Part 1 in a 2-part series. Read Part 2.
The Internet enabled our global economy to take off at warp speed with increasingly interdependent supply chains. Our ability to be flexible – directing production to one part of the world while sourcing goods and services from elsewhere to optimize for quality and cost – is what sets some companies apart from their rivals.
But as with most situations, it is vital to have a Plan B or Plan C just in case. As we’ve seen recently in the news, the impact of natural disasters such as fires, earthquakes, and tsunamis can have far-reaching implications beyond the epicenter when the supply of goods and services is concerned. This makes the role of procurement all the more complex for executives.
Evolution toward strategic decision-making
There was a time in my career when colleagues in procurement emphasized cost considerations as a major factor in their decision-making. Now procurement has evolved into a more strategic business activity, focusing not only on securing the right goods at the right price, but also fostering supplier relationships, protecting the company’s brand reputation, and ultimately delivering customer satisfaction.
Today’s procurement leaders have become trusted advisors to the business. Not only must they keep a watchful eye on traditional supply chain metrics and issues; they must also anticipate the impact of external forces on the sourcing of goods and services.
Business, economic, and political issues
That’s a big job. Procurement teams must be prepared to address a wide variety of business, economic, and political issues. At any time, they should be able to answer questions such as:
- How will shifting tariffs impact supplier agreements and costs, and will they prevent suppliers from delivering materials on time?
- Will geopolitical issues such as Brexit affect the cost, transport, and availability of our supplies?
- What is the best way to ensure that the goods we procure uphold our corporate social responsibility to use fair labor practices and safe materials?
- How can we make environmentally conscious choices when sourcing goods and services?
- How can we manage the risk of supply chain delays and compliance issues?
- How can we ensure transparency of transactions within the supply chain – perhaps using blockchain?
- How can we measure ROI instead of focusing only on cost?
To better understand these challenges, SAP recently hosted a Webcast with Dion Hinchcliffe, vice president and principal analyst at Constellation Research, to discuss modern procurement strategies and approaches. When we polled participants about their key focus areas, more than 50% of the respondents chose just four:
- Driving process and productivity efficiencies
- Improving the user experience
- Delivering insights from data to improve the speed and quality of decisions
- Controlling costs
That’s a lot for any single organization to manage. But the stakes have never been higher.
Data-driven insights and integration
Fortunately, new intelligent technologies can help enterprises reimagine the end-to-end procurement process. Artificial intelligence, machine learning, and robotic process automation, together with design thinking sessions, are helping companies reshape their critical source-to-pay processes, collaborate with suppliers and partners, and bring new innovations to the business.
Consider the possibilities. Intelligent technologies can automatically extract data – from the enterprise, its complete ecosystem, and third-party information sources such as Dun & Bradstreet, Thomson Reuters, or weather services – to detect a potential delay and suggest alternate routing or an alternate supplier.
Open technology platforms are best-suited to support these innovative applications. Some platforms provide core industry-wide procurement data that can help companies understand and adopt the best practices of colleagues and competitors. Others support application programming interfaces, helping companies flexibly connect their systems, both on-premises and in the cloud.
We’ll explore further in the next blog in this series with examples of how procurement professionals can use data-driven insights to drive real value.
To learn more about the intelligent enterprise, listen to the Webcast series. To learn more about how technology can help enterprises reimagine their procurement processes (and more), listen to the Webcast Explore the Future of Intelligent Procurement.