A Guide to implementing Technology-Driven Procurement in the post-pandemic world

In the context of day-to-day business operations, procurement has always played a critical part in creating cost savings for a company. Today, as the world moves into the post-pandemic era, procurement leaders are looking to deliver value beyond just optimizing spends. That’s where technology will play a key role in delivering this value via integrated, end-to-end automation of the sourcing process.

Although there is a fair degree of automation in parts of the sourcing process such as supplier management and supplier performance management, procurement departments have not integrated these processes into each other or other enterprise systems. Without integrated processes, organizations are left with fragmented, disjointed workflows that pose significant limitations to the value of the technology deployed and the benefits delivered to the business.

For example, consider a procurement department that treats supplier and RFP management separately from performance management and contract compliance. In this scenario, what was “bid” by the suppliers is disconnected from what the supplier “did.” This creates leakage for the organization, as the intent (i.e., the value) of sourcing contracts is not fully realized.

Building a Sourcing Strategy with Technology as the Common Thread

Automation and integration are essential elements for procurement to close gaps and eliminate leakage. However, these elements need to be a part of a holistic procurement strategy to be truly transformative. The right approach supported by the right technology can enable procurement departments to support their organizations to compete and succeed in today’s dynamic and unpredictable business environment.

Contracts managed on an advanced contract lifecycle management (CLM) platform can serve as the central pillar around which companies can build an integrated, automated sourcing process. Contracts are the foundation of a company’s relationship with its suppliers and are the single source of truth for what a company’s entitlements and obligations are in a business relationship. Through contract intelligence technology, sourcing departments can connect contracts to “upstream” processes like the RFx and “downstream” processes like delivery and performance.

Common Challenges in implementing a State-of-the-Art Sourcing Strategy

While the benefits of an end-to-end sourcing strategy are many, implementing such a strategy is not an overnight process. In some cases, a procurement department’s design makes it difficult to execute a state-of-the-art procurement strategy. Therefore, the next step, before making any process changes, is identifying obstacles to implementation. Challenges commonly fall into these camps:

Limitation of digitization tools

Process design is often driven by what the current tech stack can support. Since there is a substantial degree of standardization among sourcing tools, businesses are kept from realizing any differentiation at the process level.

Innovation’s isolation

Innovation is typically considered a future state and not regarded as foundational in tools that are part of the current process design. This results in innovation initiatives becoming classified as separate, non-operational projects.

The static state of contracts

Contracts securing specific partner commitments are often managed as static documents. This makes them difficult to reference and enforce during delivery.

Elusive ownership, accountability, and measurement

“Bid-vs.-did” accountability does not lend itself to single ownership and is difficult to measure, resulting in unintended leakage.

Advancing to a State-of-the-Art Procurement Strategy

Once these challenges are identified and acknowledged, overcoming them and modernizing the procurement strategy is highly achievable. Procurement organizations can surmount most obstacles by:

• Integrating the contracting and sourcing processes to create a holistic and integrated sourcing approach. This approach must ensure the procurement and supply chain’s sub-processes are seamlessly integrated.
• Addressing less-than-optimal contract management systems that are not integrated with P2P and other operational systems, resulting in cost leakages.
• Eliminating unrestricted PO systems without any category strategy or contracting policy constraints, which contribute to an increasing amount of spend not under contract.

These actions are likely to require the introduction of new tools and templates. Some organizations that have successfully undertaken this transformational journey have established a Procurement Center of Excellence (CoE). A CoE can be helpful as it will be centrally responsible for creating a digital infrastructure that allows the process owners to rapidly roll out new processes, measure effectiveness, and recalibrate as needed. All companies should seriously consider implementing a technology-driven procurement strategy as it helps accelerate the innovation process, which in turn, paves the way for future success.