Tue 16th Jun 2020: The Good the Bad the Ugly of Procurement Digitisation
Digital Transformation has been a bit of a buzz phrase over the last 3 or 4 years. Speak to any one of the procurement software suite vendors and they’ll quote Gartner or Forrester or IDC and tell you that if you’re not digitising your procurement end-to-end then you’ll be at a disadvantage to your competitors because they’re all doing it.
Well, certainly not all of them will be, and the ones that are doing it are not finding it easy.
I’ve made some bold statements so far. Let’s unpack some of them before we go any further.
Digital transformation of procurement is the holy grail of marrying a fully digitised source-to-pay process with access to accurate, up-to-the-minute spend data, market and prices data and everything in between. Smooth and seamless supplier market data calmly guiding a Category Manager through an otherwise torturous supplier qualification path. Accurately placing that supplier amongst others contributing a catalogue; e-procurement to allow orders according to its share of the business; managing the orders to that supplier; managing inventory; right through to e-invoicing and accounts payable.
SAP/Ariba, Basware and Coupa are perhaps the three best known Procurement Suite vendors but there are a surprisingly large number of other players all looking for a cut of this struggling market. Vendors such as Ivalua, Jaggaer, Zycus, GEP, Determine and Synertrade amongst many others. Each of these vendors will have their slick marketing people define the market in their own way to make their solution the standout, must have suite. Each of them will boast a shiny plethora of reference customers to demonstrate their value. Many if not all of them also hiding their battle scars from overtime and over budget implementations dogged by some of the most basic of mistakes.
Relying, as they do, on the hype generated by large expensive software the analysts are singing chorus to the vendors’ verses. Rich in their exaltation of AI, blockchain and RPA, and waxing lyrical about ‘spend data analytics’ or ‘crowdsourced services procurement’ there’s often less consideration of the mundane, much of which, as I will come on to, makes the procurement digitisation a difficult path to tread.
And I contend that at this point, mid 2020, Procurement digitisation is still well in it’s infancy and will remain so for longer than the vendors would hope. In addition, I believe many early adopters of digital procurement have had a difficult time birthing their shiny new systems and some basic mistakes have been made.
I’m going to discuss a number of common mistakes – some big, some small, but all with potentially disastrous consequences. And as the list of things that can go wrong is potentially endless, I’m going to limit myself to mistakes made in the project phase, and assume that you’ve done the due diligence and bought the right software suite for your organisation.
Process first, automation after – But get your process right!
Never, ever let a software solution tell you what your sourcing process should be.
Its your process. It should work the way you need it. It should account for the way your organisation does its business, be familiar to the users and above all should be fit for purpose. If your organisation makes PCB sub-assemblies and you need to ensure your supply chains are completely conflict-mineral-free then any qualification for a supplier of relevant components must include the relevant due diligence. If you are a manufacturer of high-end luggage and your brand has been built upon a claim to trade ethically, then your sourcing process should reflect the adherence to those values. The process is defined to a large degree by the culture of your organisation.
But that process, however implicitly understood by its users it might be, needs to be made explicit and codified fully for it become a true blueprint for the software that aims to digitise it. Each step needs to be understood in its context with all its dependencies listed. Failure to communicate your processes in full to your software vendors implementation team will result in a poor implementation.
Take all your stakeholders with you.
I have written about this elsewhere and its as true for procurement digitisation as it is with process development. Something as fundamental to a company as procurement needs to have C-level sponsorship. If the top management are not interested, then you should all go home. However, even though they are as “top-right” in your stakeholder mapping box as you can get, your CEO isn’t the only person you need to be pleasing. You need to ensure all your stakeholders are on board, and that includes Category Managers, Buyers AP specialists, as well as process managers. Bringing all your stakeholders with you is easy to say and very difficult to do anyone who has worked with Category Managers knows what it’s like to try to herd cats. But not bringing these people with you will endanger your whole project.
Having access to all the data you need sound like a dream. Any medium or large organisation is sitting on a goldmine of data if they can only untap it. Unifying structured and unstructured data and making it speak to you in a meaningful way via for instance Power BI or Cognos is the ideal. The reality is that most organisations are still trying find a way to access a muddle of data from a muddle of ERP systems. As an example, Vendor Master Data with several instances of a vendor because they either sell you different products or services, or the address was mis-keyed in one time. It was added with a Ltd instead of a Limited. Then that company was acquired by another supplier and is now they are both called something else completely. Not a problem for an organisation selling intellectual property. A big problem with a global manufacturing company.
Maybe I sound a little cynical about digital transformation of procurement. Believe me, I’m not. It is the way forward. I am cynical about software vendors and analysts dousing it all with snake oil so we can swallow it more easily. In the end its caveat emptor. Do your homework thoroughly, get your house in order, then start thinking about the best software for your business.