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Digital Procurement Transformation

Zycus Special Edition

by Kelly Barner and Philip Ideson


Digital Procurement Transformation For Dummies®, Zycus Special Edition

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Table of Contents iii


Table of ContentsINTRODUCTION ............................................................................................... 1

About This Book ................................................................................... 1Icons Used in This Book ....................................................................... 2Beyond the Book .................................................................................. 2

CHAPTER 1: Understanding the Digital Procurement Imperative ...................................................... 3Operational Business Drivers for Digital Procurement ................... 4

Compliance ...................................................................................... 4Profitability ...................................................................................... 4Risk management ........................................................................... 5Competitive advantage .................................................................. 6Customer value ............................................................................... 6

Recognizing Push versus Pull Transformation Incentives ............... 7Self-driven procurement transformation .................................... 7The business wants what it wants ................................................ 8

CHAPTER 2: Looking at the Challenges to Digital Procurement Transformation........................................... 9People .................................................................................................. 10Process ................................................................................................ 11Technology .......................................................................................... 12

CHAPTER 3: Designing the Digital Procurement Function ..... 13Examining the Status Quo ................................................................. 13Reimagining Technology, Tools, and Processes ............................. 15Developing Critical Capabilities for Digital Procurement .............. 16

Transformational leadership ....................................................... 16Post-transformation procurement skillsets .............................. 16

Starting the Journey ........................................................................... 17

CHAPTER 4: Seeing the Impact of Digital Transformation ..... 19Enhancing/Delivering a Superior Digital Experience ..................... 19Measuring the ROI from Digital Transformation ............................ 20

Efficiency ........................................................................................ 21Decision making ............................................................................ 21

iv Digital Procurement Transformation For Dummies, Zycus Special Edition


Visibility for suppliers and stakeholders .................................... 21Profitability .................................................................................... 21

Involving Strategic Suppliers in the Transformational Journey .... 22

CHAPTER 5: Ten Capabilities to Look for in a Digital Procurement Transformation Partner .................... 23Track Record of Innovation ............................................................... 24Flexible Options and Features .......................................................... 24AI-Enabled Insights and Analytics..................................................... 25Centralized Visibility for Stakeholders and Suppliers .................... 25Efficient Contract Compliance .......................................................... 25Access to Real-Time Data .................................................................. 26Automated Ordering Processes ....................................................... 26Data-Driven Third-Party Risk Management .................................... 27Cloud-Enabled and Mobile-First ....................................................... 27Emphasis on Responsible Change Management ........................... 28

Introduction 1


Introduction

Procurement’s evolutionary journey can be traced back to the Industrial Revolution and America’s Gilded Age, when man-ufacturing surges required a large-scale approach to securing

supplies. Before World War I, procurement was primarily clerical. Two World Wars formalized procurement through the challenges and importance of securing raw materials. From the 1950s through the 1980s, procurement strategy began to emerge along with new approaches to managing third-party relationships.

In the 1990s, procurement’s focus shifted from securing sup-plies to delivering savings and cost containment. This internal elevation took place against the backdrop of the earliest invest-ments in procurement-specific technology: the development of supply management software solutions that helped automate the source-to-settle process. The global recession of 2008-2009 required CPOs to address compliance, mergers and acquisitions, supply chain risk management, environmental responsibility, and sophisticated cost efficiency.

Today, procurement serves as a critical link between enterprise decision makers and strategic suppliers as market unpredictabil-ity, cutthroat competition, complex regulations, and geopolitical pressures continue to challenge leadership.

It has taken over a century for procurement to evolve from tacti-cal to strategic, but the pace of change — and the magnitude of what’s at stake — are both about to increase. Procurement must align its objectives with those of the organization as a whole if it wants to leverage the full advantages of digital business. Only then can procurement achieve the much-desired position of trusted advisory partner.

About This BookThis book looks at digital transformation in the context of pro-curement’s evolution as well as the growing complexity and opportunities associated with today’s extended global operations.

2 Digital Procurement Transformation For Dummies, Zycus Special Edition


Icons Used in This BookThe following icons will be used throughout the book to add addi-tional details and points of interest.

The Tip icon gives you additional suggestions that may help procurement (or the business) get the most out of digital transformation.

Remember icon details are often forgotten in the hustle and com-plexity of digital transformation — even when they’re recognized at the outset and included in plans and strategies.

Cautionary points and common stumbling blocks are marked with the Warning icon. These items can trip up procurement teams or diminish/delay the value of digital transformation.

When you see the Technical Stuff icon, these details pertain to technology and terminology that aren’t guiding principles for transformation, but they form an important detailed basis for the effort’s success.

Beyond the BookThis book can help you discover more about digital procurement transformation, but if you want resources beyond what this book offers, we have some insight for you:

» https://zyc.us/DigTrans: Visit for more information on digital transformation in procurement.

» https://zyc.us/CPOEvol: Look at the evolution of the Chief Procurement Officer (CPO).

» https://zyc.us/ProcCount: Read the article “Making Procurement Performance Count — A 3 Step Approach.”

http://www.zycus.com/attachments/article/1147/Digital-Transformation-in-Procurement.pdf

http://www.zycus.com/attachments/article/602/Zycus_Whitepaper_Evolution-of-the-Chief-Procurement-Officer-From-Cost-Control-to-Value-Creation.pdf

https://img.en25.com/Web/ZycusInc/%7Be8836a62-1694-44e0-bced-f336eb1dd95d%7D_Making-Procurement-performance-count.pdf

CHAPTER 1 Understanding the Digital Procurement Imperative 3


Chapter 1

IN THIS CHAPTER

» Understanding why companies invest in procurement transformation

» Comparing procurement’s transformation incentives with those of the business as a whole

» Recognizing the role of B2C online shopping in procurement technology

Understanding the Digital Procurement Imperative

Procurement discusses digital transformation so often that it’s hard to separate hype from reality, but what’s behind this push, and is it really necessary? When considering the

technological advancements impacting enterprises today, as well as the complexity of the markets companies buy from, there can be no question that procurement has an immediate opportunity to transform its value proposition. In order to successfully make a change, however, procurement must consider the business’s rea-sons for wanting to increase its digital capabilities. This also requires procurement to strike a balance between the changes other functions want to see and the changes procurement envi-sions in pursuit of its own desired future state.



Operational Business Drivers for Digital Procurement

When procurement invests in digital transformation, the goal is more than just to implement additional software. By automating established processes that are designed to thrive in a digitally-enabled business environment, procurement is able to have a measurable impact on compliance, profitability, risk manage-ment, competitive advantage, and customer value. In addition, digitization makes procurement processes more accessible to stakeholders through improved user interfaces, increased self-service capabilities, and new procurement delivery models.

ComplianceCompliance is a key focus for procurement teams because lack of compliance leads to increased risk, lower negotiating leverage, and savings leakage. Digitally transformed procurement creates an integrated end-to-end user experience, centralizing informa-tion and significantly reducing the incentives for non-compliant spending. This is particularly true for non-compliant (also called maverick) buying activity associated with inefficient or overly complex information access:

» Uncertainty: Which supplier is the right source for a specific good or service?

» Customization: Where do I go if I have a need that’s not included in existing Procure-to-Pay (P2P) catalogs?

» First time needs: My product/service isn’t covered by current contracts.

» Time constraints: Why would I risk missing my performance objectives just to follow a slow cumbersome process?

ProfitabilitySavings is unlikely to ever be excluded from procurement’s stan-dard performance criteria. Although procurement has different priorities today than in years past, these are simply alternate routes to the same destination. The traditional paths toward savings — supplier consolidation, specification standardization, and leveraged volume — are worn down to the point that they have little residual value left to offer.



Digitally transformed procurement can contribute to profitability through the following:

» Analytics: Using data to consider non-standard options and identify the best value proposal(s)

» Spend visibility: Enabling near real-time decisions with increased accuracy

» Artificial intelligence: Predicting and preparing for future demand

» Speed and efficiency: Awarding the advantage to the company that gets to market first

» Standardization: Streamlining sourcing and contract management through the use of standard templates

Digital procurement organizations save money by minimizing duplicate spending and eliminating the costs of paper-based systems (for example, postage fees associated with mailing paperwork).

Risk managementVolatility is the new norm — whether the cause is natural disas-ters, industry disruption, or geopolitics. The expanse of today’s supply chains has not only increased the types of risk companies are exposed to, but also it has magnified the impact disruptions can have on the operation as a whole.

Traditional procurement processes were based on long-term sta-bility and predictability: how many units, with what specifica-tions, from which suppliers. Digitally transformed procurement monitors and minimizes risk while remaining agile enough to seize opportunities as they present themselves — and empower the business to do the same. For example:

» Pre-qualifying secondary/alternate suppliers

» Proactively monitoring likely supplier and supply-chain-based risks

» Implementing commodity-based contract pricing that automatically fluctuates with the market

» Leveraging closed loop management of sales forecasts and inventory levels



Technology can be used to enrich spend data with market intel-ligence, helping decision makers arrive at a solution that is informed and relevant, and contributes maximum value to the business.

Competitive advantageDigitally transformed procurement can be forward-looking in more ways than one. Not only do predictive analytics make it possible to more accurately forecast demand, but also procure-ment can help spec out and source products and services that the company is buying for the first time.

Procurement’s experience can directly contribute to building competitive advantage in the following areas:

» Cost modeling

» Standard versus custom specification trade-off analysis

» Make versus buy analysis

» Market intelligence gathering and interpretation

Customer valueMany procurement organizations got their start managing indi-rect spend, which means that their stakeholders were all inter-nal, and they were only able to impact the corporate bottom line, not contribute to revenue potential. For these teams, the idea that procurement needs to create value directly for the company’s customers is somewhat new but can be enabled through digitiza-tion. When procurement is fully integrated with the rest of the business, it can exert a direct impact on the organization’s growth and profitability.

Indirect spend is comprised of products and services that won’t be resold to the company’s customers. Its management has always been about internal process checks and balances versus a focus on customer value. In manufacturing, procurement teams often start with direct spend, or the materials that are eventually sold to customers, and work their way back to indirect.



Recognizing Push versus Pull Transformation Incentives

The merits of digital transformation may be in the eye of the beholder. Some procurement teams clamor for transformation, and others have it thrust on them. The difference can be felt in many ways, including staff, business objectives, and the defini-tion of success.

Self-driven procurement transformationWhen procurement teams are in the driver’s seat for transforma-tion, these teams have seen what their current technologies have empowered, and they’re ready for full digitization. Procurement teams making a business case for transformation often cite the following aspects of ROI:

» Value and savings: Transformed procurement still delivers savings and broad value, but it opens new, innovative avenues for doing so.

» Spend under management: Increased automation efficiently expands procurement’s reach into more enter-prise spend — from top to “tail.”

» Efficiency: Digital procurement moves at the speed of modern business, increasing the likelihood of participation in fast turnaround, short-term projects.

CASE STUDY: A PERFECT PAIRINGA large U.S.-based wine exporter worked with one of its suppliers to use cans rather than bottles to package and distribute some of its wines. This expanded the locations and occasions in which its product could be consumed, including the beach and sporting tailgates. Procurement’s efforts to innovate with the supply base expanded the company’s addressable market and positively influenced demand — making a direct and measurable contribution to the top line.



» Visibility: When all information and activity is accessible digitally, getting an accurate picture of project status and additional opportunities is possible.

» Stakeholder collaboration: Transformation should benefit everyone and should engage distributed stakeholders in all areas of spend management.

» Compliance: Most compliance isn’t malicious; instead, it’s a trade-off between cumbersome systems and easy alterna-tives. Digitally transformed procurement changes the balance by making it easier to follow the established process than to use an alternative.

Many enterprises implemented their first procurement technol-ogy in the 1990s. Not only has the landscape of available solutions completely changed since then, but also users have become far more tech-savvy. User experience is more important than ever before as professionals expect the same ease of use at work as they have in their personal lives.

The business wants what it wantsWhen the business is the driving force behind procurement trans-formation, its objectives are likely to be very different. Frustration with slow timelines and poor technology enablement may be at the center of the effort.

When facing a transformation being led by another function, procurement should remember the following:

» Be open-minded, rather than defensive, but be willing to advocate for the business’s best interests.

» A desire for procurement transformation doesn’t necessarily mean procurement will go away; in fact, it may present exciting opportunities for procurement to change for the better.

» Consider the background and experience of the function pushing for procurement transformation. What pressures and challenges does procurement face?

CHAPTER 2 Looking at the Challenges to Digital Procurement Transformation 9


Chapter 2

IN THIS CHAPTER

» Acknowledging the human element in the transformation effort

» Involving suppliers during procurement transformation

» Facing challenges in delivering the full expected ROI from technology

Looking at the Challenges to Digital Procurement Transformation

If digital transformation were easy, procurement organizations would just flip the switch and be done with it. The challenges associated with managing such a significant period of change

thoughtfully are real — and they can have a lasting impact on procurement’s brand and reputation. During digital transforma-tion, many of the problems procurement already faces are either amplified or made more virtual:

» Inability to identify savings opportunities: Spend visibility and data accuracy will guide procurement’s priorities throughout the transformation process.

» Anticipating customer needs: Procurement must know customers well, identify trends, and plan strategies to deliver competitive advantage.

» Maintaining a standardized tracking system: Both quantified (savings dollars) and intangible (improved delivery or service terms) results must be measured carefully.



» Duplication of supplier data: Duplicated supplier data can easily lead to duplicated payments. Procurement must regularly ensure full management of supplier details.

» Inability to negotiate: Procurement professionals should be able to negotiate effectively with internal and external stakeholders in order to achieve desired goals and safeguard the quality, price, and quantity of supplies, materials, and services.

» Supplier and supply chain risk management: Depending on the type of risk at play, procurement may have to investigate a range of legal and technical considerations to identify and assess third-party risk.

The traditional focus on people, process, and technology applies during digital transformation, and procurement should be pre-pared for the challenges associated with all three.

PeopleHuman beings present significant change management chal-lenges. Digital transformation not only raises issues of adoption and compliance, but also it often exacerbates them by minimiz-ing how human the face of procurement is toward the rest of the enterprise.

Transformation requires active involvement from people across the organization — especially IT resources. This reinforces the need to align to procurement’s objectives with overall enter-prise digital strategy. Common transformation-related stumbling blocks include the following:

» Digital transformation may require users to adjust to a new set of procurement systems and functionality.

» If procurement is already technology-enabled, distributed users may not see the benefits associated with making (yet another) change.

» Procurement teams going from first round digitalization to a second or third round may not invest as heavily in gathering cross-functional input.

CHAPTER 2 Looking at the Challenges to Digital Procurement Transformation 11


While procurement may think of upgrading its systems as a procurement-only change, others in the organization will be affected. Building consensus is challenging and time consuming, but nothing can be more damaging to a digital transformation effort than ignoring the growing mumbles of discontent from disparate user groups.

ProcessWhile intended to improve interactions between a company and its suppliers, digital procurement can also create distance, driving out the very value procurement hopes to deliver. The following factors can either work for or against procurement:

» Communication and collaboration: Does the technology facilitate interactions between the parties or make it cumbersome?

» Long-term relationships: Will procurement make the right decisions from a strategic supplier’s perspective about how to spend newly found discretionary time?

» Learning curves: User experience is often listed in the objectives of procurement transformation projects. Will suppliers be able to intuitively navigate the new platform, or will they have to undergo extensive training?

» Standardization: While consistency is the source of many efficiency gains, procurement needs to know when to work outside of the box. Will fully digitized procurement allow for non-standard supplier proposals?

» Mutual trust and respect: Internal users can expect increased visibility from a well-executed digital transforma-tion, but what about suppliers? Will they gain (or retain) the visibility required to deliver maximum value?

Procurement technology is often where internal buyers and their suppliers meet and interact. Digitization must not be associated with a loss of control over supplier relationships or the fear that jobs will be cut due to the efficiencies made possible by increased procurement automation. It must also not be burdensome. How a supplier engages through procurement technology can be the difference between being perceived as expensive to serve versus being a customer of choice.



TechnologyEven the most successful implementation can create a mountain of challenges. Be on the lookout for the following during imple-mentation and beyond:

» Full functionality use: Procurement needs to actively engage to ensure that all new functionality is leveraged — or risk sacrificing an important part of its transformation value proposition.

» Post-implementation continuity: The dissolution of a cross-functional implementation team is a critical moment. The transition must be managed and trainings conducted so the transformation is well adopted.

» Complex reporting: Whether it’s a barrier to producing the same reports that the enterprise is used to having or just a lack of familiarity with reporting capabilities, having to move to external systems in order to meet reporting needs can create damaging breaks in an otherwise end-to-end system.

» Managing expectations: Sometimes expectations for new systems are missed, and other times they’re misunderstood. Procurement must communicate realistic expectations and address frustrations during and long after implementation.

» Supplier learning curves: Suppliers are often required to integrate with multiple customers’ procurement systems — none of which may be the same. This represents a disruptive learning curve as well as high costs for suppliers that companies profess to value.

IT TAKES A VILLAGE . . .The implementation and adoption of procurement technology is often a significant corporate undertaking because of resulting disrup-tions in business operations and change management issues that pose barriers to success. To counter these barriers, a receptive com-pany culture needs to be established. This can be accomplished by executive leadership and commitment, clear communication of the benefits, and tying the business value of procurement technology to overarching corporate objectives.

CHAPTER 3 Designing the Digital Procurement Function 13


Chapter 3

IN THIS CHAPTER

» Starting procurement’s transformational journey

» Finding inspiration for a unique digital vision

» Ensuring the required skills and capabilities for post-transformation

» Getting the ball rolling

Designing the Digital Procurement Function

Asmart procurement organization needs to perform at the best of its abilities in order to stay relevant in the long term. Technology alone can’t deliver the range of results

that a competitive enterprise needs from procurement. There needs to be a higher level strategy guiding procurement’s priori-ties, as well as a service delivery model that incorporates technol-ogy, data, talent, and organizational design. Digital technology is integral to a modern procurement set-up; however, many companiesfindthemselvesinastateofdigitalshockandstruggletomakeacompletedigitalcultureshift.

Examining the Status QuoAppropriately mapping the journey toward digitalization requires procurement teams to objectively consider where they are today and understand what needs to change to achieve their goals. Given the importance of accurate self-reflection, procurementmay need to call on the perspectives of other functions and even



partner with an experienced external service provider. The ques-tionsprocurementteamsshouldbepreparedtoaskandanswerinclude the following:

» Where do we fall short? Transformations provide an opportunity to address procurement weaknesses that may not be rooted in technology. Changes to organizational structure and process can be managed more realistically and sustainably as part of a larger overhaul.

» What are we currently good at? Procurement may not be perfect (who is?), but existing strengths should be recognized and preserved.

» What organization is a role model for the kind of transformation we want to achieve? Documenting goals and objectives can be abstract and hard to base tough decisions on. Pick a company or team that has successfully transformed and ask, “What would it do?”

» What talent gaps do we expect to encounter and how will they be bridged? Talent and skills are likely to be the most significant bottlenecks to full transforma-tion. Predicting where gaps may occur and lining up options for meeting them can keep the project timeline on track.

» How should the transformation be explained to non-procurement stakeholders? Discussing transformation internally and explaining the effort to others are two completely different conversations. Language, point of view, and the level of detail shared will all vary but should be consistent starting from the beginning.

» How should non-procurement stakeholders be engaged in the transformation journey? Procurement shouldn’t expect to go it alone, nor should all outreach be one way: from procurement to its audience. Other functions should be involved in design, implementation, testing, and post-transformation governance.



Reimagining Technology, Tools, and Processes

The word transformation tellsyouthatprocurementshould looksignificantly different after digitalization, but what does thatmean? Taking full advantage of the transformational processmeans considering more opportunities and options than can be acted on and selecting the best.

Companies can successfully navigate the cultural shift associated with digital transformation by being open to change, leveraging data,increasingtheirriskawareness,andembracingdisruption.The strategic plan or business case that procurement will use to navigate its transformation must include a number of factors, all of which should recognize the needs of today and strive to antici-pate the needs of the future:

» Patterns of spending behavior: Having access to historic data is one thing, but empowering procurement and distributed buyers to negotiate and purchase from contracts with suppliers in the best way may change the preferred frequency and channel for future transactions.

» Value beyond cost savings: Procurement often wants to extend its range beyond savings, but what does that mean? Outlining specific categories of impact helps ensure that the technology and skills foundation is put in place to make them a reality.

» Centralization of procurement operations: Which activities will be completed by procurement or under its direct oversight, and which will the business be empowered to manage independently?

» Supplier partnerships: What would the ultimate, digitally enabled supplier partnership look like? Do your intended supplier partners have the same vision?

» Risk management: As procurement has access to a greater range of data and analytical capabilities, it has the opportunity to manage and monitor for an expanded set of risks associ-ated with the first and subsequent tiers of the supply chain. Gathering these requirements from different functional teams can ensure that all needs are met without duplication.



Developing Critical Capabilities for Digital Procurement

Procurement will need two types of skillsets to successfully navigate transformation: leaders who have the vision to man-age the transformation itself and skilledmanagers and practi-tioners with the abilities required to achieve post-transformation objectives.

Transformational leadershipWhen procurement has responsibility for ushering in its own changes, simple project management experience doesn’t begin toqualify someone to takea leading role.To leadprocurementtransformation, a professional needs to have a vision that’s unwaveringyetflexibletothevaluableinputreceivedfromotherfunctionsandsuppliers.Thispersonalsoneedstheconfidencetohandle the unexpected situations that arise, which may require alterations or additions to the master plan.

Post-transformation procurement skillsetsThe exact skillsets and experience levels needed in a post- digitally transformed procurement world vary by company, but they may include a combination of the following:

» General business acumen: Rather than expecting to follow a prescriptive process each time spend is brought under management, procurement needs to handle one-off situations with creativity and skill.

» Collaboration: Traditional procurement often plays a contained role, even in projects that it leads. As the type of effort procurement is involved in expands, it can expect to spend more time working with internal and external stakeholders — and without a standard framework to guide those interactions.

» Category expertise: Which types of industry or market knowledge should procurement have in-house, and which should be brought in through third-party contractors? This question is important for procurement to answer — both for the sake of its capabilities and its budget.



» Influence building: Procurement isn’t investing in a digital transformation just to end up exactly where it started in a couple of years. Increasing the impact of procurement technology requires professionals to build influence — and use it wisely.

Starting the JourneyPlanning is important, but at some point, procurement needs to makethedecisionthatthetimetoexecuteitsdigitaltransforma-tion has arrived. How can procurement get such a large scale and complexeffortunderway?

» Improve the stakeholder experience by allowing people to procure goods and services from anywhere.

» Achieve a balance between the sourcing and Purchase to Pay (P2P) service offerings in procurement’s portfolio.

» Create a center of excellence and use predictive forecasting to soften risk.

» Find, design, and implement the best mix of suite and niche technology solutions.

CHAPTER 4 Seeing the Impact of Digital Transformation 19


Chapter 4

IN THIS CHAPTER

» Defining expectations for the digital user experience

» Considering the categories of ROI that may be achieved through procurement transformation

» Considering opportunities to engage suppliers in the transformational journey

Seeing the Impact of Digital Transformation

The results of digital procurement transformation should be multi-sensory: Procurement should see the difference, hear the difference, and feel the difference in everything it does.

These differences should be apparent to executive leadership, internal stakeholders, and suppliers as well. Given the prominent role that the concept and promise of digital plays in procurement transformation, technology must create a positive experience for everyone who uses it.

Enhancing/Delivering a Superior Digital Experience

Embracing fully digital procurement isn’t a rejection of transac-tional Purchase to Pay (P2P), sourcing, or tactical buying; instead, it’s an expansion of it. While traditional procurement (including invoice payments, purchase order maintenance, and document routing) is transactional, digital procurement has a higher level focus.



Unlike activities that add marginal value to the business (at best), strategic procurement includes requirements analysis, source selection, cost modeling, negotiation, supplier relationships, and previously unattempted initiatives that contribute enormous value. In short, digitally transformed procurement creates an experience for stakeholders, suppliers, and procurement profes-sionals themselves.

Elements of a successfully executed digital experience include

» Seamless access to information: Suppliers and stakehold-ers should never have to remember where to look for which piece of information. Digital procurement centralizes information, making it quickly and intuitively available.

» Distributed empowerment: In the time since procurement technology was first rolled out, there has been an explosion of consumer-facing ecommerce. Procurement should recognize the increased capabilities of buyers and strive to meet the usability expectations it has built up away from the office.

» Need to know: Knowledge is power, and this extends beyond supplier contact information and historical spend data. Digital procurement should make as much information available to stakeholders and suppliers as possible, including the status of requests, approvals, and payments.

Measuring the ROI from Digital Transformation

Procurement’s classic metrics are savings and spend under man-agement. While both of these align with procurement’s mandate, they fail to capture the total impact of procurement’s work with stakeholders, spend, and suppliers. The same challenge exists with digital transformation. Much of the return on investment (ROI) will come from subjective or value-added improvements instead of quantifiable results.

CHAPTER 4 Seeing the Impact of Digital Transformation 21


EfficiencyWith the digitalization of procurement comes an increase in pro-curement’s own efficiency. Sourcing cycle time can be reduced through technology and standard templates, which reduce the human effort required to get a project underway and mitigate the errors associated with manual data collection. Finally, contract life cycle management (CLM) software makes it possible to manage expiration dates and terms compliance with less hands-on time.

Decision makingDigital procurement tools equip stakeholders across the business with real-time access to insight and analytics — potentially even further empowering them with the help of artificial intelligence (AI). AI also makes it possible to find newer and smarter ways to integrate data models with day-to-day decision making.

Visibility for suppliers and stakeholdersThe digitalization of procurement processes ushers in visible changes and benefits in terms of the processes, costs, and pro-ductivity factors involved. It also transforms how buyers inter-act with their suppliers and other third parties by serving as an accessible platform for better collaboration.

ProfitabilityImproved financial visibility at the transaction level makes it eas-ier to trace an audit trail. A truly digital procurement organiza-tion also automates repeatable tasks to boost efficiency and drive down costs — directly impacting the bottom line by empowering better decisions with less prep time.

Enterprises have access to software solutions that are so easy to adopt that they clear the way for investments in AI, machine learning, and robotic process automation (RPA). These allow additional benefits such as on-demand analytics and convenient guided buying.



Involving Strategic Suppliers in the Transformational Journey

Of all the traditional procurement processes, supplier manage-ment requires the highest degree of human engagement. Tasked with developing lasting, strategic relationships and monitoring/minimizing disruptive risks, procurement and supply manage-ment professionals need to know their suppliers inside and out.

Part of this knowledge comes from working directly with suppli-ers, and part of it comes from the industry network procurement professionals build over time. Increased access to insight allows procurement to develop new ideas and be aware of unexpected risks. The information gathering process is ongoing and must constantly be consulted if procurement is to optimize its impact.

The following types of interaction allow strategic suppliers to play a valuable role in the transformation of procurement:

» Asking for input on the best channel(s) for each type of communication

» Requesting feedback on the best practices seen in other clients

» Ensuring that performance reviews are two-way, actively uncovering situations where procurement unintentionally blocks value

» Mining all types of data, including any resources that can improve the factual basis of procurement’s recommenda-tions to the business

CHAPTER 5 Ten Capabilities to Look for in a Digital Procurement Transformation Partner 23


Chapter 5

IN THIS CHAPTER

» Emphasizing the characteristics and capabilities that a transformation partner should possess

» Considering the full range of processes and technologies that should be touched by transformation

» Remembering to incorporate emerging, and even future, technology in procurement’s digital roadmap

Ten Capabilities to Look for in a Digital Procurement Transformation Partner

Digitizing procurement is the first step in a longer transfor-mational journey. In the next two to four years, companies are likely to see further evolution toward next-generation

strategic procurement, where data from outside a business’s own ecosystem can open the door to advanced decision making.

Your organization needs to start its digital procurement journey now to ensure that the race for competitive advantage doesn’t leave you behind. Selecting the right company to partner with is a matter of rightsizing, cultural fit, and philosophical alignment. This chapter gives you the capabilities to consider in terms of your decision-making impact.



Track Record of InnovationThe procurement technology landscape is a competitive one, driven by constant re-evaluation from start-ups and established firms alike. The pressure to improve on processes and analytics that regularly come under enterprise scrutiny has led to regular innovation from the best solution providers, and extinction for the rest.

Zycus is a leading global provider of the complete Source-to- Pay (S2P) suite of procurement performance solutions. Its com-prehensive product portfolio includes applications for both the strategic and the operational aspects of procurement — eProcurement, eInvoicing, Spend Analysis, eSourcing, Contract Management, Supplier Management, and Financial Savings Management.

Its spirit of innovation and passion for helping procurement create a greater business impact are reflected among the hundreds of procurement solution deployments the company has undertaken over the years. Zycus has best-of-breed clients across verticals, such as Manufacturing, Automotive, Banking and Finance, Oil and Gas, Food Processing, Electronics, Telecommunications, Chemi-cals, Health and Pharma, Education, and more.

Flexible Options and FeaturesIn digital procurement, business controls (for example, govern-ance and compliance) can be coded into AI models to help users skip redundant or cumbersome steps. Users are more likely to act in a desired manner when they’re presented with choices in the context of enterprise objectives. This doesn’t require them to be presented with exhaustive information each time they’re making a buying decision.

By streamlining the purchasing process and reducing manual intervention, procurement technology can save time, money, and energy all at once.



AI-Enabled Insights and AnalyticsDigitization helps organizations develop predictive strategies by using artificial intelligence (AI) and machine learning to run spend analysis reports before, during, and after a sourcing project. Being armed with this additional, non-static insight creates the opportunity to identify demand patterns and perform market and supplier performance analysis before an organization makes a costly commitment.

Centralized Visibility for Stakeholders and Suppliers

Procurement digitalization introduces visible changes and benefits the organization through processes, costs, and produc-tivity. It also transforms how buyers collaborate with suppliers and other third parties.

Effective collaboration isn’t possible without the requisite visibility — on the part of both stakeholders and suppliers. The more centralized this information is, the easier it is to ensure everyone is working from the same version of the truth and pre-venting the loss of valuable knowledge capital.

Efficient Contract ComplianceOne would expect the parties involved in a contract to keep their respective promises, but this doesn’t happen without a great deal of work. Contract terms are often not adhered to, and purchases are routinely made from suppliers other than the ones contracted for a specific good or service.

Off-contract spending, also called maverick spending, ultimately reflects poorly on procurement’s abilities to ensure contract compliance. Even when purchases are made in alignment with existing contracts, some teams don’t have the means to match all purchases against contracts in order to validate that maverick spending isn’t a problem.



Buy-side contract management solutions can deliver proven efficiencies for every department, achieve the organization’s procurement and legal goals, and help the company realize significant hard dollar savings. Organizations have to deal with hundreds or thousands of suppliers, partners, and dealers every year. Without a solution to enable efficient contract compliance, risks increase — as do lost savings opportunities.

Access to Real-Time DataCompanies need to embed intelligent automation into their procurement systems. This process allows data-based decision making to become pervasive enough that people and machines alike are equipped to access and act on it.

Digital procurement tools also equip stakeholders across the business by providing real-time access to insights and ana-lytics through AI. It deploys newer and smarter ways to infuse data models to enrich day-to-day operations and enables data- supported decision making.

Automated Ordering ProcessesBefore transformation, procurement spends a considerable portion of time coordinating orders to replace existing stock. While these tasks need to be done, they’re administrative and resource intensive. In order to increase procurement’s efficiency, it will be necessary to explore new ways of completing low value-added tasks.

Digital procurement provides the automation required to offload these tasks to the technology itself. Robotic process automation (RPA) can use an organization’s purchase and inventory data to identify when purchases need to be made. It then automatically makes them without human intervention.

Not only can digital procurement automate the ordering process and improve the productivity of procurement resources, but also it streamlines the process from requisition to payment, thereby eliminating the chance of human error.



Data-Driven Third-Party Risk Management

Tasked with developing relationships and minimizing risks, pro-curement and supply management professionals need to screen suppliers for exposure before they’re awarded a contract, and then they need to maintain that oversight for the duration of the agreement.

Poor standards and negative press about suppliers can have a det-rimental effect on their customers. Supply chain disruptions of all kinds can prevent deliveries from being received. Both are worries that procurement must deal with daily. However, with hundreds (or thousands) of suppliers to monitor, how does an organization stay on top of it all?

Once again, digital procurement provides the answer. Procure-ment can monitor potential supplier risks by integrating third-party data on suppliers with other spend management systems. Thanks to the ability to source and store more in-depth data, and pre-setting risk related notifications, the organization can gather actionable insights to make accurate and effective decisions.

Cloud-Enabled and Mobile-FirstMobility from smartphones, tablets, iPads, wearable technolo-gies, and cloud software solutions is transforming everything that comes its way. Procurement is no exception, and mobile tech-nologies have infused the supply chain with new levels of agility, efficiency, and convenience.

As procurement lays plans for transformation, making sure that mobile needs and opportunities are considered from the outset is critical. This is likely to start with a collection of enterprise use cases and stakeholder requirements.

Digital transformation simply ensures that processes, informa-tion, and documents are stored in a format that’s accessible to computers. The business value of this is realized when people can access what they need to be effective, including accessing pro-curement information and transactions on the go.



Emphasis on Responsible Change Management

Today’s organizations must be built for change. This includes technology, processes, and people. Automation plays a critical role in enabling change and helping users adjust, embracing new methods and standards even when they’re not natural.

Procurement may take a role in leading change, deciding what digital transformation will look like and rolling it out, but it must also actively help affected users and stakeholders adjust. This means making deliberate investments in communication, listen-ing with an open mind to stakeholder concerns, and even proac-tively soliciting feedback.


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