Digitalization of Procurement Becoming More Feasible for Stakeholders

By Dennis Bouley

April 11, 2018 at 7:43 AM

The recent growth of Internet connected industrial and personal devices has been referred to as the “Internet of Things” (IOT) revolution.  In fact, this trend is really an evolution that has been underway for quite some time.  The key drivers which have accelerated the trend include a broader adherence to open standards (such as Ethernet) and technology breakthroughs in the area of data aggregation middleware and data analytics.  This growth in digitization across industries presents new opportunities to drive business in a much more efficient manner thanks in large part to advanced connectivity.

Procurement leaders are looking to digital transformation as a new way to cut costs, improve agility and grow their impact across the enterprise by driving more profitability. According to a recent survey by The Hackett Group, two thirds of procurement organizations now have a strategy in place for addressing the growing influence of digitization, and nearly 50 percent feel they have the resources and competencies in place to execute digitalization-related projects.

Another important factor that is driving the spread of digitalization is the shift in human behavior and the changing workforce. The desire to measure and compare the effectiveness of objects that humans interact with is leading to a rapid acceleration in data creation, and more visibility to that data, and now often via a mobile device.

For instance, a plant manager today has access to 10 times more information about his plant than he did 20 years ago. In addition, plant/shop operators now have access to data from other off- the-shop-floor systems. For example, weather data can be used to predict crop growth, which can then be used to predict the need for fertilizer manufacturing over the upcoming 3 months. The fertilizer production plan therefore becomes more accurate.  

These concepts can lend themselves to improving the efficiency of procurement staffs.  The ability to leverage predictive analytics to anticipate supplier behaviors and performance, for example, can lead to better decision-making.

The cost of visibility to data is dropping

Digitalization allows monitoring of new variables that, in the past, were cost prohibitive.  Measurement of vibration on machinery and power consumption on all branches of the power system on a manufacturing floor, for example, can lead to predictions of when that equipment might fail. From a procurement perspective, that could mean MRO costs could be more effectively controlled.

The Hackett Group survey goes on to indicate that procurement organizations are expected to increase their use of robotic process automation and AI related technologies (i.e., cognitive, machine learning, virtual assistants) over the next two to three years.  They also plan to expand their use of cloud-based applications, advanced analytics, data visualization, and mobile computing.

The study also found that procurement executives expect dramatic growth in the use of technologies over the next two to three years with access and visibility to data being a major driver. Broad adoption of master data management is expected to grow by 3.8X. Broad adoption of advanced analytics is expected to see 3.2X growth, and data visualization adoption is expected to more than double.

To learn more about the impact of digitalization on procurement, download The Hackett Group’s 2018 Procurement Key Issues research document, “The CPO Agenda: Expanding Procurement’s Influence Through Change and Innovation.”



Tags: procurement digitalization procurement IoT procurement digital transformation
Category: News Article

Dennis Bouley

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Dennis Bouley is Editorial Director of MyPurchasingCenter.com and special advisor to MediaSolve Group, a strategic B2B marketing services firm focused on helping companies and institutions leverage the web and social media to achieve business goals. He spent 18 years at Schneider Electric as Managing Editor of Global Publications, and was responsible for cross-division management of the corporation’s white paper and customer success story processes. Prior to that, he spent 10 years working for IBM managing both small and large accounts. He holds a Bachelor of Arts in Journalism from the University of Rhode Island and holds a Certificat Annuel from the Sorbonne in Paris, France. 


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