demystifying the path toward digital procurement · procurement teams are in the early stage of...

Demystifying the path toward

digital procurement

David Schannon Partner, Bain & Company

2IOFM conference_DigitalProcure ...SFR

Whyare we talking about digital

Whyare we talking about digital

Increased connectivity

More data

Greater computing power

Digital is

happening

now

New business models

Leaner operations

Re-defined operating models

Digital will

transform

your business

Faster processes

Increased value to the business

Buy Better + Spend BetterSM

Digital will

change

procurement

Augmented

Reality

Digitalrecombinant innovation

Artificial

Intelligence

Robotics

3D Printing

Autonomy

key technologies

Advanced Analytics / Big data, Blockchain, Wearables, Sensors, IoT, Microelectronics,

Cybersecurity, Advanced communications, Disruptive Cloud computing, Digital engagement, …

ConstructionVirtualized

sites

Consumer productsDigital Marketing

MedtechRobotic Surgery

Manufacturing3D Printing

of applications

Digitalreal use cases

Cost QualitySpeed Growth

Digitalcreates value


Digital is impacting industries at a different pace

No cohesive digital

strategy, just pockets

of investment

Digital strategies

are emerging

in silos

Digital strategy is

embedded within the

enterprise strategy

Construction Mining Oil & Gas PharmaUtilities

Grade 1Digital is nascent

Manu-

facturing

Consumer

products

Healthcare/

Medtech

Transport/

Logistics

Education

Hotels

Airlines

Auto

Grade 2Digital is a differentiator

Insurance

Banking

RetailTelco Tech Media

Grade 3Digital is table stakes


Procurement teams

are in the

early stage of

digital adoptions

Of procurement leaders

believe there is more they

could be doing to leverage

the latest digital tools

80%of procurement department have

deployed technologies like

Big Data, serverless architecture

or blockchain technology

10%rely solely on Microsoft office

tools for category management

stakeholder management, and

risk management

70%


In the era of digitization,

CPO has a new pivotal

role to be an accelerator

ResistorStuck in old ways of operating;

limited participation in innovation

See slow “cycle” time within procurement

processes, across functions

Finds difficulty reallocating resources

despite proven upside

ReactorReactive to digital trends

Follows others (business leaders, competitors) on how

and where to innovate

Cautious and less consistent digital process management

AcceleratorAdvocate for and enabler of innovation;

thought partner to business leadership

Willing to test and trial new solutions

across capabilities

Effective and proactive manager of

transformation process

What kind of leader will

yoube?


Key digital themes emerge within procurement functions

Frictionless

collaborationEnhanced partnering across

stakeholders and suppliers

Smarter

procurementAdvanced optimization

of procurement spend

Automated

and agileStep-function acceleration of

operational processes

Context

Sourcing to contract

Procure to pay

Automated

and agile

Step-function acceleration of

operational processes

AI enabled

supplier landscape,

shortlist leveraging

market and internal

data streams

Sophisticated

spend analysis

Streamlined

contracting life cycle

with ‘smart contracts’

Digitally enabled

selection process

Fully automated

invoicing and

payment process

Supplier portals and

self-service reporting

Underlying data lake integrating

multi-source master data

Blockchain

technology

Artificial Intelligence (AI) and robotic

process automation (RPA)

Example

technologies

Context

Frictionless

collaboration

Enhanced partnering across

stakeholders and suppliers

Predictive forecasting

and flagging risk of material

and labor shortages

Real time data

collection and sharing

across groups

Single source of

truth and real time

access to spend

and financial data

Stakeholder

management

toolsProcurement

Platform to collaborate with self service optionsRFI/P process, contract negotiations, unit and specification design

Context

Smarter

procurement

Advanced optimization of

procurement spend across Buy

Better + Spend BetterSM levers

Optimization

levers

Price

negotiations

Volume

allocation

Demand control

and compliance

Design-

to-cost

System cost

reduction

“Buy better” “Spend better”

Negotiate prices

Negotiate terms

Manage price risks

Pool volumes / contracts

Shift volumes to best price

suppliers

Leverage procurement networks

Control demand

Enforce compliance

Reduce complexity

Perform value

engineering

TCO process

improvement

Collaborative

improvement

Optimize value-add

supply chain

AI/ML predictive

price analytics

Demand

forecasting

Design tools with

approved parts

Spend

analytics

Vendor

co-development

Example

digital

enablers

points of digital light

Network intelligence to identify and qualify suppliers

Spend audit

tools

Demand

forecasting

3D printing for niche parts to

reduce lead-time

RPA to reduce touches

for invoice processing

Integrating

large data for better spend

analysis

Predictive

analytics to identify

opportunity areas

Enhanced,

real time

spend analytics

provided to business partners

Supplier portals

for improved

communications and

access to data

Mobile apps for digital transportation

and delivery documentation

Developing new

partnerships across the ecosystem

Context

Pre-procurement Sourcing to contract (S2C)

Procure to

pay (P2P) Ongoing

Overall procurement

strategy

Category management Sourcing Supplier

relationship

management

PurchasingPerformance

ManagementDefining categories Spend analysis Supplier selection Contract management

major digital use cases being deployed today

Supplier Management

Risk Management

Supplier Quality Management

Transport optimization

Procure-to-Pay Suite

E-invoicing

Dynamic Discounting

Recovery audit

MRO Procurement

Robotic Process Automation

On-demand/On-location Parts Manufacturing

Inventory Management Systems

Multi-domain Master Data Management

Vendor Management Systems (VMS) / Statement of Work (SOW) Solutions

Network/Market Data Intelligence

Spend Analysis

Demand Forecasting

Parts search and selection software

Social Procurement Tools

E-auctions

Contract Life Cycle Management

Collaborative Data Platform


A Bain survey highlights five top digital solutions 2018 by category

Most important

to business


Multi-Domain Master Data Management

Contract Life Cycle


Spend Analysis

Highest deployment

adoption


Multi Domain Master Data Management

E-invoicing

Spend Analysis

Demand Forecasting

Satisfaction

with solution

Recovery Audit


Transport Optimization

E-invoicing

Collaborative Data Platform

Context

More importantLess important

Low

satisfaction

High

satisfaction

Importance of solution to company over next 5 years

Satisfaction with solution currently deployed

Adoption

of

solution

Step 1

Step 2

Step 3

Step 4

steps to deploying

digital procurement solutions

Context


Low

satisfaction

High

satisfaction



Adoption

of

solution

Recovery audit Transportation optimization

Collaborative data platform

Supplier quality management

E-invoicing

Start with solutions that users are very satisfied with, as they are likely to be successfully

deployed, and build momentum for digitizing procurementS T E P

Context


Low

satisfaction

High

satisfaction



Adoption

of

solution

Supplier

management

Multi-domain

master data

Management

Risk

management

MRO

procurement

SOW

Solutions/VMS

Procure-to-pay

suite

On-demand

parts and

manufacturing

Next, focus on very important solutions with relatively high satisfaction,

as they are likely to deliver on ROI and prove value for future investmentS T E P

Context


Low

satisfaction

High

satisfaction



Adoption

of

solution

Network

/Market Data

IntelligenceSpend

analysis

Demand

forecasting

Inventory management systems

Contract

lifecycle

management

Proceed with caution on solutions with lower satisfaction ratings,

and ensure solutions are a good match for your needsS T E P

Context


Low

satisfaction

High

satisfaction



Adoption

of

solution

Parts search &

selection software

RPA

Social

procurement tools

E-auctions

Dynamic

discounting

Take a highly discerning approach to investment in solutions rated low in satisfaction and

importance; wait until technology improvesS T E P


Deciding where to invest first

Cross-functional readiness

Technology requirements

Data readiness

ROI

Priority digital solutions

Highest potential digital solutions for near-term deployment

Is your data formatted in a way to enable full functionality of tools?

Can your company’s technology adopt this?

Can you get prioritization in the IT pipeline?

Do teams (and cross-functional leaders) have the openness, ability,

buy-in, and time required to adopt a new digital solution and process?

Can you create a business case with a true return (savings from

external spend, people spend, working capital, increased

production, or improved time to market)?


Our approach

Procurement digital roadmap development

InputsGather inputs from overall company,

internal stakeholders, and industry,

digital and market trends

VisionCraft your long-term digital vision

for procurement, and consider the

technologies, talent, and systems required

RoadmapDevelop the stepping stone to achieve

the vision; ruthlessly prioritize to

develop a track-record of success


Our approach

Procurement digital roadmap development

Inputs Vision Roadmap

Procurement digital vision

“the

what”Source-to-

contract,

procure-to-pay

process

Role in

accelerated

innovation

Vendor

management

Category

management

“the

how”

Talent and

culture

Data and

analytics

Operating model

& partnerships

Systems and

technology

Wave 1 goals

Fill in text

Key investments

Fill in text

Business case

Fill in text

Timeline

Fill in text

Industry digital

direction

Procurement digital

departure

Function digital

direction

Company vision

Closingperspectives

(Too) many solutions

for procurement teams

to consider

Digital is innovating

and accelerating

at an unprecedented pace

Prioritize solutions

likely to succeed

and drive real value

—vet team, IT, and

data readiness

before diving in

demystifying the path toward digital procurement · procurement teams are in the early stage of...

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