestration of

source-to-pay

services

5Ecosystem of

networked

solutions

1 Insight-driven analytics

Setting a foundation of

data and insight driven

analytics


Big data has the potential to transform procurement analytics

Source: The Hackett Group

Data

Data

Information Intelligence

Value

Latency

Record Understand Anticipate

Big Data

Transactional data

Operational data

Machine-to-machine data

Cloud services data

Transactional data

Operational data

Partner data

Sensor data

Social data

Partner data

Weeks/days Days/hours Hours/real-time

Real-time

analytics

Analytics

Reporting


Building a foundation of data and insight driven analytics

Q7. Which trends will have the greatest transformational impact on the way procurement performs its job over the next decade?

65%

57%

48%

47%

43%

30%

27%

19%

7%

8%

Predictive Analytics and Forecasting Tools

Global economy

Cloud computing

Millennial workforce

Mobility

Cognitive computing infused intoprocurement software tools

Robotic process automation

Enterprise Social Networking

3-D printing

Other

Which trends will have the greatest transformational impact on

the way procurement performs its job over the next decade?

Source: Key Issues Study, The Hackett Group, 2016

Building an omni-

channel, personalized

stakeholder experience


An omni-channel Olympics experience

Digitalization is affecting change everywhere, including the Olympics

Accessibility

Communication

How has digitalization changed the way we

experience the Olympics?

How does it apply to procurement?

• Anyone can watch live from a television, smart phone,

tablet, or computer

• Recording capabilities and platforms such as YouTube

allow people to watch on demand

• Viewers can interact with people all over the world on

social media to tweet, post pictures, and share stories

about their experiences

• Technology applications can enable end users to make

purchases when they are away from the desk (i.e., from a cell

phone or tablet)

• Online portals can provide updates and policy information

accessible to users at any time

• Social media platforms, e.g., chat groups and forums, provide a

venue for employees, internal customers, and suppliers to

interact with each other


Creating an omni-channel, personalized stakeholder experience

Omni-channel access to procurement

process allowing ability to buy/pay for

goods/services from all locations

(corporate, satellite offices/locations, home,

on-the-go/mobile)

Real-time information and status on all

procurement requests/transactions

Intelligent purchasing process that know

who you are, where you sit, and what role

you play in the organization

Capabilities

In-browser chat support

Self-service

User experience analytics

Community engagement

Personalized experience

Email and messaging

Guided talk tracks

Phone support

Case management

Voice

Mobile

Social

Web


Chat bots: the next big channel redefining the stakeholder experience

Chat Bots will reinvent the way we interact with

the internet. Browsers and desktops will be

replaced by chat screens. We’ll ask our bots

the weather and the time that the football

games start rather than search for it ourselves.

Buying products on sites like Ebay will be

much more streamlined with the addition of

bots. By removing our reliance on human

responses to messages we’ll speed things up

greatly.

However, self-service does not equal good

service and a multi-pronged approach is

needed


Even better… No more typing!


Amazon Echo takes the concept even further… totally hands free


Procurement needs a structured approach to improving the stakeholder experience

Identify key stakeholder groups and individuals,

their interactions and general attitude

Develop measurement approaches tailored to

key stakeholder groups

Analyze stakeholder feedback, plan for action

by leadership to own and deliver

Provide feedback to key stakeholder groups on

customer satisfaction and action plans to

address identified improvement needs

Identify

Stakeholders

Improving the

Stakeholder

Experience

Measure

Success

Analyze

Results

Take

Action


The first step is to begin mapping out the influence and importance of key stakeholders

Monitor and

Inform

Occasionally

Importance

Influe

nce

Who are your stakeholders?

Which are most approachable?

Who will be a good champion?

Who are your greatest consumers?

Key Players

Engage

Actively and

Keep

Satisfied

Minimal EffortKeep

Informed

Identify

Stakeholders

Improving the

Stakeholder

Experience

Measure

Success

Analyze

Results

Take

Action

Stakeholder Segmentation


A practical procurement example -- guided buying

Providing a user experience that balances simplicity, risk and control

Identify

Stakeholders

Improving the

Stakeholder

Experience

Measure

Success

Analyze

Results

Take

Action

Source Buy

Source

User- defined

source

Tactical sourcing

desk

Non- sourced

Requisition

Automated

inventory/ MRP

Pull from stock

No system required

Buy

Automated (no

touch)

SRM sourcing

cockpit

P-card or travel

card

No PO (invoice

only)

E-catalog

Strategic sourcing

Orchestrating a “smart”

portfolio of digital

procurement services


Orchestrating a “smart” portfolio of digital procurement services

Table stakes in a digital era: 100% paperless process from source to pay

Creating a “procurement-as-service” portfolio – building awareness (branding)

Taking advantage of robotics and eventually, cognitive computing opportunities


Automation: Agile P2P organizations are piloting robotic process automation (RPA) – especially in shared service centers

Large outsourcing providers have begun to reap the

benefits of RPA as a way to lower their own operating

costs. GBS and procurement shared service centers

should explore the potential as well.

When does RPA make sense?

– Stable, relatively static applications

– Need to access multiple systems

– Limited need for human intervention, exceptions handling

– Clear understanding of the current cost of manually

completing the work

– High transaction volumes


A small percentage of P2P organizations are just getting started with RPA; RPA is ranked one of the top 4 transformational areas in the next decade

77%

16%

7%

0%

RPA Adoption in P2P

None Piloting Partially Rolled Out Fully Adopted

Source: 2016 P2P Key Issues Study Results

2%

5%

18%

23%

27%

39%

43%

45%

57%

59%

75%

Other

Enterprise social networking

Prompt payment regulation

Millennial workforce

Global economy

Mobility

Cloud computing

Robotic process automation

Process ownership and link to procurement

Predictive analytics and forecasting tools

Digitalization of B2B connections and transactions

Trends that will have the greatest transformation

impact on P2P in the next 10 years


P2P orgs that are implementing RPA expect benefits in higher productivity and lower operating costs

If you have implemented RPA, which benefits do you expect?


9%

22%

43%

48%

52%

65%

Increased regulatory compliance e.g. through traceability of data /information

Improved data analytics / management information

Higher employee productivity through increased focus on value-addedactivity

Increased quality and accuracy

Process cost reduction

Operational efficiency / productivity


Hackett’s point of view on RPA

Hackett’s point of view is that RPA will have a limited lifespan as artificial intelligence and cognitive

computing matures and eventually displaces the need for the current generation of RPA.

RPA is most useful when dealing with legacy, inflexible software tools that otherwise cannot be

upgraded and modernized. For enterprise software that is newer, changes frequently and is up to

date on releases, RPA is not the right solution. As legacy software is phased out and replaced, so

will the RPA utilities deployed to extend its life.

We predict that this generation of RPA may have a small impact on the number of people needed

to perform mundane, repetitive tasks but ultimately, this is a good thing. Resources can be

reassigned to more rewarding activities and job satisfaction will increase. And, this can be an

effective stop gap for every company that is being asked to take on more and more work without

adding FTEs.

That being said, when “unsupervised” AI matures to the point that it is pervasive in all enterprise

software, there will be more significant implications on talent management. Companies are

advised to begin planning long-term what this will mean to their own workforce – leading the

discussion with how talent will be transformed to take full advantage of automation and not how

automation will take the place of talent.

Creating a digitally

enabled workforce


Creating a digitally enabled workforce

Helping Millennials, the first generation of digital natives,

draw from a familiar set of technology tools to work

anywhere, anytime

Self-provisioning of IT assets (i.e. phones, laptops, tablets) to

increase productivity, job satisfaction

Modernizing training to include broader experiences through

job rotations, industry recognized certifications and new ways

of learning – ex. “massively open online courses (MOOC)


Video conferencing has come of age for internal collaboration but what about working with suppliers…?


In the future, video conferencing will also play a role in breaking down language barriers by mashing it up with real-time translation services


Four characteristics of successful talent management in procurement

1. Training is conducted in the field, not in a classroom. It is creative, engaging, challenging

and specific/based on real-life scenarios.

2. Staff is rotated within and between business units and geographies, developing potential

future leaders who have a broad understanding of the entire value chain.

3. Recruiting and hiring draws from outside the typical pool of procurement and sourcing

specialists. Softer skills like relationship management, intellectual curiosity and business

acumen are highly valued.

4. Procurement’s culture is defined by successfully challenging the status quo, influencing

leadership to try something different. It is a “constructive disrupter,” displacing traditional, less

efficient processes with new, creative solutions that are able to scale with the future strategy.

Unlocking Value

Through an Ecosystem

of Networked

Procurement Solutions


An ecosystem of networked solutions can take many forms

Source-to-pay software – emerging and legacy solutions coming together

Supplier and trading partner networks

Knowledge networks for market intelligence

Crowdsourcing networks for ideation, freelance assignments

Risk networks to better manage the interconnectivity of events

Enterprise social networks to collaborate internally

“Internet of things” networks connecting physical (and sometimes human) assets


The source-to-pay software landscape

Supplier Lifecycle Management

(Supplier Master Data, Performance and Risk)

Track performance, monitor risk, aggregate third-party data on suppliers, maintain master data, view performance

Automated

Spend AnalysisE-Sourcing Contract Lifecycle

Management

E-Procurement E-InvoicingServices

Procurement

• Identify category

opportunities

• Aggregate and

report on enterprise

spend

• Cleanse and

rationalize spend

data

• Define

requirements/aggre

gate demand

• Conduct RFx

• Evaluate suppliers

• Optimize bids

• Conduct e-auctions

• Create and store contracts

• Maintain standard templates

• Manage negotiation workflow

• Alert on milestones

• Maintain

e-catalogs

• Search approved

suppliers

• Punch-out to

supplier catalogs

• Create requisitions

• Input/upload

invoices

• Match invoices

• Manage

discrepancy

resolution

• Approve payments

• Manage requisition

workflow

• Benchmark rates

• Maintain service

agreements

• Track time and

approval workflow


Automated Spend Analysis

E-SourcingContract Lifecycle Management

E-Procurement

E-Invoicing

E-Payables

Supplier Networks

Supplier Portals

Procurement Savings Dashboards

Supplier Lifecycle Management (Risk and Performance)

Services Procurement

Robotic Process Automation

Dynamic Discounting Software

Supply Chain Financing Software

Lo

wV

alu

eH

igh

The ecosystem of available solutions are all at different levels of maturity

Piloting Adoption Phase Fully AdoptedPercentage using Software-as-a-

Service

Q2.5 For each software category, please indicate how

extensively your organization is using it, the estimated level of

value that it has driven and the deployment model being used.



Hot off the presses: understanding the pricing models and tips for selecting a supplier network


Aggregators like Amazon Business help to expand the universe of available suppliers while still providing procurement visibility to the spend

Source: The Hackett Group

Savings

Suppliers

80% of

spend

20% 100%

0-2%3-4%5-7%

40% influenced by strategic sourcing

5% not influenced

10

% n

ot in

flu

en

ce

d10% influenced by buying desk 5% infl.

by e-catalogs

To

tal sp

en

d p

er

su

pp

lier

10% not influenced

15% not influenced

5% unknown

Example of tail spend at a company with a non-mature procurement organization with 55% spend influence

15-30% candidates for spot buys

5%


Beyond supporting transactions, networks can also be a source of market intelligence

Suppliers

Research centers

Industry groups & trade associations

Internal business partners

Government agencies & NGOs

Customers

Universities/schools

Procurement


Crowdsourcing networks in procurement

A tool for drawing on ideas and expertise from both suppliers and customers as a

source of co-creation or innovation, and a potential forum for researching new

products and markets

Crowdsourcing enables sourcing teams to gain access to thousands of new

suppliers from all over the world, encouraging them to submit bids for particular

pieces of work

Less attention has been given to what we might call microtask-based

crowdsourcing, where a problem or task is presented to a crowd that collectively

provides small units of work, which are then aggregated, processed and

assembled into a more comprehensive output

Procurement will still be tasked to enable and manage new platform-based

work/service intermediaries (“suppliers”) — with the usual objectives in mind

(cost, risk, performance). However, we are talking about suppliers that are

radically different from the suppliers we have been dealing with for 10 to 20 years.


Networked solutions are also required to mitigate interconnected risks


Enterprise social networking defined

Enterprise social networking is the use of technologies like wikis, social networks, and discussion forums

to enable or streamline business processes while enhancing collaboration.

Enterprise social networking aims to help employees, customers, and suppliers collaborate, share, and

organize information better.

Skype for businessProfessional meetings and collaboration—all

integrated with your Office apps (prev. Lync)

Freemium cloud based team collaboration tool.

designed to increase productivity and team

comms in one searchable place

Quick messaging, no history

Quick voice / video calls

Android/iOS app

Live voice translation

Chatter

Persistent chat rooms

Robotic automation

Android/iOS app

Communication and Collaboration

Freemium enterprise social networking service

used for private communication within

organizations. Used by 80% of Fortune 100

organisations

Facebook message board for the office

Setup team groups with closed access

What is it How to use it


The benefits of internal collaboration tools

A tool like Slack can structure communication into threads that focus on a specific topic or project

— places where team members can share information and files associated with that project. This

can be more effective than sending separate and various emails with attachments, which can be

harder to organize and keep track of.

This idea also translates into procurement-specific collaboration tools. Buyers within the

procurement department can search for vendors on the platform and share information, send

comments and discuss the potential supplier with other team members, all within communication

forums. It’s a mix of a project management, collaboration and communication tool.

It’s also a tool that can prevent wasted time on emails. These forums keeps procurement

professionals communicating and collaborating in one platform, instead of having to send

information and communicate over separate emails. All the information and discussion is kept in

that forum, making it easy for procurement to keep track of the organization’s sourcing activities.


Last but not least, there’s the “Internet of Things”

More intelligent asset management

Enables pay for performance business models

Predictive maintenance

Facility/Smart buildings

Inventory tracking and forecasting

Conclusion and Q&A


Wrap up: the five factors shaping procurement’s digital transformation

An Omni –

Channel,

Personalized

Stakeholder

Experience

A Digitally

Enabled

Procurement

Workforce

A “Smart”

Orchestration

Of Source-to-

Pay Services

An Ecosystem

of Networked

Solutions

Insight Driven Analytics

The Digital Business Strategy

1

2 3 4 5


Assessment Questions

Digital Stakeholder Engagement• Have you segmented the stakeholder base to better understand their needs and wants?

• Have you aligned your engagement model with each stakeholder’s requirements?

• Is the stakeholder experience consistent across all interaction channels?

Digitally Enabled Workforce• Are employees able to self-provision their laptops, phone, tablets, etc.?

• Has training been modernized to take advantage of new digital formats?

• Is there a plan in place to maximize the use of video conferencing, including suppliers?

Digital Service Orchestration• Have you evaluated your current state for RPA opportunities?

• Is there a clear inventory of procurement’s available services? Is it well understood?

• Is there a vision for delivering procurement-as-a-service?

Digital Network Ecosystem• Is there a vision for extending supplier networks to all trading partners?

• Is there a strategy in place for taking advantage of emerging technology?

• Has crowdsourcing been considered? Enterprise social networking?

Insight Driven Enterprise

• Have you evaluated your current BI solutions to understand their roadmap to cognitive computing?

• Do you have a plan in place to deliver predictive forecasting in areas like commodity volatility and risk?

• Is mobility part of the overall strategy? I.E. How are you enabling access to real-time analytics on a tablet

or phone?

Digital Transformation AssessmentAre you ready? Do you have an overarching strategy for digital procurement?


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This document contains trade secrets and information that is sensitive, proprietary, and confidential to The Hackett Group the disclosure of which would provide a competitive advantage to

others. As a result, the information contained herein, including, information relating to

The Hackett Group’s data, equipment, apparatus, programs, software, security keys, specifications, drawings, business information, pricing, tools, taxonomy, questionnaires, deliverables,

including without limitation any benchmark reports, and the data and calculations contained therein, may not be duplicated or otherwise distributed without The Hackett Group Inc.’s

express written approval.

www.thehackettgroup.com