We are living in challenging times where companies are facing unprecedented challenges on multiple fronts. Supply shortages existing alongside inventory gluts and steep interest-rate hikes in response to economic inflation now threaten to push the global economy into a recession. The Collins Dictionary “Word of the Year” for 2022 is “permacrisis,” reflecting the volatility and unease created by multiple conflicting drivers of insecurity and instability. And, as often happens in tough times, unique challenges create unique opportunities for procurement teams to win.
However, the age-old conflict between Finance and Operations remains prevalent within discussions around procurement’s digital path forward. Should the case for Procurement Transformation be made using cost-savings, business continuity or both? Or is there an entirely different approach that focuses on faster cycles for holistically preferred outcomes? What would a digital roadmap look like if it focused on investing in agility and adaptation?
In their white paper, “Championing Procurement Transformation in the C-Suite,” Spend Matters analysts discuss how predictive procurement orchestration creates C-suite executive alignment between Finance and Operations, accelerating overall digital procurement excellence.
The Spend Matters white paper highlights:
- The current mobilization of C-suites to future-proof strategic procurement and shore up business continuity through a focus on operational performance
- How talent and business continuity unify Finance and Operations around transformation
- The urgent need to see around corners with Predictive Procurement Orchestration
- How spend under prediction (SUP) augments spend under management (SUM)
- How simulation-based technologies create a knowledge base for a changing workforce
All eyes are on procurement and the supply chain
The current business climate has brought attention to supply chains and procurement since many disruptions impact a company’s top line and, consequently, its survival. The stakes are no longer just cost optimization and improvement of the profit and loss (P&L) statement. Instead, procurement is now understood as key to business continuity, growth and profitability.
The awakening of modern C-suites allows today’s procurement leaders to do things differently. The readiness for CFOs to allocate funding for digitizing procurement contrasts starkly with what procurement teams have experienced over the years, even as recently as 2021. Deloitte’s 2021 CPO study showed that lack of funding is the third barrier to effectively implementing technology in procurement.
The other two barriers mentioned in Deloitte’s study — poor quality of data and poor integration across applications — are long-standing problems that have never been truly solved by traditional change management approaches (e.g., approaches to digital procurement that rely on scarce and expensive headcount, either through hiring or outsourcing). And this is especially true with the scarcity of talent and the issue of scaling talent in an ever-changing environment.
What Procurement needs is technology with a “set and forget” setting that delivers value regardless of user adoption and clearly addresses the challenge of poor quality of data, poor integration across applications and scarce or expensive talent. And CPOs need technology that puts their existing data to work as well as improves time-to-value and the speed of high-quality decision making to remove any perceived trade-off between procurement’s involvement and business velocity.
The flawed approach inherent to traditional technology implementations is a reliance on scarce and expensive talent. As a result, many CPOs feel caught in a chicken-and-egg problem with respect to technology transformation and talent acquisition. Fortunately, turning to Predictive Procurement Orchestration offers a powerful framework for breaking apart this problem.
Predictive Procurement Orchestration (PPO) offers a unique approach to digital procurement transformation through its three key form factors:
- Embedded – Unlike traditional technology, PPO is userless by definition and does not require any change management, training or user adoption.
- Amplified – PPO amplifies the benefits and impact of existing systems and processes by serving real-time recommendations at the right moment, enabling organizations to influence more spend faster with a beneficial impact on costs.
- Holistic – Rather than constantly optimizing for the lowest price, PPO’s self-learning model reflects an organization’s holistic intentions and preferences across a vast number of activities (purchase orders, contract awards, etc.) for all spend types, including direct materials, one-off purchases and CapEx. PPO enables repeatable cost improvement with existing suppliers without any negative impact to supplier relationships.
How organizations use PPO to drive savings and boost supplier operational performance
The Spend Matters white paper looks at three case studies. These case studies highlight the following:
- How speed and savings are driving each other within PPO’s return on investment cases
- How PPO impacts cost and operational performance differently from manual processes
- How PPO can shrink cycle times from 13 to 5 days and delight suppliers as a result
- How PPO can solve logistics procurement issues that jeopardize business continuity
The case studies from Bel Materne and Westfall Technik show how PPO can unlock value in the sourcing process for different categories (direct and indirect) by relying on price predictions. However, spend under prediction (SUP) is about more than reducing prices and cycle times — it can increase operational supplier performance.
The competitive advantage of PPO
Unprecedented times call for new approaches, not incremental changes. The mobilization of C-suites to future-proof supply chains is an opportunity that procurement organizations shouldn’t miss. PPO eliminates traditional trade-offs by being efficient, effective and sustainable at the same time by learning from past decisions made in similar situations.
Solving the chicken-and-egg problem in procurement transformation must be the core focus for champions of digital procurement roadmaps. PPO brings a different approach, one that learns from your procurement team’s (and stakeholders’) best procurement decisions over time.
Predictive Procurement Orchestration enables:
- Dynamic data foundation: Captures knowledge from retiring team members, creating a knowledge base that can serve as a data foundation for the future of the organization.
- Intelligent performance layer: Creates the conditions for transparency, accountability and incentives for individuals to perform better and improve over time.
- Always-on monitoring: Learns continually from the best outcomes across silos in the organization, including purchasing preferences from decentralized stakeholders.
To discover how PPO can accelerate your digital procurement roadmap, read more here.