The 3 Tech Areas that Support a Digital Procurement Operating Model

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The push for digital transformation is in full force this year, and procurement organizations have acknowledged that this digital wave will revolutionize their operating models. Case in point: over 80% of procurement groups believe that digital transformation will soon change the way they deliver services, as GEP reported in its 2018 Procurement Outlook.

But there are still obstacles to embracing this transformation. Only 32% of procurement organizations currently have a procurement strategy in place, and just 25% say they have the necessary resources and competencies to execute a digital strategy.

Bridging this gap between strategy and capability will require procurement to understand the essential technologies that underlie a digital operating model. To start, practitioners should get up to speed on the following three technology areas.

Chatbots and Collaboration Tools

The way businesses communicate is changing. Driven by shifts in consumer technology, enterprise software users now expect applications to have many of the features they encounter in their daily lives, particularly the ability to easily converse with the application and other team members.

The increasing ubiquity of voice-controlled assistants like Alexa and Siri, for example, illustrates just how comfortable consumers have become interacting with machines to execute simple tasks and retrieve information. These capabilities are showing up in procurement software, too, frequently in the form of chatbots.

Conversational chat systems allow users to interact with virtual assistants that serve as a front-line purchasing desk. This allows requisitioners to ask the system basic questions, such as whether a particular item is available in current inventory, or procurement staff to save time on routine tasks, such as fielding initial inquiries from vendors.

This ability to request and retrieve information matters when users want to interact with another human through the system, as well. A truly digital procurement organization must facilitate internal collaboration through digital tools, enabling users to communicate with each other within the application they are using for a specific task, not just in dedicated communication tools.

As we explored in a related series on this topic, collaboration tools within enterprise software are an essential component of effective program management. The rise of collaboration tools like Slack have shown that businesses want to be able to manage fast-paced communication on the ground so they can tie day-to-day tasks back to strategic objectives.

For procurement software, that means that not only synchronous and asynchronous communication features (i.e., chat and email integration) are needed, but also capabilities that facilitate project planning and management, such as virtual whiteboards for ideation and milestone tracking for accountability.

Robotic Process Automation

Extending the notion of easy communication and collaboration to program management brings up another relevant priority: how much time a procurement organization is able to dedicate to strategic projects. If the goal is to construct a fully digital procurement operating model, organizations will need to embrace tools like robotic process automation (RPA) to make time for what really matters.

Automation can sound like somewhat of a dirty word these days, but the “A” in RPA is much more of a boon to procurement professionals than a threat. At its core, RPA is a type of software that mimics the activity of a human carrying out a task within a process. RPA records anything a user does through clicking on a screen or typing into a keyboard and then repeats those actions as directed, completing tasks such as opening emails, completing e-forms, and recording and rekeying data into a spreadsheet.

RPA is commonly used in transactional processes such as invoice receipt and validation. When a vendor sends an invoice, the RPA application will open the email, open the PDF invoice, retrieve the relevant information, log in to the ERP and input the data and possibly check that data against a PO to make sure the invoice is accurate. If everything checks out, the application could even issue a payment.

While RPA is not a new technology, it has become increasingly important to procurement groups as they embrace digital transformation. As GEP explains in its 2018 Outlook Report, continuing adoption of RPA is helping organizations move away from models that rely on labor arbitrage. Instead, transactional tasks are being automated to improve overall delivery speed and quality as well as secure cost reductions once the necessary capital investments have been made to support automation.

Artificial Intelligence and Machine Learning

Digital transformation is, of course, more than about just automating tasks to squeeze out extra savings. In their most mature form, digital procurement groups use artificial intelligence and other cutting-edge technologies to make procurement “smarter” and help their organizations deliver additional value to stakeholders.

AI has many use cases, but one of the most compelling ways to help procurement operate in a truly digital way is by applying the AI-powered customization we know from consumer technology to B2B scenarios. Consider how companies from Facebook to Tesla gather data from customers to improve their own offerings. The same concept is slowly being applied to procurement software, as Spend Matters Chief Research Officer Pierre Mitchell explained in a recent webinar.

“What’s really making those systems more and more powerful and relevant is artificial intelligence,” he said. “Tesla has all these cameras that are learning how to help you improve how you drive. The same thing is going to be happening with Uber. The machines out there are learning, and they’re learning from you.”

This is a revolution for anyone who relies on enterprise software. With AI-powered customization, based on the data compiled by systems on different kinds of users, a “smart” procurement system can differentiate users by business role and tailor the system to a user’s specific needs. As users continue to interact with a procurement system, the platform refines its predictions of what they’re looking for, essentially guiding them down appropriate buying pathways.

The ultimate goal of all of this, of course, is to maximize adoption and use of the platform. As Paul Blake, associate director at GEP, said on the same webinar, user expectations about an application will affect their opinion of whether a software is suitable, which is then correlated with adoption of the software.

“If your users are finding workarounds because they don’t like the software, the solution you’ve found is no solution at all,” Blake said. “The right user solution directly drives return-on-investment. It keeps users engaged and enthusiastic.”

That combination of ROI and engagement is essential to transforming procurement’s operating model from one that merely makes use of digital tools to one that is itself fully digital.