The Evolution of Procurement

Procurement plays an increasingly prominent role and many CPOs/CSCOs are starting to get a seat at the executive table. 82% of top 100 companies in Southeast Asia have dedicated functions for Supply Chain and Procurement, with more than half (56%) of supply chain leaders positioned either at top management or corporate level [1]. From procurement being a supporting function, to playing a leading role in driving growth. The importance of procurement can no longer be ignored.

The role of procurement has evolved, from a traditional, siloed and functionally focused to one that  is more integrated and intelligent, powered by digital and technology enabling visibility, providing actionable insights to innovate and gain competitive advantage.

The objective of procurement has always remained the same, to source from the right suppliers, at the right time, right price and best quality. However, the market in which many CPOs are operating has become much more volatile and complex, complicated by Global Covid-19 pandemic, compounded by the Global Supply Chain crisis resulting in aggressive cuts, materials shortage, increasing demands and price escalations. Throw in technology advancement in the form of rapid digitalization that changes how we buy and interact with our suppliers and customers, and we have a very complex landscape. 

The traditional procurement model which is functionally focused but is siloed in its operations and is slow to react to the volatility of market changes. In this current market where speed is a key differentiator, CPOs must now learn to adapt quickly to the market in order to meet the objective of procurement.

However, every cloud has a silver lining. CPOs could start looking at the future of procurement, leveraging digital and analytics to get visibility of what is happening in their procurement, drawing intelligence & actionable insights to improve the procurement strategy and process, and implement these improvements to respond quickly to the market.

The Future of Procurement is Digital

The Future of Procurement has transformed the traditional function by ingesting key digital capabilities turning data into actionable insights:

  • Demand Management, leveraging AI-powered analytics to analyse historical consumptions and future demands to determine the right requirements through intelligent planning  
  • Category Management, through end-to-end visibility of corporate spending allows one-click procurement strategy development like variant and volume consolidation, vendor rationalization, multi-years contract, etc.
  • Strategic Sourcing supported by:
    • Should Cost Models, development of cost structure and associated levers associated for automatic price adjustment (currency exchange, LME, Minimum Wage etc)
    • Tender Analytics, leveraging descriptive analytics which enable thorough data comparison of submitted tender documents to provide fact-based negotiation strategy through cost structure analysis and comparison of past and external cost.
  • Vendor Management, systematic management of vendor relationship covering end-to-end vendor life-cycle management which enables value optimization through innovation, risk mitigation, and partnership program
  • Contract Management and R2P, integrated systematic contract fulfilment system allows better compliance monitoring of contract which increase SLA of R2P through automated payment system

With all the positive disruptions caused by digital procurement, many companies struggle to make the transition from traditional procurement to the one that is future-ready. In Accenture, we work together with our clients to take the first steps in transitioning to the future:

Making the Transition

There is no easy way to make the transition, but the obvious one is to start now. 'If you always do what you always did, you will always get what you always got'. 
In this case, we helped leading utility company in Southeast Asia on their digital procurement journey to unlock value through intelligent procurement by: 

This transformation brings new ways of working, addressing critical challenges along the procurement value chain leveraging digital technology at the core of the Procurement & Supply chain process:

The Future is now

Intelligent Procurement might sound futuristic and far-fetched, but it is no longer just a future trend. Leading companies have started jumping on the bandwagon of digital transformation and were justified through the tangible and intangible benefits generated across multiple fronts from:

  • Sustainable cost savings (~15%), as procurement is directly related to cost, companies directly reduce their cost by implementing intelligent procurement.
  • Productivity improvements (~20%), through use of digital tools, companies have reported improvement in team productivity eliminating / automating / accelerating processes along the way
  • Digital workforce (analytical and data-driven), by enabling data-driven decision as the new ways of working to improve overall efficiency within the organization. Less time on data collection, more time spent on data-driven analytics
  • Technology-enabled audit trail and good corporate governance, ensuring compliance to regulations and policy.
So take the next step, make a difference

COVID-19 has major impact on procurement organization around the world. How procurement leaders respond will affect not only the longer-term vision of procurement within the company, but also the leaders’ ability to make a true difference in the company. While what we do in traditional procurement is still important, how we do it needs to be more intelligent, leveraging the vast amount of data that organization has and using digital to unlock the full value, from having end-to-end visibility, generating actionable insights to implementing the changes and monitoring the value generated. Intelligent Procurement will bring new ways of working to a procurement function, freeing majority of the organization’s procurement resources and time to enable CPOs to focus on what matters e.g. growth, innovation, cost-savings.

With COVID-19 serving as the impetus, the time is right for change. If procurement leaders want to truly affect where the company is going, CPOs need to move out of their comfort zone and disrupt procurement into a driver of growth and Intelligent Procurement provides the pathway to do so. After all it is why procurement leaders are invited to the table in the first place - To make a difference. It is not an easy task, but the benefit is worth it for the company at large and the CPO who are bold enough to make the transition.

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"The future of procurement is digital. The future is NOW. Start your journey towards intelligent procurement TODAY."

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Sources and notes

[1] Accenture Internal Research

[2] 2021 Accenture Research Journal Final – Evolution of Customer Experience Report

[3] 2021 Accenture Research Journal Final – The Journey of Operation Maturity

[4] The Road to Procurement Mastery Isn’t Straight Anymore

Jefferson Soesetyo

Managing Director – Supply Chain & Operations Lead, Indonesia

Koko Suherman

Senior Manager – Sourcing & Procurement, Indonesia

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