Think twice about jumping head first into the latest procurement technologies, say Alejandro Alvarez and James Bousher of consultancy Ayming. There may be easier ways to have the same impact.
Procurement people love talking about blockchain, even if they’re not entirely sure what it is. And why not? It’s exciting, after all. The technology represents a potential breakthrough that may greatly impact a range of sectors.
Blockchain allows procurement departments to increase integration with their supply base, unlocking a whole range of savings in transactional procurement areas. But it’s no procurement panacea and for businesses, getting the basics right first might be a better bet.
When it comes to technology investment, businesses often face a problem. A potentially game-changing piece of kit comes onto the market that can overshadow less glamorous projects that might have a greater impact. Procurement pros aren’t immune to this, nobody is. There are four simple changes your department can implement to ensure it makes the most of its technology investments.
1. Ask yourself, is this really the answer?
There is no denying that technology makes life easier. But the most important thing procurement chiefs should do before making an investment is ask themselves if it’s really the solution they need.
When researching our Procurement 2020 report earlier this year, only 14% of respondents cited as an important aim the ability to gain a single source of truth with a full audit trail – one of the biggest benefits of blockchain. So why do so many procurement chiefs think blockchain is the best way for them to achieve their ambitions?
Investing in over the top tech is akin to getting a new Ferrari when what you really need is a Ford Focus. And sometimes you don’t need the tech at all. Would you really drive that Focus out of the showroom if you were strapped for cash and could walk to work?
2. Consider the big picture for the business
Not only does this approach help procurement get the most out of its new tools, but it builds the procurement brand within the business.
Only 17% of Procurement 2020 respondents, spanning the C-suite, believed their procurement function was entirely strategically focused, with fewer than one in five executives feeling their organisation had driven significant value from procurement in recent years. This needs to change.
The best way to improve the reputation of procurement departments, and with it department heads’ ability to lobby for future purchases, is to assess the impact of implementing technology on the business as a whole.
3. Unleash its full potential
The other big problem with procurement technology is people don’t implement it to its full capability. I’m sure many readers will have first-hand experience of sourcing systems that are just used to send messages to suppliers. This won’t do. Modern enterprises need to show ROI for all investments – so the more value you can get out of a system, the more likely you are to be able to implement another.
Go beyond simple onboarding courses. Adapt your culture to ensure that all procurement tools are fully integrated and thus cost effective. If you’re finding it exceptionally difficult to move people across then you might have the wrong system.
4. Look for the next best thing
It’s easy to get enamoured with fashionable innovations but departments can guard against temptation by prioritising actual business needs. This means keeping a close eye on developments in your sector as well as the tech space to make sure you match your solutions to the right problems. Maybe blockchain is the answer, but it may be a matter of something simpler.
When applied properly, technology can transform procurement and put it at the centre of a reinvigorated business. But heads of department need to be careful when investing, or they might end up stuck with a Ferrari they can’t take out of first gear.
Alejandro Alvarez is director of operations performance and James Bousher is operations performance manager at international business performance consultancy Ayming.