The why and how of digital transformation
According to procurement consultant David Holmes, there’s one thing driving digitisation: information. In a world where data is the new oil and cash remains king, the rapid exchange of information is high currency. And for any organisation without a clear plan in place to capitalise on their data, time is running out to act.
“Faster information means for a faster service,” says Holmes. “So for procurement, that means keeping up with your vendors, keeping up with your clients and keeping up with the supply chain as a whole.
“When you are digitised, your communication is that much quicker and more or less every company is going down that route – so there’s a risk of being left behind. As such I don’t there’s an argument against it. I do however think the approach you take to digitisation and the reasons for it need to be crystal clear.”
As a case in point, he argues that procurement should be looking to save money first and foremost. But does that come from the payment system, the procurement system or the supply chain? Or does it need to be a mix?
“All those elements have masses of data attached to them. That data is the key to unlocking a lot of potential for procurement. But before you go ahead and digitise the lot, you need to think about what you really want to do, what you’re really hoping to achieve.
“What’s your business case? What’s your return on investment for doing that? It could cost a lot of money. And you are to a certain extent, doing parallel running with your current manual systems. So you’ve got those costs as well, because while you’re doing one, you’re doing the other until such point you cut over.”
Where to start (if you haven’t already)
If you’re going to digitise your procurement department, it pays to hire expertise. Having strategist or consultants on board who will map the process, align it to your business and build a case for ROI, will save you money in the long-term. Moreover, it makes the transition smoother and far more likely to succeed.
“You need to understand the tools that are best suited for your business and that are going to get the most from your data,” Holmes says. “Not all services, suites or products will do what you want them to. “Not all will suit your needs. And if you don’t know what you’re doing, your total cost of ownership will go through the roof and your overall service will suffer.”
Holmes adds that an overlooked aspect of the equation is knowing where to look in the first place. For that he recommends tendering as you would with any other service or major investment, which clear and obvious objectives.
“Your business transformation program needs to match the strategy. And then your strategy will drive how you want to tender and how you want to move forward. And therefore you need to have a plan.
“Tendering is fine, but once you’ve gone out to supply, what are you going to do with it? It could be a two or three-year plan, but you need to go back to basics. And that’s where a lot of companies fail because they rush into it and they haven’t really thought of the plan.”
The case for data has been cut and dried for several years. Frankly, if you’re not using it you ought to be; history shows us that yesterday’s innovative is today’s standard – and if you’re not up to standard then it’s very easy to fall behind and into obscurity. Evolution is very much the name of the game.
Not all data was created equal of course. And as far as procurement is concerned, less is more – to an extent anyway. Carefully selected and intelligible data is better than a poorly managed, illegible mass; it is after all how you use and interpret the data that counts. That job is made far easier if you’re prudent about what you choose to monitor.
“For procurement to take advantage of digitisation, it should be using key procurement data,” Holmes says. “You need to be able to look at spend data, contract data and invoicing data. Those three elements give you insight into category spend, supplier performance and the nature of your processes, among many other things.
“With clarity on those elements, you can start to see patterns emerging. You can start to make decisions with confidence and accuracy, and you can make incremental and iterative improvements to the fundamental aspects of procurement. Over time, this compounds and transforms procurement into strategic partner within the business – as opposed to a cost centre.”
Tellingly, this phenomenon loops back to the idea that faster and better information ultimately leads to better service and to a better performing business overall.
One of the major selling points of digitisation is that it frees execs from mundane repetitive tasks into more strategic work. In his experience, Holmes says that happens – and it leads to significant improvements for the organisation.
“I was able to save a contractor seven figures recently, simply because I had data to hand. I was able to approach the team that is responsible for compiling and analysing data and ask for specific procurement data sets.
“Using that data, I was able to spot an opportunity to make the saving. If I’d had to find and compile that data myself it would have been too time consuming and the opportunity would have been missed.
“I was able to make a decision in half an hour. In today’s market, that’s a huge competitive advantage, and one that not many business can afford to pass up.”