Nearly every company is involved in some form of digital procurement transformation. But how many are actually seeing it pay off?
According to research by Bain & Company, only 8% of global companies have been able to achieve their targeted outcomes from digital technology investments. The same is true in the procurement function, where many leaders are still struggling to deliver enough value from costly digital plans.
A key reason is that for many, “digital” transformation means “technology” transformation. In practice, however, placing the focus on technology doesn’t create the value-add opportunities that organizations need to thrive in a post-COVID world. Rather, the emphasis should be on a broader digital strategy, of which strategic tools are a component.
True digital transformation requires a bigger, bolder approach than simply selecting tools. To succeed in this area, procurement must push the boundaries. To that end, here are three ideas to challenge your thinking.
Data-centric, supplier-first thinking yields ongoing value. When it comes to your suppliers, consider this cycle: A better experience for them creates better data for you, which creates a better experience for them –—and so on and on.
Most of the data you need about your suppliers, from basic company-level information to detailed compliance, risk and locally specific data, is owned and maintained by your suppliers. Any attempt on your part to improve supplier data quality that ignores this fact is doomed to fail. The virtuous data-experience cycle encourages and incentivizes suppliers to actively provide and maintain their data. To achieve this procurement, one must engage regularly with suppliers.
In reality, though, suppliers find it difficult to provide information. Pain points, such as having too many systems to log into and not being able to communicate with the organization easily, are a major cause. When it’s strenuous to share material, suppliers de-prioritize the task until it becomes critical. Even at this stage, they’re likely to only share the bare minimum and get back to business.
Seventy-two percent of chief procurement officers in large organizations say that quality of data on suppliers is a barrier to improving supplier experiences and relationships, according to a recent HICX survey.
Conversely, procurement owns the power to remove these friction points and make it easier for suppliers to engage. But the function needs to step into this power. The way forward is to place supplier experience at the core of every new activity, workflow, process and initiative. Be deliberate about removing friction across these activities. This forms the basis of supplier experience management, a growing movement that champions supplier — and hence, organizational — success.
Transformation is really all about the way in which people think about technology, rather than the tools themselves. Only once your digital strategy has been crafted to drive mutual success should solutions be added.
Segmentation is dead. Hyper-segmentation is king. As consumers, we’re all used to a world of increasingly personalized content and experiences, whether via recommendation engines or highly targeted ads based on browsing history. It’s founded on the vast amount of information that brands can access about us. The same principle holds true for suppliers.
While traditional procurement segmentation methodologies such as the Kraljic matrix enable internal decisions to be taken about which strategies to use, its function is primarily to inform resource allocation. But there’s another reason to segment suppliers —for what one might call “experiential” reasons. In other words, how do we adjust the experience that the supplier receives based on its characteristics? This is a much newer phenomenon, but one that some of the most forward-thinking organizations are addressing.
The technology is available, for instance, to enable a supplier to access an enterprise portal in its chosen language, see its preferred currency, view the compliance and risk information relevant only to it, and to access important transactional information at the click of a button. This is in spite of an organization perhaps having multiple enterprise resource planning (ERP) systems, more than one peer-to-peer suite, and a dozen other best-of-breed applications that might need to be accessed in order to serve the supplier.
If you combine this capability with intelligent self-service so that the supplier can express its own preferences — just like consumers can choose the language on the website of a multinational brand — you can deliver what feels to the supplier like a one-to-one experience, just for them, and removes friction.
Procurement is best placed to own the mandate. A common reason why supplier experience management doesn’t exist in many organizations is because no one has the mandate to own it. Corporations are too often internally focused, with each function having its own silo or solutions. Only once the problem is externalized and looked at from the suppliers’ perspective can the issues be identified and solved, as the whole experience is viewed end-to-end.
The real challenge here is that nobody owns the supplier experience. Without an end-to-end understanding of what suppliers go through, it’s difficult for organizations to identify a supplier experience problem. The good news is that procurement is well placed to take the lead on supplier experience. Not only is the function set up to gather quality supplier information, but it can also manage and make this data accessible to other departments.
Trustworthy data contributes toward making the business more profitable and compliant. By gaining the mandate to own supplier experience management, procurement can empower the organization at large to be more competitive. Moreover, it should be given the resources to achieve this.
Digital procurement transformation is all about pushing boundaries. To truly alter the function for the better, consider how technology can be used to deliver mutual success. With suppliers at the heart of everything that procurement does, the function can step into its power, tap into the right technology, and drive digital plans that are truly transformative.
Anthony Payne is a supplier experience expert at HICX .
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