Forrester Study Offers Framework to Embrace Procurement Innovation, Overcome Challenges

The role of Procurement has drastically evolved in recent years, as boards increasingly turn to Chief Procurement Officers to help companies thrive in today’s uncertain, dynamic market. While controlling costs remains important, that now presents just one of many objectives. CPOs today are expected to help companies manage new sources of risk, ensure compliance with a growing web of regulations, drive innovation from supply chains, grow revenues and more. Procurement today is a true source of competitive advantage.

Success with such a broad set of complex objectives increasingly requires procurement leaders to think strategically and process ever greater volumes of diverse information. Unfortunately, this is an area with significant room for improvement at most organizations, though one receiving the appropriate level of attention.

A survey of over 400 procurement leaders by Forrester found their top priority to be “improv[ing] business insight on purchasing activity through reporting and analytics.”

The obstacles to more informed, strategic decision-making are quite consistent. The study, entitled “Enabling Smarter Procurement” and to be discussed in a live webinar on June 13 at 11 AM EST, found 3 core issues, equally weighted by respondents. First, despite efforts at automating processes, too much capacity is still consumed by operational/manual activities. The growing requirements procurement faces are not being met by corresponding increases in resources. Hence, teams must free capacity to conduct analysis and plan but are struggling to do so.

Second, leaders struggled to access relevant insights when and where they are needed. The volume of information now available is of little help if not digestible, simply leading to information overload. Compounding this, respondents also cited poor data quality as a key challenge. Duplicate supplier records, inaccurate data and poor integration between systems all were cited as sources of data quality issues.

These challenges are real, but the deciding factor in whether procurement teams succeed in operating smarter or not is how they respond. In particular, will they use the obstacles as an excuse for inaction, or ride over them? New technologies are finally available that can empower procurement to rise to the occasion. AI in particular is finally coming of age. Yet here too multiple obstacles were cited, from perceived immaturity of use cases (likely due to vendor marketing being ahead of capabilities in the rush to sound innovative) to lack of internal skills and again data quality.

The key to success is to tackle the challenges in parallel to adoption of new technologies. It is true that AI relies on a solid foundation of large volumes of quality data, so solutions that offer clever applications alone are sure to disappoint. But that is not reason to sit back but rather a guide to how to proceed. One of the key challenges highlighted was the lack of availability of relevant insights. This is an area where AI can help greatly, with digital assistants a case in point. They can search across all available data and provide quick answers or even custom reports to answer questions entered by users. To realize the possibilities, leverage digital assistants that are offered within integrated suites. Better yet, suites that integrate seamlessly with 3rd party and back end systems. This ensures that insights can be gleaned from all activity, rather than just a subset.

Full suites also offer the greatest potential to automate processes and hence free capacity. For example, an integrated suite enables matching of contracts to catalogs to orders and invoices, ensuring compliance and automatic invoice matching. It is exactly the points between processes where manual effort is created, if not integrated. Similarly, suites with a single supplier record can provide true 360 degree visibility of supplier performance and activity, and enable AI applications to predict potential risks. Historically, many companies opted for a collection of best-of-breed solutions rather than compromise capabilities for integration. While this strategy made sense at the time, advances in capabilities of full suite providers means no compromise is needed. And the need to effectively see across all processes and systems is key to realizing the true potential of AI.

Such approaches help address data integration and availability of relevant insights, but data quality must also be addressed. Suites also tend to create clean data, but that does not help address issues with past data or those in other systems. Here, master data management solutions should be leveraged that can actually fix issues in back end systems, linking vendor and item master records across systems. This further improves visibility and the potential for new and better insights.

Empowering procurement to make more informed, strategic decisions is no longer a strategy – it is now a requirement. There is simply no other way to effectively meet the broad set of objectives now expected. Fortunately, new technologies are finally reaching the level of maturity where they can have a transformative impact. Challenges certainly exist, but smart leaders are tackling them in parallel. Their organizations will thank them for it.

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