Back to the Future of Procurement Technology

Posted on October 21st, 2015 by

Picture of Back to the Furture Car

The Procurement of Things… that’s “PoT” – I’ll explain in a minute. Meanwhile, bear in mind that Marty and Doc, having gone Back to the Future in the first film, took the DeLorean forward to what was then the future in Part 2.

They arrived on October 21, 2015. That’s when I’m posting this, in fact – today. No sign of Doc or Marty yet, no DeLoreans in the car park (I’m sure we’d have noticed).

Some of what was predicted has similarly failed to arrive. It strikes me, though, that we’ve moved ahead in ways unimaginable at the time of the film. Or at least we think we have.

You see, recent research has suggested that the majority of companies think that they are using Procurement Technology. Having discussed the proliferation of platforms and huge expanse of applications within procurement last time, it’s worth a reality check on that – as I said before, there is more to this than traditional programs.

Just over three quarters of participants said that they were using “Spend Analytics Technology,” for example. Well, that covers a lot of ground, from spreadsheets at one end to full business intelligence solutions at the other.

We should also consider how people are using what technology they have in place, or may be in the process of acquiring. Is it fully fit for purpose? Is it over the top? Is it truly deployed to full advantage? And, most critical of all, is it fully and effectively adopted by those who can use it to greatest benefit – are all stakeholders fully engaged?

The research in question was carried out by Xchanging for their 2015 Global Procurement Study. It’s worth looking at what the report tells us about who has what and how they’re using it. For instance, Europe was shown to be lagging US companies on technology deployment, who were 8 per cent more likely to have it. Those most likely to have procurement technology in use tended to be:

  • Based in the USA
  • Employing at least 3,000 people
  • In the Retail, Consumer Goods or Manufacturing sectors
  • Actively outsourcing some aspects of their procurement

Perhaps there is some reflection of the climate of austerity, but the data on technologies more readily adopted also show us procurement’s comfort zone, or path of least resistance:

  • 77% Savings Tracking
  • 76% Spend Analytics
technology and advertisement concept - laptop computer with graph on screen

This is reinforced by pressures from within businesses themselves, of course, where KPIs on which procurement functions are most frequently measured tend to be cost related. The top four KPIs were:

  • 47% Cost Savings Realised
  • 19% Revenue Impact
  • 16% Cost Savings Identified
  • 14% Cost Avoidance

Over half of participating companies said they already had “Procurement Technology” in place, as noted earlier. Supplier Performance Management platforms and Predictive Analytics were top of the shopping list otherwise, with 12 per cent of respondents saying they were likely to implement them in the next two years.

Beyond those more familiar areas of Savings, Spend, Cost and Revenue, though, the question remains as to how much of those thought to be in place are, or will be, effectively deployed within, or focused on, procurement. These are the other technologies people say are in use:

  • 68% Automation
  • 68% Reporting Dashboards
  • 67% Contract Management
  • 64% Supplier Performance Management
  • 60% Market Intelligence
  • 59% eSourcing
  • 54% Predictive Analytics
  • 54% Internet of Things

That last item in particular is eye-catching. It’s becoming increasingly familiar to see it abbreviated to IoT: and it basically refers to all that “connected stuff” that we’re moving towards via driverless cars, wearable devices and the like. It’s the Future we’re going forwards to… apparently.

The Internet of Things refers to the way in which all of this will be wirelessly connected across the web and allow your computer or phone or hub to control it – your lights going on and off, feeding the pet, you name it (maybe even your robot housekeeper walking the dog, who knows…).

Back to future on this: the Procurement of Things. It’s possibly a “big ask” to expect, as the Xchanging respondents suggested, that the most imminently impactful technologies for supply chain operations will be the Internet of Things and Predictive Analytics (79 per cent and 80 per cent respectively). Remember: 46 per cent of those taking part said that they were “unlikely to ever implement online auctions…” Well, those are established at this moment (unlike hoverboards).

So what will the Procurement of Things (PoT) really look like? Another report issued by DHL and Cisco in April this year estimated that 50 billion devices will be connected to the internet by 2020. The figure today is 15 billion, so that’s an increase of over 300 per cent. That suggests that the IoT (Internet of Things) could generate $1.9 trillion across supply chain and logistics operations alone, with warehousing and freight benefitting the most.

Procurement and Logistics are very much part of our DNA at SpringTide, so the DHL/Cisco study, an international project that surveyed 830 procurement decision makers across the UK, Europe and North America, allows us to consider this whole Procurement Technology matter from a “real world” angle.

It also makes eminent sense that an operation that truly “connects” the supply chain end-to-end (E2E), involving internal stakeholders and external customers alike, will be in a special place to reap the benefits of the Internet of Things.

Those IoT benefits to supply chain and logistics are summarised as:

  • enabling businesses to track the exact whereabouts and the condition of goods in transit in a global supply chain
  • automatic monitoring of inventory levels to manage cash flow more efficiently
  • removal of human error from the process.
  • enabling hedging on the price of raw materials to become a daily part of the procurement process
  • creating further opportunities for automation to increase accuracy and efficiency
  • driving a more strategic approach to sourcing

The report concludes that IoT in the realm of logistics will facilitate “sensing and sense making.” “Sensing” refers to the monitoring of different elements within a supply chain via a variety of technologies and media; whilst “sense making” brings together the vast amounts of data sets thus generated and turning it into insights to drive new solutions.

All of that already counts as best practice for SpringTide: we’re already “back” to that particular future. When we “automate business processes to eliminate manual interventions” (as the report says the IoT will allow), we do it to generate savings, improve quality and engage stakeholders more productively. The technology – any fit for purpose technology – connects it all, speeds it up and allows us to deploy people with great flexibility. It puts it all into “real time.”

Group of Business People Using Digital Devices

The IoT will also “improve quality and predictability, and lower costs. [With it] we can optimize how people, systems, and assets work together, and coordinate their activities. And ultimately, we can apply analytics to the entire value chain to identify wider improvement opportunities and best practices. ”

Our case would be, again, that we can already do that. We constantly promote a value chain approach in both Transformation and Outsourcing at any level. We’ve won prizes for it. But we certainly won’t turn up our noses to the Internet of Things when it comes to the Procurement of Things.

Our mission regarding technology, then, is to make sure that people really need it, get the right platform for them, use if effectively and get everyone on board with it. Basically, you don’t have to wait for the Internet of Things to get the promised benefits to businesses, stakeholders and customers from the Procurement of Things.

DHL and Cisco find that those benefits “extend across the entire logistics value chain, including warehousing operations, freight transportation, and last-mile delivery. And they impact areas such as operational efficiency, safety and security, customer experience, and new business models.”

Again – by all means get ready for the Internet of Things. But please get a handle on your Procurement of Things first! The Xchanging report does tend to suggest that people need to know what technology they’ve got already; and be careful what they wish for. An honest diagnostic on “how it is” and a sensible plan derived from it is the best place to start.

The two reports taken together suggest to SpringTide that the adoption of new technologies needs to be at the right pace for, and address the particular needs of, each individual company involved. It needs to progress in parallel with a sustained focus on the value and expertise of procurement professionals in the here and now.

That is a path to procurement as a strategic, indispensable part of any organisation that is both navigable and sustainable. We don’t have the self-tying shoe-laces, as the film predicted; but we do have the expertise right now – and much of the technology is available, too. The key thing to consider about the Internet of Things is to get your Procurement of Things ready to make the best of all your connections.

So… why not connect right now and talk to us about the future as you see it? Give us a call now on +44 (0) 1543 466835 or fill in this form.