Seize the wave of the second supply revolution

There are no two identical digital transformations. When organizations consider the ways digital transformation can reshape their operations, they can think small or large – making technical improvements to an individual business function or reengineering every aspect of their operations with artificial intelligence (AI) and automating. Digital transformation is also happening at different paces, with some companies taking years to move away from manual processes while their competitors are rapidly moving towards full automation and digitization.

No two organizations are at the same stage of their digital transformation journey, and neither organization’s business units are completely consistent in their level of technology or automation.

Procurement is a business function that offers enormous potential for digital transformation and optimization. Previously managed primarily using spreadsheets, email and manual calculations, new procurement tools allow organizations to automate the processes of sourcing, obtaining and arranging goods and necessary services. Innovative platforms provided the process and data layers, allowing organizations to integrate essential processes such as AP/AR and basic vendor management.

In recent years, a new generation of procurement tools is driving the industry forward and providing new levels of procurement information and orchestration for large enterprises. But for companies to take advantage of these functions, they need to identify where they are in their procurement transformation and take the right actions accordingly.

The first shopping revolution

Ten years ago, the majority of large companies relied on spreadsheets to organize and manage their procurement processes. While spreadsheets could automate specific calculations, each transaction required manual data entry, a process that was both tedious and prone to human error. As new customer relationship management and data storage platforms grew in popularity, it’s no surprise that dedicated solutions emerged for procurement as well.

The first generation of digital procurement solutions essentially provided a data layer for large enterprises. The proposed solutions moved the basic organization and management of procurement processes to the cloud and connected some critical data points. Today, these platforms have been adopted by a significant number of Fortune 1000 companies. Cloud procurement platforms provide a very valuable resource to companies: a rich store of data harvested from millions of actions of individual supply. But despite the high costs of these solutions, they don’t provide the kind of workflow, insights, and analytics that could drive more value and ROI for businesses. The second revolution in procurement is seeing technology unlock this information and drive both cost savings and greater strategic advantage.

The new era of shopping

Historically, large organizations have viewed procurement as a cost center. Identifying and sourcing the things needed to run a large business simply functioned as a major budget line item – something to contain rather than optimize or leverage for any kind of strategic competitive advantage.

The second technological revolution in procurement offers a new approach. Instead of seeing supply as a line item to be absorbed, new insights can bring important efficiencies and strategic insights that affect both revenue and bottom line. The next generation of procurement technologies breaks down existing data silos and performs analytics to show where to find opportunities in business operations and support. Over time, these process improvements can generate significant cost savings and even help organizations achieve environmental, social, governance (ESG) and diversity, equity and inclusion (DEI) benchmarks by identifying diversified and socially responsible suppliers.

New supply solutions are particularly attractive as businesses face economic pressures. Analytics tools that integrate with an organization’s existing data layer have the potential to drive massive increases in the ROI of existing procurement software solutions. These huge savings can help businesses stay nimble during tough economic times and avoid more painful cuts.

Take steps forward

How can companies move forward and start driving value from their procurement organization? The first step is to identify where they are on their digital transformation spectrum. While many large US companies have embraced this critical data layer in their procurement processes, many organizations still rely on spreadsheets, emails, and manual data entry. These companies don’t have an entry ticket to the next generation of sourcing technologies – the core data that underpins valuable analytics. Adopting cutting edge data layer technology and aggregating their data is the first step towards a modern strategy.

Companies that have a data layer solution can now consider how to start maximizing their assets, moving from a silo of data to something that drives value for the business. This can be a tough pill to swallow, as CFOs and purchasing managers expect a seven-figure position to deliver a complete solution. However, these leaders need to recognize the potential of a small upgrade to generate massive returns on that investment.

In a tight economy, business is won and lost on nifty little adjustments. Organizations that are able to take a small step in their digital transformation, adopting a more modern, data-driven approach to procurement, could find themselves with an exploitable advantage over the competition. Are you getting the most out of your data? Do you even know where it is? These are the questions CFOs and procurement managers must answer as they strive to move their organizations into the present.

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