How data-driven insights can transform corporate purchasing

13 September 2021 Consultancy.uk 7 min. read
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According to Efficio Vice President Simon Whatson, data-analysis and digital processing have helped the customer journey for consumer-facing businesses become completely seamless. However, the co-author of ‘Profit from Procurement: How to Add 30% to Your Bottom Line by Breaking Down Silos’ believes that businesses are failing to provide the same level of service for corporate purchases – presenting a big opportunity for those who are first to do so.

As consumers, we are growing increasingly used to the concept of a one-click purchase. Whether it be a takeaway, a ride home in a taxi, or even a holiday, we expect the transaction to be quick, easy and seamless. Unfortunately, for the corporate world, the purchasing experience is much different.

In fact, for the buyers in a business, wherever they sit, purchases are much more than a couple of clicks away. Before they can even get started, employees are often faced with a deluge of paperwork, forms, and requisition templates. This is followed by a long wait for vendor responses, which can be further delayed by requests from procurement to buy something slightly different to what you’ve ordered, or limitations around only using vendors already on your system.

Simon Whatson, Vice President, Efficio

Unfortunately, while technology emboldens, quickens, and streamlines transactions for consumers, it can also stand as a bottleneck for the activity of procurement in a company if not accompanied by the right process and skills. It’s a source of huge frustration that needs to change.

Aligning tech investment with people and processes

It is not to say that technology hasn’t been explored to rectify the situation. Procurement hasn’t been impervious to digital transformation; it has simply fallen short of its stated aims, due to a common organisational error. Simply, technology is being invested in as an opening gambit – a saving grace to those aforementioned problems. As such, the siloed box being ticked doesn’t embrace the data available, the people using it, and the processes being implicated.

According to Efficio’s ‘Procurement 2025’ study, published in 2018, close to 80% of procurement leaders across Europe and the US agreed that tech investment should be a boardroom priority. But half admitted to purchasing resultant solutions simply through a fear of missing out, rather than based on a full understanding of the product’s benefits. And here lies the issue.

No matter how shiny, advanced, or impressive the solution might be, if it’s not being both informed and guided by bespoke strategy, then really that’s all it is – a nice, new machine. An accessory. If anything, it may even turn out to have a detrimental impact on proceedings, as it may hinder the parts of your business that are already in good shape – namely, those people and processes. If the tech isn’t working in tandem with these strands, it’s likely to be working – at best – adjacent to them, and – at worst – against them.

The three pillars of procurement innovation

We’ve often compared this error to building a steam-powered Tesla. The machine is elite, but it has no fuel in the form of data or application. So, it doesn’t move.

With any digital transformation, the technology should be the result of company strategy and objectives, not the pre-cursor. Solutions should be employed to support an operating model. And in procurement specifically, there are three core ways that this relationship between tech and model can be established.

1. Automation

Hardly a dark secret, the role of robotics and AI are well entrenched in the supply chain, but very few organisations have got close to automating their purchase to pay (P2P) activities yet. This is despite AI already making automation in this area possible, as it unifies and connects the numerous different processes that make up a P2P network. It remembers the requisite processes, translates them, and encourages resultant interaction. Ultimately, the business user can handle queries and make orders much more quickly. But it also highlights new opportunities through spend and contact data analysis, and automation helps to highlight risk forecasts with key suppliers with your data pre-prepared and aligned.

2. Communication

Striving for more of a B2C marketplace mindset, as seen through the likes of eBay. Having to go through specific individuals, often in procurement, to speak with suppliers is not uncommon in the B2B world. This can slow down communication, lead to confusion and create bottlenecks. Tech in the form of a dedicated B2B marketplace can help to mitigate these challenges and allow buyers and suppliers to interact based on pre-set rules and frameworks so that control is not lost.

3. Reliable procurement data

This is set to be one of the biggest step-changes across the supply chain, largely as a result of blockchain. Compliance checks, audits, performance monitoring, and tracking of suppliers take up a lot of the procurement team’s time and, even then, the data is often disputed; but blockchain serves as a full proof way of ensuring accurate data. The data is encrypted and cannot be tampered with, without anyone in the chain being notified.

Data-driven decision making

The effects of that final tech advantage revolve around accurate and trustworthy data. And it should be this data that companies build their procurement digitalisation strategies around. The above solutions are potentially game-changing but, as previously mentioned, you need to formulate a conducive operating model first – and this involves putting data at the heart of decision making.

In order to embrace these technologies effectively, organisations need to take ownership over their data and resist the urge to over-configure. Instead, they need to effectively visualise their data and turn it into usable insights for the business, and they need to capitalise on their existing knowledge.

To get started on this, organisations should implement a common taxonomy for spend and contract data to effectively identify opportunities for spend optimisation. Transforming data into insights that are easily visualised can be achieved by understanding what insights will help the business to make better decisions, and then adopting the software that takes the required data from various disparate systems.

To manage knowledge, organisations need to capture and curate the data generated by processes so that they can be repurposed, time and time again – effectively reducing the need to reinvent the wheel. When identifying procurement tools in which to invest, make sure you have designed your knowledge management process first, as that will inform what you really need.

By building the technology journey on enabling data-driven decision making in procurement, businesses are far more likely to generate positive returns. In other words, you’ll be making your procurement function more efficient, effective, and attractive to potential suppliers.

Until this point, consumer comfort has been the driving force behind most organisations’ digital transformation plans. Now it’s time to make the corporate world a little more comfortable, too.

In May 2021, Simon Whatson became the first leader to join Efficio’s partnership since the consultancy returned to a private ownership. Co-written with Efficio colleagues Alex Klein and Jose Oliveira, his book ‘Profit from Procurement: Add 30% to Your Bottom Line by Breaking Down Silos’ is available from Wiley.