Business and technology leaders in the ASUG community—not just those involved in procurement—no doubt will be intrigued, and some may even see themselves in the results of a new Economist Impact study.
Earlier this year, Economist Impact interviewed 430 C-level executives from around the world, including 119 chief financial officers, 109 chief operating officers, 102 chief procurement officers, and 100 chief supply chain officers; 130 of these from the Americas. They were interested in knowing how executives think the procurement profession is going, and just as important, where they plan to take the procurement function within their businesses.
Chain reactions: Building value in procurement through digitalization, an Economist Impact report sponsored by SAP, reveals a clear acceleration in the pace of digital transformation—or “digitalization”—within procurement. According to the report, a significant number of U.S. businesses are increasing their investment in digitalization. Proof: 62.9% of respondents reported modest-to-significant increases in their digital transformation budgets in the past year.
The Rise of Digitalization in Procurement
In a business environment that has been altered by events such as the COVID-19 pandemic, leaders are taking notice of the value of digitalizing procurement. The Economist Impact report observes that “digital technologies allow better access to data as it brings all the sources into a single place, which allows firms to use predictive analytics to analyze opportunities for cost reduction, improve supply chain visibility, and source new value chains.”
The survey reveals several drivers for digitalization. Among them, two, in particular, stand out across all regions: user experience, selected by 42.6% of respondents, and category management, chosen by 40.2%. These are also two of the top three drivers in the U.S., where 42.3% of respondents chose user experience, and 40.8% selected category management.
- User experience. When leaders talk about transforming the user experience, they’re saying they want to convert old processes that rely on paper invoices, phone calls, and spreadsheets to real-time, intuitive digital platforms. Digital tools offer a more positive and efficient user experience by simplifying and centralizing access to information. Additionally, they accelerate process execution, provide more visibility into supply chains, and enable procurement teams to make informed proactive decisions.
- Category management. We shouldn’t be surprised that category management is a key driver, given its impact on two of the major challenges procurement faces today: cost and risk. According to the Economist report, category management processes are evolving with the increased use of digital technologies, such as smart contracting platforms that leverage sophisticated indices to identify risks and opportunities. Additionally, as companies seek to maximize procurement value, they are placing growing importance on new sourcing procedures, capabilities, and data sources—all of which can be enhanced through digital technologies.
Interestingly, opinions about drivers of procurement digitalization differ depending on business function. CFOs and COOs were far likelier—43.7% and 44%, respectively—to favor user experience as a top driver, whereas CSCOs and CPOs ranked category management highest—46% and 42.2%.
This suggests CSCOs and CPOs are concerned with mitigating risk and maintaining end-to-end supply chains. They also remain focused on enabling continuous and cost-effective access to supply given the large-scale supply chain disruptions of the last two-to-three years.
Why Category Management?
The report calls category management a “rising star.” Although this may not come as a surprise—we’d been hearing the same directly from customers—the report puts an exclamation point on it.
To be clear, leaders are not saying they are dissatisfied with how they go about developing their category management strategies. Leaders are telling us they are satisfied with the outcomes they’ve been able to deliver.
But they’re also saying they’ve had enough of doing category management via PowerPoint and Excel, and they want us to take them to the next level. They’re challenging us to take the “technological muscle” in traditional ERP applications and apply it to procurement.
These leaders know we live in a world where data is mined in multiple ways to drive everything that goes on around us. They are looking for tools to help their people capture and analyze spend data to reduce standard costs, improve strategic sourcing, and increase the efficiency of spend management.
Take category management generalists as an example. They have access to data, but the truth is, it’s difficult for them to know everything the data is telling them. Additionally, they may not have access to all the data they need. Meanwhile, their stakeholders are looking to them for insights and recommendations that can lead to improved business outcomes.
The digitalization of procurement enables category management teams to bridge the gap between having data and using that data to identify trends, develop and execute strategies, and measure success against real business metrics.
Procurement Powered by Digitalization
The Economist Impact report provides a forward-looking snapshot of procurement and the impact of digitalization on this key business function. Download the full report here.
As I mentioned earlier, many of the report’s results might sound familiar based on your day-to-day experiences. But I am mindful that ASUG is a large organization with many opinions and perspectives. I’m interested to know whether your experiences tell the same story or a different one. Share your point of view with me directly via LinkedIn.
SAP Spend Connect Live
To learn more about where SAP is headed with user experience and category management, join SAP, and attendees from ASUG, for SAP Spend Connect Live, Oct. 24-26, 2022, in Dallas. This unique, in-person experience will highlight the SAP Intelligent Spend solutions for procurement, external workforce, travel and expense, and Business Network.
Baber Farooq is Head of Market Strategy, Procurement and External Workforce, Marketing and Solutions, SAP.