The 3 Components of a Successful Tech-Fueled Procurement Transformation

From vetting suppliers to making payments (and everything in-between), procurement professionals are transforming the way they work to reflect changes in technology. For some organizations, this begins with overhauling their procurement strategies from top to bottom and side to side; for others it means adopting brand new procure-to-pay (P2P) systems to streamline operations. In any case, they’re motivated by the savings that can be gained by taking a big-picture approach to procurement— bringing together internal resources and outside partnerships and investing in new tools and technologies—to optimize their processes and drive results.

Let’s explore the trends shaping the procurement transformation:

1. Strong Executive Leadership
Insights from a Governing Institute survey performed to assess states’ purchasing processes can be applied to procurement efforts in the private sector. What the top ranking states share in common is a need to gain the full support of top-level officials who see procurement as a place to advance goals, consistent message down and through the ranks. Many companies, like many government centers, have been slow to adopt new technologies due to budget constraints and entrenched traditional business practices that can be challenging to unravel. But they’re seeing the writing on the wall that they need to bring their technology up to date and use it to introduce new ideas—and support for this level of change has to start at the top.

SupplyChainQuarterly.com’s 10 Best Practices You Should be Doing Now leads with the recommendation that organizations establish a governing supply chain council to serve as a forum for cross-functional communication and to ensure procurement and organizational goals and strategies align. And A. T. Kearney’s piece, How to Become a Procurement Champion, states that while there are a few different ways to achieve procurement excellence, “the one thing all procurement champions have in common is leaders who provide resources and remove obstacles.”

1.5 Adequate Staffing and Training
As companies navigate the changing tech-for-procurement environment, they’re aiming to support effective management teams with enough people to get the work done—and have the capacity to explore new ideas, too. Part of this human resources support involves arming employees with training to keep them stay up-to-date on technology, but also to build softer skills to aid in managing negotiations and organizational/process changes, for instance.

2. Rehabbed Vendor Management
Sourcing, vetting, partnering and contracting with vendors today takes a fresh set of competencies that more companies are exploring. The process of vendor management itself is more strategic, with more focus placed up-front, while determining program objectives and during project design. On the whole, organizations are taking a more collaborative, transparent approach in sourcing and selecting vendors, and they’re finding ways to use vendor performance metrics to evaluate existing relationships.

Maintaining vendor relationships is increasingly a two-way street with both parties invested in the process. In fact, SupplyChainQuarterly.com’s 10 Best Practices You Should be Doing Now refers to this practice as “alliance management,” and suggests that an effective alliance management program with key suppliers should:

• Provide a mechanism to ensure that the relationship stays healthy and vibrant
• Create a platform for problem resolution
• Develop continuous improvement goals with the objective of achieving value for both parties
• Ensure that performance measurement objectives are achieved

With respect to contract administration, organizations are putting more effort into making sure vendors comply with their contracts. They’re using a combination of enhanced employee training and relevant data to help the procurement team address potential issues proactively rather than reactively.

Read Exploring AP Technologies: Supplier Portals for insights into a new way to interact with vendors.

3. The Right Technology
Successful procurement departments are making technology work for their exact needs and practices. In doing so, they’re avoiding the downtime and workarounds characteristic of out-of-the-box solutions that don’t integrate well with existing systems or deliver actionable intelligence. Because it’s critical that their technology helps keep their processes running smoothly and adaptively—and on the payments ends, making payments accurately and on time—many procurement organizations are introducing digital processes and/or implementing SaaS platforms to help them manage any or all P2P functions.

And when it comes to data, organizations are using it to track their procurement process end-to-end. Their databases are filling up with information on suppliers and spending as well as market metrics—intelligence they’re using to make pricing decisions, improve customer service, maximize ROI, and plan for the future.

For more insights into technology’s impact on the procure-to-pay process, read
B2B Procurement Goes Digital and Exploring AP Technologies: Complete Procure-to-Pay Solutions.