Whitepaper

State of Procurement Digital Transformation: Value Drivers and Expectations

by Constantine Limberakis and Nic Walden of The Hackett Group

Available for download with permission.

Are your ready to deliver better results at a lower cost?

Enterprises are increasingly relying on digital technologies to enhance the customer experience, accelerate new product and service innovation, improve operational cost efficiency, and make sense of massive amounts of data. Procurement organizations have the potential to play a more strategic role in the digital era, but to do so they must engineer their own digital transformation. Our research has found that only 63% of procurement organizations have even developed a plan for doing so. Selecting the right mix of digital initiatives to address the most significant value drivers is one of the most difficult challenges procurement organizations face as they identify a path forward.

The Hackett Group’s research shows that addressing the impact of digital transformation on business has become the most critical imperative for enterprises in every industry. While implementing technology has always been a part of business strategy, adoption of emerging technologies for procurement and supply operations is critical in a rapidly changing business environment marked by intensifying competition and disruptive innovation.

As the world of big data, robots and artificial intelligence takes shape, procurement is expected to provide more profound insights into supply relationships, including conventional cost structures, supply availability, lead times and quality. Moreover, in this new digital landscape, users of business technology are demanding consumer-like e-commerce interfaces from e-procurement systems to find the products or services they need quickly. Procurement in the digital age requires operational agility to prioritize customer service delivery while anticipating or even predicting new supply opportunities based on volatile market conditions.

The Digital Transformation Landscape

Developing Use Cases for Emerging Digital Technologies

Advanced procurement teams are already piloting or deploying digital technologies in both upstream and downstream activities. Some are partnering with technology or service providers to co-create or even co-innovate use-case examples as ways to mitigate the risk of failure, and potentially deliver faster results by accessing external expertise and specialists.

Anticipated Strategic and Tactical Value Drivers of Digital Transformation in Procurement

As industry pundits and technology providers consider procurement’s digital evolution, practitioners are keen to know what steps to take next. The Hackett Group conducted the Digital Transformation Performance Study in late 2017 to gain an understanding of the broader strategic context of enterprise digital transformation for the procurement function. We take a brief look at the study results and evaluate how the most common strategic and tactical value drivers for digital transformation currently align with the digital technologies that can address them.

Strategic value drivers are those that will increase procurement’s contribution to the enterprise, such as set it apart from competitors or become more profitable; tactical drivers are those that improve procurement’s day-to-day activities and interactions with stakeholders.

Conclusion and Recommendations

Whether spurred by a single, compelling event or part of a more extensive digital transformation of the enterprise, executive leadership is challenging procurement to deliver better results at lower cost. How well procurement responds often comes down to its capability maturity and willingness to embrace new technologies and ways of working. With only limited increases in resources expected for the foreseeable future, below are some suggested strategies:

  • Target specific transformation objectives and goals
  • Know how procurement’s digital transformation will affect critical stakeholders
  • Before investing in additional solutions, understand how the procurement organization’s current technology providers are addressing emerging technologies
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