In a recent research report, Achieving Procurement Excellence in the Age of Digital Disruption, The Hackett Group states, “Procurement is facing a dual challenge in 2020: reducing costs – both internal and external – and adding value.” The research also notes that companies must become more agile in order to adapt to changing business needs. Procurement must support those needs by focusing on objectives aimed at sustaining a cost-effective, value-driven function.
As digital transformation rapidly becomes a critical imperative for procurement functions, I’ve seen many chief procurement officers (CPOs) who have attempted to both reduce costs and add value. In reality, however, most have only taken on the challenge of optimizing costs – and that is not enough in today’s disruptive global economy.
It’s time for CPOs to take on what The Hackett Group research calls “key objectives for 2020.” I particularly think that improving procurement agility, becoming a trusted adviser to the business, modernizing application platforms, and improving analytics and reporting capabilities are some of the most important objectives that the research highlights. If CPOs really want to add value to the enterprise and move beyond reducing costs, those will be the game-changers.
In fact, I’m already seeing CPOs in top-performing organizations rise to the occasion in regard to these objectives. They recognize that the greater opportunity to add value lies in the use of intelligent, innovative technologies that can truly make an impact on a business’ bottom line while driving new and accelerated business outcomes. Here is how they are doing it.
Technology is the enabler
Today, there are more intelligent and innovative technologies than ever before in the procurement space. Global companies across various industries are investing in intelligent, integrated source-to-contract solutions to increase usability, improve user adoption, and speed execution.
These solutions are also providing procurement with the ability to uncover previously hidden opportunities throughout the enterprise in real time, which increases their value as a true asset to the business. They are enabling CPOs to use data-driven, real-time intelligence and advanced analytics and reporting capabilities powered by machine learning and artificial intelligence to develop strategies that support their businesses. CPOs are also using intelligent data-driven insights to quickly bridge what were information operational gaps and reduce the complexity of compliance, both of which are even more difficult to execute on a global scale.
Data is the game-changer
The driving force behind these opportunities is, of course, data. However, capturing the right data to extract strategic value is more challenging than ever. Clean, high-quality data must be collected and integrated from not only the procurement functions but also sales, manufacturing, finance, and any other critical operation in the company.
It’s when these functions interact and data comes together in real time that CPOs have the holistic visibility they need to drive more value while supporting enterprise requirements and complexities.
The result? An intelligent enterprise
With value-driven source-to-contract transformation, CPOs now can start to empower their procurement functions, make smart global decisions, and quickly respond to the changing needs of the business as a whole. And that’s when procurement can help the entire enterprise increase responsiveness to rapidly evolving market shifts and even help create new business models that can predict how to improve performance and increase bottom-line revenue.
To read more about The Hackett Group’s research, access the full report. Or to discover more on the benefits of intelligent spend analysis, sourcing, and contract solutions, learn about strategic sourcing.