Welcome to the latest issue of CEOstrategy where we highlight the challenges and opportunities that come with ‘the’ leadership role
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Our cover story focuses on the work of Nigel Vaz, the CEO of Publicis Sapient – a digital business transformation company that partners with organisations globally to help them create and sustain competitive advantage – and his approach to change management.
Welcome to the latest issue of CEOstrategy!
Tasked with accelerating business growth, while building the synergies across an organisation that can drive innovation to meet diverse customer needs and keep revenues on track, the modern CEO must be mentor, marshall and motivator on the journey to success.
“I lead Publicis Sapient with a set of principles to keep me on track, and which I offer to fellow CEOs as a guide,” says CEO Nigel Vaz. “Embrace change, and view challenges as opportunities for growth and innovation; Foster a culture of continuous learning within yourself and your organisation; Advance the organisational capabilities that will enable your company to deliver on your brand promise; Adopt a data-driven approach to decision-making, utilising analytics and advanced technologies and Stay rooted in purpose to realise your competitive advantage.”
EMCS: Leading a small fish making a big impact
“If you look after your people and you have the right people in place, the customer experience takes care of itself,” explains EMCS Industries CEO Trevor Tasker. “A lot of entrepreneurs say the same, but you don’t always see it in action. If I have to micromanage somebody, I’ve made a hiring mistake. When I’ve found the right person, all I have to do is support them and trust them. If I can’t trust them, I can’t lead them. And being trusted makes my employees so much better at their jobs. It makes choosing the customers you deal with very important as well…”
Moneypenny: People at the heart
We are consistently listed in the best places to work rankings and have created a happy and fun working environment,” says Moneypenny CEO Joanna Swash. “We strive to be authentic, and that starts at the top. If the leadership team walks the walk and talks the talk, then trust is built. Trust fosters a culture where employees are motivated, engaged and empowered with a culture of transparency and honesty…”
Bupa: Choice, care and compassion driving digital transformation
“In a fast-changing world, it’s essential that we harness the power of technology to keep improving health outcomes for our customers,” says Global & UK CEO Carlos Jaureguizar of the digital transformation journey helping Bupa become the world’s most customer-centric healthcare company. “We give our people the tools to give customers the best care, streamline the customer experience and drive innovation.”
Also in this issue, we hear from Rachel Youngman, Deputy CEO at the Institute of Physics, on how organisations can leverage ESG targets to meet the Net Zero challenge; we get the lowdown on a fintech success story from RTGS.global CEO Jarrad Hubble; discover the importance of Strategic Thinking with Institute for Management Development Professor Michael Watkins and count down ten reasons why integrity is key to business success with Serenity In Leadership CEO Thom Dennis.
Global cloud services point-of-sale provider, GK Software, was founded over 30 years ago in Germany. For most of its existence,…
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Global cloud services point-of-sale provider, GK Software, was founded over 30 years ago in Germany. For most of its existence, its focus was on expanding across Europe. However, in 2015, GK broke into the US when its partnership with SAP helped it drive into that vital market. The business has been thriving stateside ever since. Its core business is a point-of-sale software platform – CLOUD4RETAIL – which features the OmniPOS solution. Today, GK is ranked highly in global POS installations and has been among the top three for the last five years.
GK is an organisation committed to continuous improvement and customer engagement. It is evolving, getting into newer technologies like AI in a big way. It’s leveraging its expertise to improve insights into what its retail customers and their shoppers need. This includes everything from price optimisation to loyalty to self-service technologies.
Its ability to provide these services, through its expertise, is what attracted Virginia ABC to GK Software. Virginia ABC was a previous user of SAP’s point-of-sale (POS) solution, but as the authority evolved, it required an updated POS.
GK Software meets Virginia ABC
Enter: GK Software. “As a result of our relationship with SAP and with Paul Williams at Virginia ABC, we were shortlisted in their new point-of-sale solution selection,” explains Max Francescangeli, Regional Sales Director at GK Software.
“With Virginia ABC, we went through quite an extensive selection process. It’s a government agency, so the rules are very strict,” says Francescangeli. “But we were able to prove that we could use our expertise to address and solve all of their problems in spite of the unique environment they operate in. They needed a flexible solution that would interact well with their legacy platforms during implementation. We were certainly able to provide that. So, we were eventually awarded the business and the project has been extremely successful.”
The approach GK takes with its customers during these projects highlights just how much out-of-the-box capability its solution has. GK’s team spent a lot of time with Virginia ABC. The organisation examined its business requirements and using a consultative approach to show how its software could be configured. This was so it could meet the end-state business requirements and take advantage of best-of-breed capabilities that exist within GK’s platform.
“Rather than going there and trying to do a lot of customisation, we wanted to help them take advantage of the software as it exists,” Francescangeli adds. There were also other areas where GK was able to provide a lot of value and expertise to Virginia ABC. These include payment processing and its partner ecosystem. Virginia ABC was previously using a payment provider with limited capabilities, but GK was able to step in and expand the technology set. “We gave them more hardware choices, expanding what they could do with their in-store devices.”
Virginia ABC also needed more advanced reporting and analytics within its environment. So, GK introduced a solution called Advanced Central Electronic Journal and Reporting. Francescangeli continues: “It saved them a tremendous amount of effort, and gave them a lot of flexibility. We implemented that very quickly and they gained business value from it immediately.”
An evolving partnership
GK Software and Virginia ABC worked on initial deployment for the first 12 months of the project, and GK has continued to supply its services ever since. Each year after the first, Virginia ABC has expressed interest in something else GK offers. As a result, the relationship has remained close and Virginia ABC continues to expand the partnership.
“Paul and his team have been champions of ours and we’re champions of theirs as well,” Francescangeli states. “Due to the relationship we have with Virginia ABC, we have been able to secure business from other retailers in the same space because they have confidence that we know how to handle the market.”
“GK checks a lot of boxes retailers are looking for,” Bill Miller, North American VP of Sales at GK adds. “We’re in this inflection point where we offer modern technology that also has a lot of functionality out of the box, and that’s what people want. That’s what Virginia ABC wanted, and that’s what we supplied.”
CPOstrategy explores five ways CPOs can attract (and retain) top tier talent and why there is no one simple solution.
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Only a small fraction—less than one-fifth—of procurement directors and executives are confident in the ability of their current talent pool to meet the future demands of their organisations’ procurement functions. While these leaders were relatively confident in their current talent pools, the survey revealed a significant drop in confidence levels when considering their ability to address future demands.
The industry-wide talent shortage affecting procurement teams is driven by the compound forces of an increasing procurement workload, and the increasingly strategic nature of the field. Procurement is not just purchasing anymore; procurement professionals are expected to have greater business acumen, technical knowledge, and be “orchestrators of value” within the business. It is vital that the procurement leaders of today attract, retain, and develop the procurement professionals of tomorrow if they want to leverage the strategic potential of procurement beyond simple cost-containment.
1. Competitive salaries
Offer competitive salaries and benefits packages to attract top talent. This is while demonstrating the value placed on procurement expertise within the organisation. There’s plenty of content out there focused on company values and work-life balance to attract talent without paying for it. But just as cost is still at the heart of procurement you still need to pay people what they’re worth.
2. Professional development opportunities
Provide opportunities for continuous learning, skill development, and career advancement through training programs, certifications, and mentorship initiatives. Old attitudes concerning employee loyalty are disappearing faster than the housing market. Jobs that don’t provide room to grow will be vacant before long.
3. Embrace flexibility
Remote and hybrid jobs attract seven times more applicants than in-person roles. Despite what some opinion columnists at Business Insider and Bloomberg say, no one wants to live and die in a cubicle. Casual Fridays are hell on earth, and managers who resist flexible working arrangements need to face up to the fact that they are not only fighting a losing battle, but also hindering their company’s hiring potential in the process.
4. Foster a collaborative environment
Create a collaborative and inclusive workplace culture that encourages teamwork, innovation, and open communication. It is about fostering an environment where top talent can thrive and contribute their best. Businesses that practice DEI give themselves access to new and diverse perspectives. This is especially essential in an era of increased supplier diversity and nearshoring.
5. Use tech and make a big deal out of it
Getting the chance to apply cutting edge digital solutions to real-world problems is what people get excited about. By highlighting your organisation’s commitment to leveraging cutting-edge technologies and innovative procurement practices, your procurement roles will seem appealing to those eager to embrace new tools and methodologies. Successfully (and visibly) leveraging technology will also help combat the fact that, when it comes to recruiting younger staff, procurement’s reputation as a back-office function can hold it back. Leveraging AI, big data, and automation successfully can be highly impactful in boosting the function’s profile.
Technology and training are working together to lighten the administrative load faced by procurement teams.
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Over the last 18 months, attitudes towards ongoing economic (and political, oh, and climate) uncertainty seem to have finally pushed past a tipping point. Discussions of a return to some pre-2020 normal baseline appear to have been replaced by a more honest interrogation not of how we get back to where we were, but how we learn to deal with how things are.
Geopolitical, economic, and climate instability aren’t going anywhere, and the organisations that learn to adapt to this new state of affairs will be the ones to generate real value from their functions. “Procurement and finance teams are increasingly tasked with enhancing their organisation’s spend management,” writes Ruth Orenstein, Senior Director of Product Management at Tipalti. “This is crucial to ensure financial stability and resilience against fluctuating macroeconomic conditions.”
The growing trend, Orenstein notes, is a shift towards a “streamlined, decentralised P2P process, emphasising the importance of employee experience and the adoption of procurement-related processes.”
Rather than centralising procurement decision-making within a single department, decentralised procurement takes a freer hand, allowing individuals to make purchases for their own departments, instead of pushing all purchasing through a centralised team. Procurement, even for a mid-sized organisation, can encompass a huge variety of purchases., which can range from which ergonomic mouse pad to buy for a remote contractor to sourcing thousands of tonnes of raw material weighed against cost, time to delivery, and ESG goals.
When different teams specialise in different product categories, or when handling smaller and less impactful purchases, decentralising the procurement process can increase the speed and agility of an organisation’s spending.
Decentralised procurement: risk vs reward
There are obviously risks to adopting a more decentralised procurement strategy. Handing over purchasing autonomy to department buyers or individual employees carries an increased risk of overspend, fraud, and more dark purchasing throughout an organisation. There is also a risk that teams will spend an outsized amount of time monitoring spend, chasing down policy violations, and generally not saving any time.
However, the advantages can be significant, and procurement teams that successfully create strong procurement guidelines and parameters (digital marketplaces that allow department buyers to make acquisitions from a pre-approved list of goods can be a functional halfway point between centralised and decentralised procurement), as well as effectively educate non-procurement personnel in good buying strategies can successfully lighten their load, create greater agility, and overall improve the overall process throughout the organisation.
If every company in 2015 was a tech company that required employees to have a basic knowledge of the IT stack, by 2025, every company might just be a procurement company.
With cyber attacks on the rise, Chief Procurement Officers need to take a more active role in protecting their organisations.
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The number of attacks against supply chains is rising at an alarming rate, and increasingly it is the case that a business’ most common vulnerability is their supplier ecosystem. “If your company were to get breached, there is a 70% probability it will be through one of your vendors,” noted Norman Levine, a senior manager at Omnicom in a 2021 webcast. By 2025, Gartner predicts that 45% of organisations around the world will have been the subject of a cyber attack on their software supply chains.
Increasingly, then, CPOs have a meaningful role to play in standing between potentially risky suppliers and their organisations.
Robust cybersecurity
However, the increasingly complex and digitalised nature of the procurement sector isn’t making this job any easier. Baber Farooq, a senior VP at SAP Procurement Solutions wrote in a recent op-ed that “As companies and consumers increasingly rely on global, interconnected supply chains, procurement operations are now a favourite target for cybercriminals.”
According to a 2023 survey of CPOs by Deloitte, fewer than 3% of procurement leaders felt they had “high visibility” beyond the first tier of their supplier network.
“If enterprises don’t know who they are doing business with—directly and indirectly—it is almost impossible to manage risk proactively,” Farooq writes.
Setting the standard
Only by setting standards for their suppliers that garner real visibility deep into their supplier ecosystems, and then supporting that visibility with periodic monitoring is essential.
“For procurement leaders to avoid risks, they need to start from square one. That means performing due diligence during the supplier selection process and implementing continuous monitoring across their extended supply chains throughout their relationship,” argues Farooq.
“Risk Ledger reports that over 20% of organisations do not conduct cybersecurity due diligence before entering a contract. On top of that, 23% of suppliers do not have formal agreements in place with their third parties regarding security clauses. These situations compound the risks of cyberattacks and make an organisation increasingly vulnerable to a breach.”
In this innovative partnership, the whole is greater than the sum of its parts as the two companies focus on taming tail-spend with an on-demand platform with embedded change management.
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Businesses have been leaving money on the table for years. For most organisations, (indirect) tail spend flies under the radar because of the large number of lower-value transactions, a fragmented supply base, and a poor user experience. This results in process inefficiencies and lost savings opportunities that can be eight to 13 percent higher than with more competitive sourcing.
Simfoni and Kearney set out to solve this problem, joining forces on solutioning tail spend management. The partnership pairs Kearney’s rich heritage and expertise in procurement transformation and change management with Simfoni’s composable analytics and spend automation technology. The result is a comprehensive global delivery model that significantly improves tail spend management, which until now has been a major problem for large and smaller organisations alike.
“We started our journey over three years ago,” says Stefan Dent, co-founder of Simfoni. “It takes some time to form a bond. You get to know one another working together on client engagements and then you realise that the relationship is really working, so you double down on the commitment.”
Simfoni helps businesses “see spend differently” leveraging data analytics to gain a deep understanding of user needs across everyday ‘tail spend’. Founded in 2015, Simfoni is a leading provider of tail spend, spend analytics, and e-sourcing solutions for large and midsize businesses around the globe. Simfoni’s platform uses machine learning and AI to accelerate and automate tail spend management, saving time and money. Its solution quickly ingests and organises complex data to uncover opportunities to optimise tail to higher value spend. Simfoni emphasises rapid value delivery through on-demand spend automation solutions that are operational in weeks rather than months.
Remko de Bruijn, senior partner at Kearney
The Kearney–Simfoni partnership delivers a unique and powerful proposition, combining Simfoni’s digital tail spend solution with Kearney’s know-how and ability to launch a transformation and unlock the promised value, says Remko de Bruijn, a senior partner at Kearney. “There are many digital procurement solutions around, but frankly, many of them aren’t delivering the promised value, typically because of challenges with user adoption and change,” he says. “Kearney continuously assesses solutions in the market, with one of our other partners, ProcureTech, and together, we concluded that Simfoni is leading in tail spend. This is how we found each other.”
Kearney is a leading global strategy consulting firm founded in 1926, with more than 5,700 people working in more than 40 countries. The company works with more than three-quarters of the Fortune Global 500 as well as with the most influential governmental and nonprofit organisations. Kearney is a partner-owned firm with a distinctive, collegial culture that transcends organizational and geographic boundaries—and it shows. Regardless of location or rank, the firm’s consultants are down-to-earth and approachable, with a shared passion for doing innovative client work that realises tangible benefits for their clients, in both the short and long term.
“We see Simfoni as a powerful solution to realise savings in indirect tail spend. It’s about not only data and spend automation, but also the customer experience,” De Bruijn says. “This is crucial when dealing with everyday spend as most users are non-procurement professionals.”
Kearney aids businesses in implementing Simfoni’s solution quickly, mitigating risks associated with unmanaged spend and vendors. “The attractive thing about Simfoni is that the solution manages tail spend—optimising both spend and vendors—with the savings funding the digitisation. It’s a tail spend solution that delivers a comprehensive service,” De Bruijn says. “Simfoni will even pay the tail suppliers with Simfoni becoming the ‘One Vendor’ for the tail, which creates additional benefits in accounts payables and working capital.”
Simfoni and Kearney both operate globally, which is important since their customers often operate in multiple regions around the world. “It’s a very interesting and powerful proposition,” De Bruijn says.
Stefan Dent, co-founder of Simfoni
Simfoni designed its tail spend platform from the ground up. The company founders came from the procurement domain, having worked in a variety of procurement leadership roles and at other procurement technology providers. “Let’s face it, existing solutions never solved tail spend, which accounts for around 80 percent of your vendors and transactions and around 20 percent of spend value,” Dent says. “Until now, the only options were BPOs, where you effectively outsource your tail to be managed by humans in a lower-cost country, or you use self-service bidding platforms. These solutions deliver some value, but it’s like putting a plaster on a wound. You never properly cure the problem.”
Simfoni’s platform is unique in that it is first and foremost a software-as-a-service (SaaS) solution with integrated buying services and digital procurement content components that connect with a client’s existing systems, or Simfoni can operate autonomously. Dent says that’s not even the best part. “The user experience is the most important element because, as Remko pointed out, most tail spend users are not procurement professionals,” he says. “Our users are in R&D, IT, plant operations, or marketing. They want an intuitive, easy-to-use solution to source and buy goods and services to support the everyday needs of their business. This is where traditional eProcurement systems fail.”
Dent says Kearney is an ideal partner being a trusted advisor to many of the world’s largest organisations. Kearney’s expert knowledge of procurement and transformation are a vital part of the offering. “Kearney’s input and expertise is crucial as Kearney helps our clients scope their tail spend program and update their procurement operating model while Simfoni frees up resources, allowing the client to focus on higher-value activities,” he explains. “At the end of the day, technology alone doesn’t solve tail spend. It’s about change. Kearney helps our clients make that digital shift. That’s why our partnership is so powerful because together we provide a comprehensive change and a digital solution as a package. The opportunity for our clients to finally control and optimise tail-spend is huge.”
Linda Chuan, Chief Procurement Officer at Box, discusses the value of delivering effective and long-lasting change management in procurement.
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Being at the forefront of change requires a specific type of person – it’s not for everyone.
But for those that are equipped to deal with the volatile and at times, disruptive, nature of change, that’s where the rewards can be uncovered.
Knowing this all too well is Linda Chuan. She is a seasoned sourcing and procurement operational excellence executive with a public accounting background and a strong ability to execute from vision and strategy. Her innovative experiences with organisations large and small have culminated in a unique, but practical end-to-end view and understanding of business processes. Chuan’s approach to problem-solving is holistic, mixed with a blend of discipline, creativity, agility and resilience. She has demonstrated successes in her execution and delivery with real results time and again, while also leading successful transformational digitisation strategies.
Procurement’s transformation
The industry she serves has undergone quite an evolution in recent times. Having transformed from a back-office function into a dynamic, exciting, enterprise division at the forefront of change. Procurement and its professionals have been on quite the journey in recent times. As such, Chuan explains that the space is, in fact, so unrecognisable that even its definition has changed. “Procurement started out as purchasing for primarily manufacturing companies decades ago,” she discusses. “Then it evolved from purchasing to procurement where the practice and the profession required more skills around understanding contract verbiage and how the commercial terms would impact the business. There was a little bit more skillset required, legal terms, understanding contracts, all the way to what we know today as strategic sourcing.”
Fast forward to 2020’s Covid pandemic and procurement was forced to shift again amid significant disturbance to supply chains. As a result, procurement was swiftly elevated to the c-suite and became front of mind for most CEOs globally as businesses looked to tighten their belts while urgently finding alternative methods of supply.
“Following Covid, I think we, as procurement professionals, are now mandated to be even more than strategic sourcing and add value to the company,” affirms Chuan. “We’re asked to look ahead and think about the macroeconomics as well as the microeconomics and how it could impact the company and get that translation to direct company impact earlier. This is all while being able to help either prevent large risks or promote opportunities within the company so they can then maximise what’s happening out there in the marketplace versus where everyone was reacting to what has already happened and trying to be prepared for what was coming.”
Tech disruption
Disruption has meant procurement was propelled to become even more strategic and forward-facing following a recent surge of black swan events as technology takes a firmer grip on the space. “The whole profession has evolved, especially over the last 10 or 15 years, where we’re becoming increasingly more strategic and important to a company.”
The company Chuan serves is a cloud content management company that empowers enterprises to revolutionise how they work by securely connecting their people, information and applications. Founded in 2005, Box powers more than 115,000 businesses globally, including AstraZeneca, JLL, Morgan Stanley, and Nationwide. Headquartered in Redwood City, CA, Box has offices across the United States, Europe and Asia. Chuan joined Box over four and half years ago and was recruited to help with establishing the firm’s procurement function and building it from the ground up.
“Any engagement or relationship with a third-party provider, whether it’s buying widgets, purchasing services or even SaaS across the entire company is under my scope,” she explains. “Box has grown globally to reach new regions such as Japan and Poland to UK and Australia. We’ve continued to grow even throughout the pandemic. It’s my third role to establish and build out a sourcing and procurement organisation from the ground up. I find that to be so rewarding and every company’s a little different. What might’ve worked in my previous roles may not work at Box. I love having to tailor and think about which processes and what systems could work that would fit each company’s specific and unique culture, executive level preferences as well as the employees. It’s very exciting.”
Blank canvas
For Chuan, her passion is to make things as easy as possible for the end user. She likes to think about a procurement organisation as a service firm. “We’re like a small entrepreneur company within an enterprise,” she tells us. “Our customers are our internal employees. As the company and the employee base grows, the customer base increases too. To me, it’s really imperative that we think about the user experience because every company has policies to check off, but who really ensures that we are compliant to those policies? A lot of other larger companies find it’s easier to make the policy a mandate where employees must follow, but I find that with high-tech companies, it’s more of a case of “influencing” rather than “mandating” in that kind of environment.
“In order to establish more of a centralised process where all of the employees would have to come through this one system and one intake, it has to be so user-friendly or else people are not going to want to come to you. If you make it easy for them and design the process in such a way that the policy is already incorporated, then employees will want to utilise the process. It should feel like they’re just going through the process, but they’re walking through the actual compliance policy and ensuring that we’re doing all the right things to protect the company, but they shouldn’t have to feel the burden of it.”
The Box Advantage
According to Chuan, unless she can show her people a new process or system that’s guaranteed to be more efficient, she understands there will be a degree of reluctance to accept change initially. “I’m already thinking about the whole change management programme at the beginning of when I need to select a solution, especially if there was an RFP involved, rather than waiting until we’ve selected a solution and are in the implementation phase. To me, that’s too late,” she explains. “Change management happens when a project has been approved for you to go find a solution or when the project has been initiated by your senior executives through an investment committee meeting or via a software review committee. That’s where change management actually starts.”
Chuan is passionate about harnessing a positive company culture. She stresses within Box operating with a mentality of collaboration, transparency and inclusiveness holds the key to success. Chuan explains that one of her best strategies is to imagine herself as an owner of a company as it leads to better decision-making. “It’s about always trying to think about doing the right things by the right people,” she discusses.
Secret sauce
“The culture is so special and it’s truly about walking the talk versus just talking the talk. It’s about making that culture real and living every single day like our two founders, Aaron Levie and Dylan Smith. The culture itself makes it easy to collaborate and build that relationship and that trust with my fellow employees, knowing that the procurement sourcing organisation is there to help protect them and make the company better. Doing it together is so much easier than trying to push through by yourself, and I call it with every deal that ‘it takes a small village’. We have a really, really good relationship with our legal department and with our vendor trust department. I am enjoying a level of engagement and utilisation of my function more than any other company I’ve been blessed to be a part of. The culture at Box is our secret sauce.”
Given the speed at which the procurement function is shifting, being proactive to the latest trends in transformation could be the key between success and failure. Indeed, one of the most highly anticipated innovations of the past few years ChatGPT has captured the imagination of procurement professionals globally. The race to explore the technology and examine how the natural language processing tool could be introduced into processes is already underway. However, its arrival brings with it fresh fears that AI is here to replace humans.
Future-facing
According to Chuan, that couldn’t be further from the truth. “I don’t see it as taking jobs away, I see it as improving our job and work life,” she explains. “Most people don’t want to do those mundane, low-level data entry, tactical tasks anyway. But if you don’t have people or the right system checking that the data going in is of good quality, then you can’t count on the reporting and the analytics on the backend. But the problem is that people don’t want to do it. Wouldn’t it be perfect to have a replacement with AI, robotics and machine learning that could do all of the things that people don’t really want to do anyway?”
Looking ahead
Having said that, Chuan is clear that there must always be some form of human influence and oversight over AI. One of procurement’s biggest challenges in 2024 and beyond is making new tech work for each respective organisation. Chuan believes procurement, and indeed the world, isn’t to be ruled by technology, but instead used as a tool. “There has to be some kind of monitoring and human judgment to QC/QA the results,” she says.
“I don’t think we’re at the point where machines can replace judgemental thinking. I think we need to have an eye on ensuring we’re doing the right thing ethically by people and making sure that we’re using technology responsibly. Let’s say we do all of that, the increase in the level of job productivity that AI could bring to many people should outweigh people’s fears. I don’t think we should be fearing it. I think we should be looking at it from an analytical and strategic view and get excited about the prospect of having all the time to be more innovative and forward-thinking. To me, that’s where the fun and rewarding work is.”
Hear more about Linda Chuan’s passion for delivering change management in procurement in our CPOstrategy Podcast.
This issue’s Big Question explores whether procurement would be better prepared should a similar situation occur.
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COVID-19 affected everyone in different ways.
It caused death, illness, chaos and disruption the world over. It shut down airports, overwhelmed the NHS and left our streets empty. With March 2024 marking four years since the UK announced its first national lockdown, how ready would procurement and our supply chains be in the event of a similar scale this time around?
To go forward, unfortunately, we must look at the chain of events last time around.
Having been declared a global pandemic on 12th March 2020 and with cases of coronavirus accelerating to uncontrollable levels, many businesses’ supply chains collapsed. When the pandemic hit, businesses were left footing the bill for billions of pounds worth of unsold goods, causing inventory-to-sales ratios to rise high.
As a result of lockdowns, organisations were left with no choice but to cut their activity or shut down entirely for a brief period as guidance continued to change at little to no notice. As such, production was halted in factories across the world causing mass layoffs and redundancies across the majority of industries, particularly in manufacturing and logistics, resulting in a reduction in shipping which affected delivery times globally.
Consumer demands also shifted significantly. The demand for personal protective equipment (PPE) as well as the likes of toilet paper and pasta rose dramatically. There was an increase in office furniture amid a surge in demand in remote working. This, alongside the likes of government help such as furlough, helped enable a surge in demand for e-commerce as consumers bought online in record numbers. The shift in demand for goods led to a reduction in experiences such as attending events, eating at restaurants or going out to pubs.
In order to meet this increase in demand, factories pumped out goods quicker than ports could handle them. US ports were full of exports from Asia with too small of a workforce to unload them and too few truck drivers to transport the goods. While ports were full, compounding the issue was a labour shortage, especially truck drivers. And talent remains a concern to this day to procurement and supply chain.
But COVID-19 is only one of procurement’s fires. There’s been the Suez Canal disaster, wars in Ukraine and Israel and inflation concerns to contend with too.
So if the worst were to happen and another ‘black swan’ event was to take place, what lessons has procurement learned?
As a result of the generative AI boom, Jack Macfarlane, Founder and CEO, DeepStream, believes that the industry is in a much stronger position to overcome a future pandemic. “It proved that procurement needed to brush up on its ability to adjust to black swan events swiftly by investing in the right technology and training for the industry to respond to sudden challenges and changes,” explains Macfarlane. “With the growing use of generative AI, the industry is now in a much stronger position to contend with a future pandemic. Generative AI can scrape vast datasets regarding global trends, using the data to predict shortages, price fluctuations and supplier risks before they happen.
“Regardless of the industry you’re in, procurement leaders should always focus on ensuring the right policies are in place to prevent declining quality control in a future black swan event.”
Omer Abdullah, Co-Founder and Chief Commercial Officer at The Smart Cube, agrees that procurement finds itself in a more secure place than that of four years ago. “Procurement is undoubtedly readier than it was prior to the COVID-19 pandemic. CPOs and their teams have learned where potential value drivers are, and they also understand supplier relationships and supply chain intricacies more intimately,” he reveals. “Procurement has also moved further along the digital spectrum. Organisations have tools at their disposal to operate effectively, and on a dispersed basis, should a similar event take place. Additionally, there are now far more risk management solutions in place versus before the pandemic – allowing practitioners to identify problems, and potentially risky situations, before they arise. Add to this more diversified supply chains and established alternative sources for essential categories, and the function is far more prepared than pre-2020.”
However, Abdullah went on to explain that while “no one would be absolutely ready for another unexpected pandemic”, he insists the industry did learn lessons from COVID-19. “It must be noted that there’s still a recency effect at play – procurement professionals tangibly remember the pandemic’s impact,” he explains. “As time progresses, though, this may change but for now, the industry knows how to operate if a comparable scenario were to unfold soon.”
Bindiya Vakil, CEO and founder of Resilinc, believes the pandemic has showcased how better prepared companies are for the next global disruption. “Fortunately, the COVID-19 pandemic taught businesses some valuable lessons. Not nearly as many companies are flying blind in the face of disruption,” explains Vakil. “Many organisations learned that having visibility into their entire supplier network is the foundation for mitigating disruptions. Mapping their supply chain down to the part-site level and then using AI-powered technology to monitor it 24/7 for potential threats gives procurement leaders an early-warning system with actionable insights to make mitigation plans within hours.”
While Vel Dhinagaravel, CEO and President Beroe Inc, reveals that COVID-19 “took the mask off” procurement and exposed the true character of teams. “Some were much more partnership-oriented and some a lot less. Some of these memories endure and will either help or handicap their responses to future disruptive events,” Dhinagaravel reveals. “During 2020-2022 as different countries and regions were in varied states of lockdown there were tremendous constraints on supply chains. As a result, procurement got an opportunity to be part of discussions around product mix optimisation and product pricing which previously had been largely off limits to them.”
He adds that while the future is uncertain, he believes the function is in a healthier position to thrive should the worst happen again. “Post-pandemic, these relationships have endured, and we have also seen these teams consciously building agility and resilience into their operating models and supply chain,” he discusses. “They’ve been using data and analytics as key levers to get visibility of their supply chain and suppliers – identifying points of failure, assessing scenarios, and proactively running simulations to develop diversification strategies. While these actions don’t give procurement a crystal ball to predict the next disruptive event, it puts them in a much better position to be able to handle another pandemic or major supply chain shock.”
And Betsy Pancik, Senior Vice President at Proxima, says that the pandemic was procurement’s “time to shine” with business leaders recognising the importance of a robust procurement function to keep business running smoothly. “COVID-19 caused major supply shortages, which drove price surges and quality issues – many procurement teams had to quickly mobilise capability and capacity to support immediate business needs,” she explains.
“Some companies learned this the hard way by not having the right processes and teams in place, which led to insufficient inventory, spend increases, and strained supplier relationships. Many companies realised the need for alternative suppliers to prevent these issues in the future and started proactively seeking additional sources of supply. Others realised the need for emergency buying procedures, systems, and processes that enable quick action, automated buying, supply chain visibility, and investment in talent – all of which will help businesses respond in a more organised and robust way if a similar situation were to happen again.”
In truth, procurement teams learned a lot from the events of March 2020. Procurement and supply chains can’t be complacent. The function can’t afford to let the mistakes of the past define its future. Supply chains must have alternative methods of supply and Chief Procurement Officers must be agile and ready to respond. Procurement can’t drop the ball and must stay ready.
Edmund Zagorin, Founder of Arkestro, discusses his company’s rise as a predictive procurement orchestration platform.
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“What if there was a better way to compare quotes from suppliers?”
This question led Edmund Zagorin down a road of discovery which culminated in turning an idea into a start-up.
While working as a procurement consultant, Zagorin observed how much time his sourcing teams spent building Excel pivot tables. The problem? Category experts needed to identify potential errors in supplier submissions at the item level before an award scenario could be properly evaluated. Together with childhood friend Ben Leiken, who had risen to become an engineering and product leader at SurveyMonkey, the idea was to find a way to automatically pre-populate text in a sourcing project with little to no manual data entry required from procurement users of suppliers. Leiken had seen firsthand the impact that so-called “smart defaults” could have on survey completion. And Zagorin knew that in procurement, more completions would mean more supplier offers, which could yield better commercial outcomes for the procurement team. Arkestro, then Bid Ops, was born.
Studies show that when procurement is able to predict a plausible range of commercial outcomes ahead of a supplier offer, there is enormous leverage created when the buying entity names the price. Summarising the past decade of research, Lewicki et al.’s 2007 “Essentials of Negotiation” states that “…whoever, the buyer or the seller, made the first offer… determined the final selling price, with higher final prices when a seller made the first offer than when a buyer made the first offer.”
For this reason, Arkestro customers began delivering material higher cost savings outcomes than traditional RFPs and RFQs, a fact that caught the attention of Ariba co-founder Rob DeSantis. Together, Zagorin and DeSantis brought together an experienced management team, led by IBM and Ariba alum Neil Lustig as CEO. Lustig’s experience as CEO of Vendavo, a predictive pricing company used by sell-side teams to achieve better negotiated outcomes, made him ideal to scale Arkestro into a global juggernaut.
Edmund Zagorin, Founder, Arkestro
Today, Arkestro is the leading predictive procurement orchestration platform that enhances the impact of procurement’s influence, especially for large manufacturing enterprises across any procurement activity and spend category that involves collecting a quote from a supplier. Arkestro turns the traditional procurement process on its head: instead of the supplier creating a quote or proposal and then a procurement analyst using competitive offers and benchmark data to decision the desirability of that offer or action an approval, Arkestro customers use a predictive model to benchmark a potential quote before contacting suppliers, putting procurement in a position of leverage to either ask for their desired outcome using an AI-generated Suggested Offer or generate an Instant Counter-Offer to any quote.
Arkestro then helps customers persistently monitor the changes in quoted price for this item across all procurement activities, tracking trends and changes and helping teams proactively uncover the optimal procurement configuration for each item and basket with respect to timing, geography, quantity, lead time and other attributes.
By embedding game theory, behavioural science and machine learning models directly into the procurement process, Arkestro enables customers to dramatically accelerate cost reduction projects, often with existing preferred suppliers and attain their best available cost outcome for every unique item more frequently and at greater scale across their spend. This predictive procurement approach is especially helpful for technical procurement categories such as highly engineered components, materials and capital equipment, as well as categories like metals, chemicals, food ingredients, MRO, packaging, logistics and even IT.
Enterprises who are on a journey to create sustainable and antifragile data quality for their procurement function are turning to Arkestro as the predictive approach eliminates the two manual steps that tend to introduce errors into item-level identifiers: the step where the supplier creates a quote, and the step where procurement analysts have to validate, correct, give feedback and approve it. By using a predictive model to generate and validate supplier offers, Arkestro offers a continuous improvement path for enterprises whose digital procurement journey includes cleansing item-level data to create a true item-based “data foundation.”
Transformation journey
And since its founding in 2017, Arkestro has been on quite the transformation journey. The company has expanded rapidly and scaled its product – as well as for spend categories and industries served – globally. In a little over half a decade, Zagorin, Leiken and their team have created a true enterprise grade AI infrastructure platform that can be embedded into the likes of spend management giants SAP Ariba or Coupa or used as a standalone database and application.
Despite significant success in a relatively short space of time, Zagorin is keen to stress that his initial vision was to solve a problem that he was also experiencing in the market. “Our growth has corresponded to a great degree with a widening of the aperture of where we feel predictive technologies can make an impact for procurement teams,” he discusses. “I think one of the other things just from a paradigm standpoint is that procurement processes involve a lot of manually created data. There’s a lot of data entry on the supplier side, procurement side and on the stakeholder side throughout the process. Every keystroke in every process introduces the possibility of human error.”
Predictive procurement is a new approach that suggests the data before a human user enters it. What Arkestro has introduced is the idea of predictive and working with customers to apply that at different stages of the procurement process through AI. “One of the things that’s also been interesting, and you’ve seen this in other areas of AI, is that you can cross a threshold where at some point in the model it gets good enough that it really provides exponentially more value as it’s being used,” he says. “As opposed to software, which traditional software degrades over time, it gets stale and the interface feels clunky. As new interfaces come out, AI has almost the opposite dynamic where it actually gets better. It’s smarter by itself just by people using it. That’s also been pretty exciting to see.”
Procurement’s evolution
Indeed, the procurement space is in a state of flux. Amid significant transformation driving the function forward, it has never been such an exciting time to be involved in the industry. The rise of AI and machine learning is having a seismic impact with there also being hopes that new technology could reduce the need to bridge talent gaps.
“If you asked five years ago what’s holding procurement back from digitally transforming the operation and living out your full potential, I think a lot of procurement professionals would’ve said how hard it was to hire,” Zagorin explains. “People were saying: ‘Oh we have data quality issues where it’s really hard to actually know what we’ve spent, what our spend per supplier looks like for our core geographies, let alone what we paid for each individual item. We went out and bought a bunch of digital platforms and we’re struggling to gain adoption which is related to the data quality issues.’ This is what I heard from executives when I was working in procurement. Because traditionally, if you have a process and it’s not being consistently used, then it’s not going to accurately represent the most important attributes or business logic of the data that’s moving through it.”
Despite the positive introduction of tech innovation, procurement has also had its challenges. Supply disruption as a byproduct of COVID-19, wars in Ukraine and in Israel as well as inflation concerns, it is fair to say the function has never been more talked about in the C-suite.
“Boom, there’s the next wave of Covid, or suddenly there’s a war somewhere in the world,” he shares. “It has felt like there’s always something and it really creates context switching for procurement teams which is stressful, plus being bad for productivity. This is especially the case for digital transformation projects in procurement, and it’s also demotivating because it makes people feel like they’re not making progress. This then means that the length of the project elongates and you have this kind of stuck-in-the-mud feeling that it’s hard to get quick wins and generate momentum. That’s what customers are thinking about as they are looking in the market to find a true partner not just for their digital journey, but for their AI journey.”
Given the speed of procurement’s evolution, there are voices that believe the function requires a rebrand. Gone are the days of procurement being regarded as a back-office function hidden away out of sight, today it stands as an exciting, dynamic force at the forefront of innovation. “I live in California where job titles are a little bit looser generally,” explains Zagorin.
“If we look at procurement needing a rebrand, the big challenge that I see with procurement is that the structure of a lot of these categories doesn’t necessarily correspond with either the activities associated with them or with the relationships with the suppliers within those categories. What we have in procurement with ‘category management’ is we’re frequently asking procurement professionals to be a jack of all trades and master of none within their categories. Perpetual ‘crisis-mode’ is not a recipe for letting up-and-coming procurement professionals develop the category knowledge and domain expertise that are traditionally necessary.”
Procurement’s bright future
Looking ahead, Zagorin believes there has never been a better time to be working in procurement. “The profession has a lot to offer, and it really is this huge engine of value creation at most big companies,” he explains. “Arkestro serves enterprise manufacturing companies typically with multiple plant locations which buy at both the corporate and the plant level creating a lot of item-level data quality issues. What we’re seeing is the ability for companies to get live on Arkestro in a matter of days and often deliver a payback period for their entire solution costs in a matter of weeks.
“If you look at deployments of enterprise technology five years ago, that’s a stark difference in terms of what procurement’s promising versus what it’s delivering and the time-to-value. We have a new generation of startups, from intake to tail spend to what Arkestro does, more on the strategic side and or on technical procurement categories and direct materials, often starting with a bill of materials and handling all the back-and-forth with the suppliers up to allocation, awarding and the purchase order. You have this cohort of startups that’s just getting bigger and more people are using us to run large physical manufacturing operations. There’s not a lot of direct competition in the space of these growth-stage startups.
“I think what’s going to happen is more and more companies are going to say if it makes business sense and we think there’s tangible value in doing it, then let’s find a way to test and learn. Let’s find a way to try it out to implement it in one geography or for one business unit or category and just see how it works. Five years ago, it was always easy to say we’re too busy or we have other stuff going on. What’s changing today is if you’re not testing and learning constantly from new technology, you’re going to miss out because the stuff that’s happening right now is world-changing.
“Generative AI and novel technical approaches to on-demand superintelligence are going to be as impactful to many enterprises as the development of the internet, not to mention human society at large. The people who are playing around with it and staying curious and running experiments are going to create a lot more value. They’re going to have a lot more fun, and they’re going to build great teams and organisations that lay the groundwork for the next generation of procurement professionals.”
Changing requirements, shifting demographics, and new technologies are conspiring to create a procurement talent shortage.
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Two of the biggest challenges facing procurement leaders are recruitment and retention. Staffing issues were identified as one of the biggest risks facing procurement in the next two years by Amazon Business’ 2024 State of Procurement Report, as the procurement function “broadens in scope while facing staffing shortages”.
It seems as though the more critical procurement becomes to the modern enterprise, the more the cracks in the talent pool begin to show. With increased technological adoption and a growing emphasis on strategic operations (compared to a traditional transaction-focused approach) in the procurement function, solving the talent shortage is more critical than ever.
As we’re still in early 2024, we’ve put together the top five factors driving the talent shortage, as well as how procurement leaders can address them in order to capitalise on the opportunities in the industry and meet the strategic objectives of the business as a whole.
1. Digital transformation
Ironically, the very trend that’s driving the rise in procurement’s fortunes is also one of the biggest factors fueling its talent shortage. As digital transformation reshapes the procurement function from top to bottom, it also means that the skills necessary to succeed in procurement roles are changing. Even a few decades ago, a procurement job was a mixture of relationship management and sending invoices. Now, there’s AI to grapple with, big data analytics, and an expectation that the department will be a key strategic driver of efficiency, sustainability, and supply chain resilience. The skill sets that make a successful procurement team today aren’t the same as they were even a few years ago.
How to fix It: Education and development should be at the forefront of anyone’s mind looking to build a successful procurement function. Upskilling and growing the team’s knowledge base is almost always more cost effective than hiring externally, but you should also know when to look beyond the department to fill a talent shortage, even if that just means sniffing around the IT department for anyone not nailed down.
2. Competition (internal and external)
If (almost) every procurement team is short on staff (well, 86% of them, according to Amazon Business), then it’s no surprise that competition for top talent is fierce. Salaries are rising, and the fact the talent shortage is affecting departments other than procurement means that procurement is in competition, not only with other procurement teams, but with other departments in its company for talent and the money to pay that talent.
How to fix It: Smaller firms without the resources to compete might consider outsourcing their procurement functions, engaging third parties like a business might engage a legal team or a management consultancy.
3. Messaging and awareness
Or lack thereof… Seriously, procurement may be the exciting new frontier of digital transformation and strategic optimisation, but traditionally the department has largely existed as an afterthought—a place where purchase orders go to be rubber stamped. The nature of the role may be changing, but perceptions are harder to shift. If the preconceived notion is that procurement is a stodgy, backwards profession, then it’s unlikely to attract the best and brightest graduates, let alone funnel MBAs into a procurement-specific pipeline early on in their education.
How to fix it: Take a leaf out of the broader supply chain discipline’s book and go on a two-pronged charm and educational offensive. By working with educational institutions and recruiting heavily from adjacent industries with transferable skills (increasingly easy to do given the increasingly digital-first nature of the discipline), new talent can be enticed into the procurement space and developed from there by existing veterans.
4. Demographic shifts
Tied into Number 5, the natural changing of the guard is a large part of what’s ushering in a more discerning labour force. It’s also seeing Boomers and Gen X either exit the workforce into retirement or be promoted up into senior management, where the skills that made them an asset to the company on a day-to-day basis are less important to their roles.
Also, as Millennials age up towards middle management there aren’t as many members of Gen Z entering the workforce to replace them. It’s the same further up the chain as the populous Baby Boomers are replaced with the relatively sparse Gen X.
How to fix it: One way to encourage a smoother transition from one generation to the next—especially in an industry where relationship management plays such a huge role—is to encourage mentorship and development aimed at transferring skills and key knowledge from senior staff to lower (even entry level) positions.
5. The Great Resignation
Sparked by the COVID-19 pandemic, as well as a general rise in pro-labour sentiment across the economy at large, the last few years have seen a spectacular rise in employees quitting the roles that couldn’t be bothered (or afford) to pay them enough or treat them fairly. The consequences for mismanaging teams are much higher in a world where the stigma over changing roles regularly for better pay, hours, and working conditions has more or less evaporated.
How to fix it: It should be obvious, but people keep quitting their jobs, so the message must not be getting through. The age of pizza parties and casual Fridays are over. Employees expect more from their employers, whether in terms of wages, benefits like healthcare, work-life balance, and other meaningful contributions to quality of life. In addition to benefits on paper, fostering positive cultures, creating opportunities for development and salary advancement are all a big part of not only attracting new talent but keeping it as well.
Our cover story this month focuses on the work of Arianne Gallagher-Welcher. As the Executive Director for the USDA Digital…
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Our cover story this month focuses on the work of Arianne Gallagher-Welcher. As the Executive Director for the USDA Digital Service, in the Office of the OCIO, her team’s mission is to drive a tech transformation at the USDA. The goal is to better serve the American people across all of its 50 states.
Welcome to the latest issue of Interface magazine!
Welcome to a new year of possibility where technology meets business at the interface of change…
“We knew that in order for us to deliver what we needed for our stakeholders, we needed to be flexible – and that has trickled down from our senior leaders.” Arianne Gallagher-Welcher, Executive Director for the USDA Digital Service reveals the strategic plan’s first goal. Above all, the aim is to deliver customer-centric IT so farmers, producers, and families can find dealing with USDA as easy as using an ATM.
BCX: Delivering insights & intelligence across the Data & AI value chain
We also sat down with Stefan Steffen,Executive Leader for Data Insights & Intelligence at BCX. He revealed how BCX is leveraging AI to strategically transform businesses and drive their growth. “Our commitment to leveraging data and AI to drive innovation harnesses the power of technology to unlock new opportunities, drive efficiency, and enhance competitiveness for our clients.”
Momentum Multiply: A culture-driven digital transformation for wellness
Multiply Inspire & Engage is a new offering from leading South African insurance provider Momentum Health Solutions. Furthermore, it is the first digital wellness rewards program in South Africa to balance mental health and physical health in pursuing holistic wellness. CIO, Ndibulele Mqoboli, discusses re-platforming, cloud migrations, and building a culture of ownership, responsibility, and continuous improvement.
Clark County: Creating collaboration for the benefit of residents
Navigating the world of local government can be a minefield of red tape, both for citizens and those working within it. Al Pitts, Deputy CIO of Clark County, talks to us about the organisation’s IT transformation. He explains why collaboration is key to support residents. “We have found our new Clark County – ‘Together for Better’ – is a great way to collaborate on new solutions.”
Also in this issue, we hear from Alibaba’s European GM Jijay Shen on why digitalisation can be a driving force for SMEs. We learn how businesses can get cybersecurity right with KnowBe4 and analyse the rise of ‘The Mobility Society’.
Could generative AI be the answer to procurement’s problems: fewer workers, more work, and a rising bar for digital literacy.
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It’s news to no one that the nature of the procurement industry has changed.
Spurred by the COVID-19 pandemic, an industry-wide surge in digital transformation, and the rising immediacy of the climate crisis, procurement has never been more important, or more complicated. However, as the industry’s demands grow and evolve, many procurement teams find themselves in need of skilled individuals that simply aren’t there.
A recent study conducted by Gartner found that just one in six procurement teams believe they have “adequate talent” to meet their future needs. That means just 15% of CPOs were confident in their future talent pools and ability to recruit skilled individuals, even if they believed their current staffing was sufficient to meet demand today.
Concerns over “having sufficient talent to meet transformative goals based around technology, as well as the ability to serve as a strategic advisor to the business,” were the primary cause of skill shortage stress, according to Fareen Mehrzai, a Senior Director Analyst in Gartner’s Supply Chain Practice. Essentially, the changing nature of procurement means not only that today’s procurement teams are unprepared for the discipline’s continued transformation from back office buyer to “orchestrators of value” in the executive team, but face an increasingly sparse hiring market as the requirements for a new procurement recruit become increasingly complex to satisfy.
Generative AI: Making digital accessible
Generative AI exploded into the public consciousness in 2023 with the launch of image generation tools like Midjourney and DALL.E, as well as chat-bots like Chat-GPT, powered by large language models. Investment has been immediate and almost unthinkably massive. In late 2023, it was estimated that generative AI startups were attracting 40% of all new investment in SIlicon Valley, and Bloomberg Intelligence estimates that the market for generative AI, valued at $40 billion in 2022, will be worth as much as $1.3 trillion in the next decade.
Now, whether or not generative AI has the society-spanning, epoch-disrupting economic and social impact people are predicting (personally, I remain unconvinced, and anyone who disagrees can either fight me in the metaverse or try to run me over with a self-driving car) actually manifests, there’s no denying generative AI’s potential as a useful tool if adopted correctly.
Especially in an underskilled, rapidly digitalising procurement sector.
How can generative AI help procurement?
While Generative AI will never write a (good) movie script or create a piece of art that anyone with any taste would find genuinely moving, there are some things it does very well. Namely, it is very good at not only taking in and processing huge (and I mean huuuuge) amounts of chaotic, poorly structured information and answering questions about it, but most importantly, it can understand prompts and give results in simple, conversational language. There are still limitations and kinks to work out, however.
Generative AI still deals with hallucinations. However, the ability to input huge amounts of data and analyse that data in a conversational format could alleviate a lot of the technological literacy related teething problems that appear to be at the heart of the procurement skills shortage.
An EY report notes that, in the Supply Chain and Procurement space, generative AI has massive potential to: “Classify and categorise information based on visual, numerical or textual data; quickly analyse and modify strategies, plans and resource allocations based on real-time data; automatically generate content in various forms that enables faster response times; summarise large volumes of data, extracting key insights and trends; and assist in retrieving relevant information quickly and providing instant responses by voice or text.”
The future of Gen AI
Generative AI can be a source of simplicity for procurement teams at a time when new technologies often add complexity and necessitate upskilling or new hires. EY notes that a biotech company using a generative AI’s chat function has had positive results when using it as a way to inform its demand forecasting. “For example, the company can run what-if scenarios on getting specific chemicals for its products and what might happen if certain global shocks occur that disrupt daily operations. Today’s GenAI tools can even suggest several courses of action if things go awry,” write authors Glenn Steinberg and Matthew Burton.
Adopted correctly, generative AI could not only empower procurement teams to handle the pain points of today, but also tackling the looming threat of the skills shortage in an industry facing a relentless demand for skills that may not be in adequate supply for years to come.
Public sector purchasing stands to gain the most from data-driven procurement, and so far has done the least.
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Data-driven analytics have the potential to empower CPOs with greater understanding of their ecosystems, value chains, and internal operations. Big data can shine a light on places where there’s room to create efficiencies, contain costs, and mitigate risk.
In the June 2023 issue of Government Procurement, Steve Isaac notes that analytics can create significant benefits in areas like negotiation, vendor segmentation and yearly planning. He goes on to note, however, that “advanced analytics and data science haven’t exactly broken into the public procurement zeitgeist. It isn’t the subject of keynotes at the annual conferences and meetings … It isn’t a qualification line on most procurement job listings. For most agencies—even large ones—introducing advanced data science is not a priority.”
It’s not altogether shocking that, while the private sector is investing heavily in the potential benefits of data analytics and other digital procurement tools—with the global procurement software industry predicted to exhibit a CAGR of over 10% between now and 2032—public sector procurement lags behind. Isaac notes that it’s a “chicken and egg” issue with the case for a robust data science function hinging on the benefits of that investment being understood, which requires them to be felt, which can’t happen until investment, but… and so on.
However, there’s a case to be made that this delay in data science investment by public sector procurement agencies is one of the critical stumbling blocks also preventing public sector procurement from adopting artificial intelligence, machine learning, and other cutting-edge technology with the potential to solve a lot of the recurring public sector pain points.
Raimundo Martinez, Global Digital Solutions Manager of Procurement and Supply Chain at bp, noted in a recent interview with the MIT Technology Review that “everybody talks about AI, ML, and all these tools, but to be honest with you, I think your journey really starts a little bit earlier. I think when we go out and think about this advanced technology, which obviously, have their place, I think in the beginning, what you really need to focus on is your foundational [layer], and that is your data.” Martinez stresses the importance of building a strong data foundation that allows CPOs to take advantage of emerging technologies in their supply chains.
It’s not as though public procurement departments are short on data either. Isaac argues that, “if data is a precious resource, governments are gold mines.” Governments collect huge amounts of information all the time. The widespread adoption of digital ERP systems, eProcurement, supply chain management software and vendor performance sites is now doing a great job of mining that data.
As noted in a report by researchers from the Government Transparency Institute, a European think tank, “The digitalisation of national public procurement systems across the world has opened enormous opportunities to measure and analyse procurement data. The use of data analytics on public procurement data allows governments to strategically monitor procurement markets and trends, to improve the procurement and contracting process through data-driven policy making, and to assess the potential trade-offs of distinct procurement strategies or reforms.”
From compliance to being an efficiency driver, there are more benefits to sustainable procurement practices than environmental ones.
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The main obstacle cited by procurement leaders (as well as those outside the procurement and supply chain functions) to adopting sustainable procurement practices is cost.
According to Edie’s “The Business Guide to Sustainable and Circular Procurement” report released in November 2023, “Costs and Finances” was considered one of the biggest barriers to “Improving Sustainable Procurement For Your Operation”. In a survey of procurement leaders, 76% considered cost to be one of the biggest issues, compared to the distant second and third options: “Lack of Data” (54%) and “Lack of Understanding on Sustainability (38%).
However, in addition to the fact that the benefits of collective climate action dramatically outweigh its short term costs (existential threats are like that), there are sound arguments to be made for sustainable procurement practices from a business point of view as well.
The sustainability benefits incurred by reducing environmental impact in the supply chain can, according to the Edie report, be a catalyst that helps respond to a plethora of issues and considerations.”
Closing the loop to create a more circular supply chain can be driven from within the procurement function, and can do a lot to protect the S2P process from pricing volatility and supply chain disruption—something increasingly on the mind of industry leaders, as indicated by Dun & Bradstreet’s Q1 2024 Global Business Optimism Insights report, which highlighted “a downturn in global supply chain continuity due to geopolitical tensions, trade disputes, and climate-related disruptions in maritime trade causing both higher delivery costs and delayed delivery times.”
There is also the fact that meaningful adoption of sustainable practice in the S2P value chain can have a meaningful financial benefit to brands as a whole. Sustainability is an issue on which consumers vote with their wallets. According to the World Economic Forum, “sustainable procurement practices can help deliver a 15-30% increase in measurable brand equity and value”. Consumers, suppliers, and partners all value sustainable practice as a meaningful demonstration of company quality, and—especially in terms of public opinion—consumers are becoming savvier when it comes to differentiating meaningful change from empty rhetoric.
There’s more economic benefit than brand value adjustment that comes along with reexamining procurement practices from a sustainability perspective. The same report by the WEF noted that “embedding sustainability into procurement practices can actually help reduce departmental costs for procurement by 9-16%.” Evaluating processes for the sake of exploring green options often exposes existing inefficiencies, siloes and poor planning that can then be rectified rather than being left unexamined.
While business leaders continue to shy away from perceived profit loss as a result of pursuing more sustainable practice in their procurement functions, when handled correctly, it can be a source of more than just emissions wins.
As procurement becomes more important, digitally-driven, and strategic, so has the role of the Chief Procurement Officer.
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15 years ago, the Chief Technology Officer role rarely appeared on a roll call of the C-suite outside Silicon Valley. If you weren’t a tech company, you had a “head of IT” or even just an “IT guy”. Now, “every company is a technology company”, and every boardroom has a CTO. (And a Chief Information Officer, and a Chief Security Officer, and probable a Chief Digital Transformation Officer, and so on).
As technology has changed the way that we do business at a near-molecular level, so too has it changed the roles of the leaders overseeing it. No longer can you have someone in your C-suite who is technologically illiterate, just like you can no longer be a tech genius without at least a little flair for business. As the role has become more integral, it has become more strategic, and the demands placed upon executives and employees have changed.
That’s all ancient history, but history repeats itself. The same thing is happening to procurement right now.
In the last several years, the procurement function has started to show genuine signs of transformation from what David Ingram, CPO for Unilever, calls a “insular, contract-and-process-heavy organisation to a wider, more insightful function that is connected to what is happening in the broader market.”
Hervé Le Faou, CPO at Heineken, goes further, stating that “Fundamentally, the CPO is evolving into a ‘chief value officer,’ a partner and co-leader to the CEO who is able to generate value through business partnering, digital and technology, and sustainability, which are new sources of profitable growth in a shift toward a future-proof business model.”
A white paper from AI procurement company Zycus points out that the role of CPO has grown to include new duties, and preexisting duties have become more important in an increasingly fast-moving, easily-disrupted business landscape. “Today, CPOs are responsible for compliance. They play an active role in merger & acquisitions and participate in strategic initiatives. This is in addition to handling supply risk management, environmental responsibility, as well as the traditional job of ensuring cost-efficiency,” the report’s authors note. “Hence, it comes as no surprise that some companies have started inducting CPOs into the board of directors. In many others, the employee- hierarchies are undergoing a change, with procurement function reporting directly into the C-level executives or the board. The CPOs of today enjoy greater autonomy and improved control over budgets than before.”
As a result, the role of CPO has transformed from a tactical, functional one to something broader, more strategic, and typically more autonomous.
Risk management has risen (almost) to the top of CPOs’ priority list for 2024. Here’s how they’re tackling it.
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If ever the world truly reached a state of “new normal”, that state is one of constant disruption.
Even by the time the COVID-19 pandemic threw the world’s supply chains into a state of utter turmoil in March of 2020, procurement teams were already dealing with a heightened state of disruption. The US-China trade war that defined most of 2019 had barely simmered down before most of Australia was on fire and a US drone strike killed Qasem Soleimani which made an escalating war with Iran look like a very real possibility. Lockdowns, protests, earthquakes, war in Ukraine, spiking oil prices, genocide in Palestine, and both the accidental and purposeful disruption of shipping through the Gulf are just a smattering of the disruptions to which procurement professionals are becoming accustomed.
“After the last few tumultuous years, procurement teams are still facing steep challenges in getting ahead of supplier and supply chain risks,” writes Greg Holt, Product Marketing Director at Interos. “Unfortunately, there are no signs that the heightened frequency of disruptions we’ve seen over the last few years will abate in 2024.”
It’s clear that the procurement teams that learn to manage risk on a daily basis will be the ones that fare best in a world increasingly defined by geopolitical instability and a collapsing climate.
Procurement risk management strategies
Risk management is not a one-time process, nor a single overhaul of policy; managing risk requires constant oversight and frequent reevaluation to ensure you avoid disruption today and are ready for problems that will arise tomorrow.
Streamline your data, break your silos
Procurement departments are often repositories of some of the best risk management data in the whole organisation, gathering large amounts of information on suppliers and other external factors. Procurement departments that take a more purposeful approach to their risk data can quickly establish themselves as repositories of “data, assessments, monitoring and alerts,” becoming “trusted partners who can maintain the risk intelligence needed to support the business with insights, trends and a common view of the risks posed across the extended supplier ecosystem.”
Automate away human error
While there is no shortage of questions when it comes to applying automation to complex tasks (not to mention new pain points and sources of risk), correctly implementing automation can create immediate benefits when used to take repetitive, resource intensive tasks out of human hands. Repetitive, menial tasks are common in procurement systems, and are the most prone to human error. Automation tools can reduce errors and free up time for procurement workers.
Use digital transformation to diversify your supplier ecosystem
There’s a limit to the amount of decision making and supplier diversification achieved by human means. There’s simply too much decision making to be juggled. However, with the help of AI, procurement departments can diversify and adjust their supplier ecosystem much more effectively and to a greater degree. For example, the South Korean government has adopted AI-powered decision making to nearshore a significant portion of its procurement spend. Now, 75.6% of the government’s total procurement spend is now awarded to SMEs through the evolution of its AI platform.
Interest and investment in generative AI has been massive, but does the technology actually have the capacity to meaningfully change the procurement industry?
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Since the arrival of large language model-powered chatbots, like OpenAI’s ChatGPT, the corporate landscape has been frantically striving to invest in and adopt generative AI.
Executives floated (I mean salivated over) the possibility that generative AI could replace a staggering number of roles throughout virtually every sector from law to content creation and entertainment. Well, just look how well that turned out. The legal backlash has, in many cases, been severe and, just over six months into the generative AI hype cycle, cracks are beginning to show.
But what about the applications? Surely all these issues and all this money is going into generative AI technology for a reason, right? Surely we all learned our lesson from the Metaverse, the crypto bubble, NFTs, and streaming and… I guess we didn’t, did we?
Well, actually, there are a few, but they won’t look like the Wild West of content generation we’ve seen so far.
In the retail sector, for example, 98% of companies plan on investing in generative AI in the next 18 months, according to a new survey conducted by NVIDIA (a company with an admittedly vested interest in selling shiny new GPUs). Early examples of adoption in the sector have included personalised shopping advisors and adaptive advertising, with retailers initially testing off-the-shelf models like GPT-4 from OpenAI.
However, many retailers are recognising that the strength (and weakness) of generative AI is that you only get out what you put in. That’s why the technology is, ultimately, useless as a way to replace creative roles like writers and artists. However, as a brand communicator meticulously trained on a specific set of data with carefully updated parameters, it could be invaluable. NVIDIA’s report notes that “many are now realising the value in developing custom models trained on their proprietary data to achieve brand-appropriate tone and personalised results in a scalable, cost-effective way.”
Generative AI trained on a company’s internal and customer-facing databases, web presence, and curated information resources could conversationally recommend, educate, and explain critical information to employees, customers, and business partners effectively and consistently. In an industry where communication relies on clarity and an understanding of large quantities of information, like procurement, the applications suddenly start to look a lot more appealing.
Chatbots and negotiation bots trained to converse with suppliers, programmed with company approved negotiation tactics and the latest pricing information, could automate a great deal of complexity out of the Source to Pay process.
I think the looming issue is the impact of generative AI adoption on a company’s Scope 3 emissions, as 2024 will unquestionably be defined by greater scrutiny on these sources of pollution. However, it seems that however many issues the more widely known aspects of generative AI have, the technology itself could still have a role within the procurement function of the near future.
Does it justify all the investment, hype, and endless industry media thinkpieces? I guess only time will tell.
An overabundance of digital solutions and a dearth of trust in procurement data presents a unique challenge for CPOs.
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The digitalisation of the procurement sector is well underway, with the global procurement software market set to grow by $11 billion over the next decade, with demand for cloud-based procurement solutions and automated and efficient procurement processes driving this revenue growth.
Procurement efficiency drive
However, a proliferation of digital tools across the procurement landscape points to the growing danger of inefficiency and lack of clarity when it comes to CPOs’ digital transformation strategies. A report by procurement software vendor Productiv found that “procurement and IT are being inundated with software access, vendor intake and renewal requests,” leading to a 32% uptick in the number of SaaS apps procurement departments are running, and a steadily growing workload for purchasing departments as they manage, on average, 700 vendors across various indirect procurement categories.
“This patchwork of tools across various steps of the vendor management lifecycle has created technology, team and data silos,” notes Aashish Chandarana, Chief Information Officer, Productiv. “Instead of increasing efficiency, these tech stacks start adding up to a lot of manual work to bring everything together.” The result is less time and less data to support generating meaningful insights to drive the necessary efficiencies that procurement needs to start producing for the business.
Frequently, it also seems, procurement spends so much time managing sprawling, disconnected tech stacks, that it doesn’t have the time to ensure its data is trustworthy either. A SpendHQ report found last year that “79% of non-procurement executives express limited confidence, or none at all, in utilising procurement’s data for making strategic decisions.” CPOs might recognise the critical nature of accurate data in driving decisions, but so far it seems as though the industry is struggling to ensure the accuracy and reliability of procurement data throughout the wider organisation.
Big Data potential
The potential of big data, effectively harnessed, is tremendous in the procurement process—potentially creating true visibility in otherwise murky or completely opaque value chains, highlighting opportunities for cost containment and efficiency, and helping flag risk factors that could preempt disruption.
Organisations looking to maximise the potential applications of data within their organisations need to be simultaneously mindful of the need for a decluttered tech stack and verifiable, trustworthy data if they are to avoid the pitfalls currently affecting the sector.
Costas Xyloyiannis, CEO of HICX, discusses why it’s time for leaders to take a fresh view of the data problem, and plan to reduce emissions.
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The start of the year is a good time for business leaders to consider their progress against net zero commitments. It also nudges us nearer to carbon-cutting milestones, the nearest of which is in 2030. By this time, businesses across the globe need to have halved their carbon emissions. So, if they haven’t already, now is the time to step up delivery.
But first, there’s a barrier to overcome. Behind every credible net zero win, is credible carbon data. The problem is it’s in very low supply. Good data relies on good emissions information from suppliers, and securing it is notoriously difficult.
As 2024 gets off to a start, it’s time for leaders to take a fresh view of the data problem, and plan to notably reduce emissions. To enable net zero success, we can assess supplier relations in three areas: the power play, digital processes, and a principle that works tremendously well in marketing.
Suppliers are in the power seat
Gone are the days when suppliers view their role as subservient. If the Covid-19 pandemic showed business leaders anything it’s just how much they depend on suppliers – and not just a strategically relevant few. In 2020, we saw non-strategic suppliers, such as PPE and IT providers, become crucial to operations overnight. Since then, businesses have continued to need a broader range of their supplier networks. When further supply chain disruptions brought continued uncertainty, that dependence deepened. Today, as businesses require increasing amounts of carbon information, the fact that we need suppliers is cemented.
Despite this, how big businesses work with their suppliers is often outdated and counter-productive to their goal of gathering good information.
Digital processes are in the Stone Age
Bringing supplier relations into the 2020s will take some serious shifts. First, it’s time to assess the digital processes for managing suppliers, which frankly are not up to the task. A hybrid setup of old and new technology, often poorly integrated, stops procurement teams and their suppliers from communicating well. It causes other friction too, like logging in and out of multiple tools just to perform simple tasks, a headache for both parties.
Additionally, the various tools are data traps. Every time a supplier uses a tool, it collects and stores their data. Siloed in this way, supplier data can quickly become duplicated and outdated, because it’s difficult to maintain. Unreliable master data is no good at fuelling automated workflows, and so procurement teams get stuck with manual processes.
These clunky manual processes together with the frustrating communication methods are not a recipe for successful relations. Given that businesses lean so heavily upon suppliers to receive data for carbon reporting, it’s fair to say that the approach to supplier relationships must change.
Friction is building
When starting a business relationship, most suppliers don’t sign up for this level of friction. What they expect is to put in their first purchase order, deliver their first product, send their first invoice, and repeat. In a perfect world, they will simply transact and renew.
In practice, however, the relationship is not so simple. Businesses need more from suppliers than just transacting – for one, they need a significant amount of information for compliance and innovation reasons and of course on carbon activity. So, businesses send their suppliers an abundance of information requests.
Suppliers, then, who simply want to transact, must field these requests. Further bugbears such as manual processes, disparate ProcureTech setups and poor communication practices, make it difficult to respond. A recent Supplier Experience survey found that over a third of suppliers are expected to login to 10 or more systems, nearly half struggle to resolve queries with their biggest customers, and 61% find it challenging to do their best work. Yet, while suppliers don’t find the situation productive, it continues. Why? Because businesses need their carbon information.
Suppliers want a partnership
An important consideration is that suppliers have agency. When they have limited stock or an idea, they can choose who gets it. When it comes to making the effort to dig up vital carbon information they have a choice. This isn’t to say that suppliers purposefully hold information back. This would be unlikely because they too want the relationship to work. But when they are swamped trying to fulfil their original mandates whilst figuring out complex tech and deciphering information requests, the little time and energy they do have to provide information might well go to a customer-of-choice.
It’s no different in the consumer world, where shoppers decide which brands to buy from. Businesses can’t force consumers to buy from them, so marketing teams get involved and work their magic. They encourage people to spend their hard-earned, limited money on products which they may or may not need, by showing them value, often in the form of an emotional appeal.
Similarly, businesses can’t force suppliers to spend their limited time giving carbon information. But they can sweeten the experience. There’s an opportunity, therefore, for Procurement teams who manage suppliers to change things up. Rather than bombarding suppliers with information requests that they will struggle to fulfil, they can borrow the principle of ‘encouragement’ from Marketing. Procurement can show value to suppliers, according to what’s important to them, with the view to receive value in return.
So, as we start a new year, business leaders can take a fresh perspective on how suppliers are engaged. By understanding the dependence on suppliers, this relationship can be improved. Ultimately, by viewing suppliers as partners, simplifying digital processes and “marketing” to them, business leaders can lay the groundwork for net zero.
Luke Abbott, Co-Founder and CEO at Equipoise, discusses the art of accelerating sustainable procurement with artificial intelligence.
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In today’s rapidly evolving business landscape, sustainability is not just a buzzword; it’s a necessity. As organisations strive to reduce their environmental footprint and drive social improvements in their supply chains, sustainable procurement emerges as a pivotal strategy. With the advent of artificial intelligence (AI), the potential to revolutionise sustainable procurement practices has never been more promising.
Understanding sustainable procurement
Sustainable procurement is the integration of environmental, social, and economic considerations into procurement decisions, to reduce adverse impacts upon society, the economy, and the environment1. As businesses grapple with the repercussions of climate change, dwindling resources, and increasing stakeholder demands, sustainable procurement offers a pathway to not only mitigate risks but also seize new opportunities.
The AI advantage in sustainable procurement
AI, with its ability to process vast amounts of data, automate tasks, and identify intricate patterns, is poised to be a game-changer for sustainable procurement. By leveraging AI, organisations can:
Enhance sustainability data collection
Scope 3 is the hottest topic in sustainable procurement and many organisations are grappling with the question of how to measure the greenhouse gas emissions of their suppliers. Understanding this, especially beyond the first tier, requires extensive data collection. If you were to focus on your top 100 suppliers and ask your tier n-1 suppliers to do the same, when you get to tier 3 (which is probably nowhere near the end of the supply chain) you need to engage a staggering one million companies. At this point, manual data collection and analysis is out of the question for time-strapped organisations. AI tools, such as Avarni2, streamline this process, ensuring comprehensive and accurate data acquisition.
Predictive analytics for sustainability risk management
Managing sustainability risks in today’s intricate global supply chains presents challenges such as monitoring vast supplier networks, handling overwhelming sustainability data and rapidly adapting to sanctions, media reports and regulations, all while maintaining a pristine reputation. AI offers a solution by providing real-time monitoring of supply chains, predictive analysis of potential disruptions, seamless data integration for a comprehensive view, automated reporting for enhanced transparency, and scenario analysis for strategic planning. AI tools, like Versed AI3, continuously monitor vast amounts of supply chain data, ensuring real-time tracking of sustainability factors. This real-time monitoring allows companies to identify potential risks before they escalate, enabling procurement teams to proactively address disruptions and uphold sustainability standards.
Automation
According to Deloitte’s 2023 Global Chief Procurement Officer Survey4, over 70% of CPOs have seen an increase in procurement-related risks, and only a quarter feel equipped to predict supply disruptions timely. Furthermore, internal challenges like talent loss and organisational complexities add to the burden. By automating routine tasks, AI not only alleviates these pressures but also empowers procurement professionals to focus on high-value initiatives, such as supplier education on sustainability priorities. Generative AI tools like ChatGPT can expedite market research, strategy formulation, and contracting processes, allowing teams to be more agile and responsive in this volatile environment.
AI in action
Unilever’s Sustainable Living Plan5 has been at the forefront of leveraging AI to drive innovation in sustainable procurement. In 2023, Unilever highlighted how they have been using AI and digital technologies, from the launch of their first digital tool to the recent formulation of the world’s first green carbon detergent6.
“We’re using AI to help identify alternative ingredients that can strengthen the resilience of our supply chain, making our formulations more sustainable and cost-efficient, and simplifying them by reducing the number of ingredients without impacting a product’s quality or effectiveness.” – Alberto Prado, Unilever R&D’s Head of Digital & Partnerships.
Through a data-driven approach, Unilever has been making smarter, faster, and sharper decisions to optimise its portfolio of brands and products. Their commitment to sustainability is further emphasised by their ambitious goals, which include climate action to achieve net zero, reducing plastic usage, regenerating agriculture, and raising living standards within their value chain7.
Limitations and due diligence
While AI offers transformative potential, it’s crucial to recognise its limitations. The accuracy of AI predictions and recommendations hinges on the quality of data fed into the system. In the realm of sustainable procurement, this means ensuring that the data sources are reliable and comprehensive. Regular audits, cross-referencing with trusted databases, and continuous training of AI models are essential to maintain the integrity of AI-driven insights.
The 2023 Gartner Hype Cycle for artificial intelligence8 underscores the significance of addressing the limitations and risks of fallible AI systems. It emphasises the need for AI strategies to consider which innovations offer the most credible cases for investment, ensuring that AI’s transformative benefits are realised while mitigating potential pitfalls.
The future of AI in sustainable procurement
As we gaze into the future, the synergy between AI and sustainable procurement is poised to grow stronger. With advancements in machine learning algorithms, natural language processing, and predictive analytics, AI’s potential to drive sustainability will only amplify. The Gartner report highlights the rise of generative AI, which is reshaping business processes and redefining the value of human resources. Such innovations, including generative AI and decision intelligence, are expected to offer significant competitive advantages and address challenges associated with integrating AI models into business processes.
However, a conservative outlook suggests that while AI will be a significant enabler, the onus remains on organisations to embed sustainability into their ethos and operations.
In conclusion, as the business landscape becomes increasingly complex, the fusion of AI and sustainable procurement offers a beacon of hope. By harnessing the power of AI, organisations can not only navigate the challenges of today but also pave the way for a sustainable and prosperous future.
From cost-containment to carbon emissions, here are the 10 things that should be top of mind for every chief procurement officer in 2024.
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In the year to come, procurement will continue to transition from a back office function to a boardroom value-driver. Chief Procurement Officers and other leaders will need to increasingly reevaluate their relationships to the rest of the business as procurement not only becomes an increasingly vital source of business wins, but also a central piece of the puzzle when it comes to emissions reduction and resilience throughout the supply chain.
From generative AI to the skills shortage, there’s a lot that CPOs could be focusing on in the year ahead. We’re kicking off the new year with our list of the top ten things CPOs should be prioritising in 2024.
1. Drive significant value for the business
That’s why the first priority of all CPOs in 2024 is to apply technology, new operational organisation, hiring practices, sustainable strategy, cost containment, and every other trick and technique in order to create value for the business. Increasingly, CPOs are transitioning from logistical and cost-cutting functionaries to “orchestrators of value” and that will only become more apparent as the year (and decade) wears on.
2. Drive digital transformation
As mentioned before, procurement is a process that’s reinventing itself before our very eyes, embracing new digital technologies and ways of working that increase efficiency and drive value for the business. CPOs are increasingly important integrators of technology into the business, and should all be prioritising ways to implement technology over the coming year. However, it’s important to beware that technology for technology’s sake is even more dangerous than sticking it out with a legacy system…
3. Reduce environmental impact
Knowing may be half the battle, but once CPOs have an understanding of the environmental impact their S2P process has, they must prioritise finding ways to mitigate that impact. From a stricter regulatory landscape to a more perceptive and angry public, a meaningful environmental sustainability strategy is no longer “nice to have” or even necessary: it’s long overdue.
4. Understand your Scope 3 emissions
More than 60% of procurement leaders in the US, UK, and Europe surveyed in a recent report say that their Scope 3 emissions reporting process is more of a “take your best-guess” approach than a process of gathering concrete, reliable information.
The S2P process is one of, if not the, biggest source of greenhouse gas emissions for every company on earth, and understanding the consequences of working with one supplier or another (and then accurately reporting that information) is a huge part of the journey to net zero. CPOs who fail to prioritise transparency in their S2P process will find themselves actively hindering their organisations’ environmental ambitions at a time when procurement has the potential to be the biggest driver of positive environmental impact in many organisations.
5. Cultivate your supplier ecosystem
As much as technology is playing a bigger and bigger role in the procurement process, no CPO should discount the importance of building genuine, strategic relationships within their supplier ecosystem. Obviously, some industries are doing better than others, but in many areas (like the fashion industry, where “Those in charge of contracting suppliers for fashion brands say they are investing in longer-term strategic partnerships,” but their suppliers “tell a different story”) there’s still need for improvement.
6. Don’t buy into the hype (too soon)
In 2021, it was self-driving cars. In 2022 it was the metaverse. And last year saw the world get absolutely bent out of shape over the promise of generative artificial intelligence. However, much like NFTs and blockchain (another thing everyone was spending a lot of money trying to figure out how to make money from for a while), the promised trillions of dollars of economic impact from these technologies has yet to translate into meaningful business applications. Even the hyperloop was abandoned this year.
Procurement is an area with a huge amount of potential for digital transformation, and adopting the right technologies for the right reasons is what’s going to separate industry-defining success stories from all those dudes who went blind at the Bored Ape Yacht Club convention.
7. Mitigate risk to the supply chain
In the wake of the COVID-19 pandemic, the global source to pay (S2P) process has transitioned from a “just in time” approach to a “just in case” one. As climate change disrupts agriculture and manufacturing across the global south, and events like the Yemeni blockade of the Suez canal in order to hinder Israel’s occupation of Palestine hinder the movement of goods between regions, CPOs should prioritise diverse buying strategies that mitigate risk to their S2P processes.
8. Be a source of cost-containment
Inflation was a defining characteristic of the economy in 2023, as corporate price gouging (amid other factors) caused cost-of-living to spike. In a world of rising prices, and supply chain unpredictability, controlling costs will fall increasingly to CPOs in 2024. Cost reduction targets have been hit less consistently across the industry in the last few years, thanks largely to inflation and the pandemic’s disruption of global supply chains. Going into the year ahead, CPOs who can find a way to successfully meet their cost containment targets will find themselves with a serious leg up over their competition.
9. Don’t lose existing talent
The world is in the midst of a growing resurgence in the power of labour, as class consciousness and anti-capitalist sentiment rise. The old propaganda about loyalty to companies that would replace that employee in a heartbeat doesn’t work anymore, and workers are increasingly understanding (and demanding) their true worth, and it sent shockwaves through the service, autoworker, and entertainment industries in the US last year alone.
With the tech sector still leading the world in brutal mass Q4 firing and rehiring strategies, and labour movements within massive logistics firms like Amazon growing stronger by the day, 2024 promises to be defined by more strikes and other examples of direct action, not less. CPOs in the middle of a talent shortage should prioritise giving their employees reasons to stay beyond gym memberships and company pizza parties.
10. Hire top talent
The nature of procurement is changing. As the discipline becomes increasingly digitalised, not to mention plays a more strategic role within the modern enterprise as a whole, the skills that make for a good procurement professional aren’t the same skills that were on job listings ten, or even five, years ago.
In 2024, CPOs should constantly reevaluate the skills necessary not only to do the job now, but to tackle the procurement challenges of the next few years when hiring.
In our new feature, Shaz Khan takes us through a day in his life leading operations as CEO at Vroozi.
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The procurement industry is on the cusp of a golden age. The quality and breadth of software that we will have at our disposal will be able to solve pain points in ways we have never seen before. As CEO of Vroozi, every day is spent with the mission of trying to spearhead these innovations in sourcing and procurement tech forward. However, in order to keep a proper work-life balance and not burn the candle at both ends, I have to ensure that my days are organised in such a way that I can maximise productivity while leaving enough room to let my mind and body recharge.
My mornings typically look the same. I wake up every day at 6am and I spend the hour either checking emails or getting on phone calls with partners and clients who are located in different time zones. My wife and I love a great cup of coffee and she brews a mean French press every morning which I happily imbibe as we prep to take our youngest child to school.
After morning drop off, I always do some type of workout from 8am to 9am, a quick morning hike, weight training, or some type of cross-fit routine. Physical activity is important to me and I like to get my blood pumping first thing in the morning. I am based in Los Angeles and I love to take advantage of the favourable climate and conduct my daily morning leadership meetings when possible. We have built a great team and culture at Vroozi and I always want to start the day with complete alignment on our company objectives.
For the rest of the morning, I am involved in a mix of meetings with management, status calls with different departments, and direct sales calls. I try to schedule most of my meetings during these hours so that by 1pm, I can focus on my own work without distraction. I fit lunch somewhere within these time slots depending on when I find an opening, but it ranges from day to day. From 1pm to 4pm, I get to do the work I need to do to review items of importance — from various documents, contracts, or simply just game planning and overall strategy.
As a CEO, there are three major areas I am laser focused on. The first area involves evangelising the overall vision of the company, both internally and to the outside market. It is important to set a solid vision and mission statement for your team but also provide clear guidance to the market on your differentiators, value proposition, and capabilities in the simplest of terms. My second responsibility is Chief Recruitment Officer. I want to ensure that I am actively recruiting and building the best team. Of course, a big part of that involves hiring talent from outside the company, but I strongly believe in promoting from within — ensuring there is a proper promotional path for high performers within the company.
The third responsibility has two components: Innovation and Sales. I subscribe to the notion that tech CEOs should spend 50% of their energy innovating on the product and the other 50% driving sales and distribution for the product lines. CEOs need to educate themselves on the products and services that they’re selling and how to sell it. You cannot offload that responsibility to other people. You should immerse yourself in all aspects of the product and influence the roadmap of that product. That’s why it’s critical to be able to support sales efforts directly or indirectly.
After 4pm, I check in with the management team to see if there are any urgent action items or issues that need to be unblocked. I like to spend a portion of my day with core management to ensure we understand organisation goals and that we’re doing what is needed to achieve them. If we see some slips in the process, we’ll address the things we need to do to fill in those cracks. We are a tech company and much of our focus revolves around the pace and quality of innovation with our software platform. Are we responding to customer needs quickly? How quickly are we approving new features on a product roadmap that we feel is meaningful to the company mission? How quickly are we demonstrating value not only to our existing customers but to prospects in our sales cycle? Are we retaining customers and growing with them?
Shaz Khan, CEO, Vroozi
When selling software, customer retention and expansion is critical. We strive to maintain the same level of enthusiasm, service level, innovation and attention for both our long-standing customers and new customers in a consistent manner. The same way you expect a retail chain at a mall to look and feel relatively the same whether you are in Texas or California, we want our services to be consistent and world-class regardless of region and market.
As top management, you should not be the final verdict in every required key decision. You should be able to empower leadership with a framework for decision making and risk management and trust that business is moving in a continuous state of motion. You have brought leaders in for that very purpose—to lead departments, mitigate risk, and execute strategy. However, problem solving is absolutely a necessary part and art for any C-Suite executive. My approach is very action-based. If there is a problem in a department that I see is not getting addressed to the company’s satisfaction, I will actively pull up a chair and sit down with that department to ensure we don’t leave until we outline an approach to solve the issue at hand.
Leaders need to entrust the team that they have gathered around them to solve day to day problems and challenges. But CEOs also need to be active so that problems in the business can be addressed and remediated quickly.
I also draw a line in the sand where I will never go searching for problems to solve. There’s a trust that you build with your executive team to get that work done. Regardless if I’m handling the problem or one of my direct managers is handling it, I believe that if any item will take you less than 10 minutes to complete, get it done immediately. This is how you are able to streamline business operations without letting issues pile up month after month unaddressed.
Once I deal with any important matters at hand with upper management, I’ll take a break and wind down with dinner with the family or coaching my daughter’s league basketball teams. My last shift of the day is around 9pm where I will check in with our international team and partners and customers. I take any calls required from those overseas teams when it comes to product development or sales opportunities.
After 10pm, I make sure to shut down and prepare for the next day. It’s important to set boundaries when you’re off the clock. I don’t subscribe to the philosophy that you have to work all hours of the day to prove your worth. Being CEO will already require plenty of sacrifice and commitment within the title. You have to always be on and there is no real concept of a weekend or a holiday. But that does not mean that we must burn out. I always try to find time to disconnect and decompress, whether with music, art, or physical activities.
The procure-to-pay industry will see some dramatic and fantastic changes in the next couple of years and Vroozi is positioned to not only adapt to these changes but to lead these changes with our AI-based technologies. There will be an increasing proliferation of technologies within the procuretech ecosystem that will augment company resource pools with smart AI-enabled assistants. These advanced tools will streamline purchasing and payment transactions, and foster improved collaboration between buyers and suppliers, ultimately enhancing supply chain operations.
In the next three years, procure-to-pay will emerge as a vital organisational function, not only driving improved operating margins and enhancing productivity through intelligent document processing but also acting as a key catalyst for innovative supply chain developments between suppliers and buyers. This will involve capabilities that will span predictive analytics on pricing trends, supply chain scenario planning, and digital payment alternatives with AI assistants who will recommend the best course of action to take—both within the software technology map, but also with additional solutions beyond it to further strengthen your business case or outcome.
With these changes on the horizon, I anticipate shifts in my day-to-day. Before COVID, I was on the road for half the year, as I firmly believe you have to be physically present whenever possible rather than relying on management via Zoom or other video conference tools. As we continue to expand in 2024, I expect to dedicate more time to travel, engaging directly with customers, partners, and participating in key events.
As I prepare to hit the road this year, my typical day will often look different. However, regardless of my location, my routine will maintain a structured focus on developing the best possible product and getting that product in the hands of as many customers as possible.
CPOstrategy explores this issue’s Big Question and uncovers if now is the greatest time to be in procurement.
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Procurement has a unique opportunity.
Amid unprecedented digital transformation and innovation, it finds itself in a state of flux and momentum. For professionals who like change, procurement is the place for them. The years of procurement standing still are long gone, its position in the c-suite is only becoming increasingly secure and prominent.
As Covid outlined, businesses need flexible and agile supply chains that are equipped to deal with local or global disruption based on macroeconomic factors. This could be an aforementioned pandemic, wars like the ones we’ve seen in Ukraine and Israel in recent years or other external issues such as the Suez Canal disruption or inflation concerns. Procurement’s time is now.
At DPW Amsterdam 2023, the notion that procurement exists in today’s world as an exciting function that spearheads the c-suite. In comedian and host of DPW, Andrew Moskos’, opening welcome, he noted procurement’s transformation and shouted. “Procurement used to be boring but now we’re all rockstars. We run the company, we’re in the c-suite, we run ESG, sustainability, risk and 80% of the spend of a company goes through us.” His message was met with loud applause from a capacity crowd at former stock exchange building Beurs van Berlage.
Michael van Keulen, CPO, Coupa
According to Michael van Keulen, Chief Procurement Officer at Coupa, it’s the feeling of ‘no two days are the same’ which keeps him energised and feeling refreshed about meeting new challenges in the space. “I wear so many different hats every single day,” he explains. “I always say sometimes I’m an accountant, others I’m an environmentalist. Sometimes I’m the treasurer or a finance person, but I’m also sometimes a psychiatrist. Sometimes I’m a doctor, a nurse, a lawyer, a judge, an environmentalist and yes even a wizard.
“I never know what my day looks like. I can plan it, but something may happen where everything goes out the window. Procurement will always be going through some type of disruption. It’s about how you drive the competitive edge and how you drive value despite that. Procurement is the best gig in the world. It’s great that more people have started to see that now too.”
Right now, generative AI is the latest craze causing quite the buzz in procurement. Indeed, its noise is loud with its true influence yet to be determined. But it’s worth remembering generative AI didn’t start with ChatGPT in 2022. Chatbots actually go back to the 1960s. Among the first functioning examples was the ELIZA chatbot which was created in 1961 by British scientist Joseph Weizenbaum. It was the first talking computer program that could communicate with a human through natural language. But, given the introduction of a far more advanced model – ChatGPT – gen AI isn’t just making waves in procurement but across industries globally too.
Daniel Barnes, Community Manager, Gatekeeper
For Daniel Barnes, Community Manager at Gatekeeper, the stakes are high. As a self-confessed change agent, he believes procurement stands at a make-or-break moment. “You’ve got people who are stuck in the past that are archaic with what they’re doing. Then there’s those who are really pushing the profession forward,” he explains. “I see it as a moment in time where procurement kind of goes one in two ways. It’s extinct in terms of how it used to be. There’s solutions which have automated workflows and are doing the work that traditional procurement people used to do. We can pull people along, but there has to be a willingness to change or it’s not going to happen. That’s why I think it’s great to see people that are showing that willingness. They may not have the answers, but they want to learn.”
Alan Holland, CEO, Keelvar
According to Alan Holland, CEO of Keelvar, he is bullish and optimistic about procurement’s future, stressing that decision-making for the function is easier than ever before. Holland affirms tomorrow is “very bright” as procurement enters an era with intelligent software agents that can automate workflows and make the human workday more efficient. “There’s a whole new range of possibilities where creative and thoughtful planning will provide a competitive advantage for organisations. Procurement can be far more influential in how successful their companies can be. It’s a game-changer.”
Scott Mars, Global V
Scott Mars, Global Vice President of Sales at Pactum, affirms procurement’s in its golden age given the number of vendors operating within the procuretech ecosystem has hit soaring heights. He tells us, “I was speaking with a CPO recently and he said 10 years ago you could name the procure to pay and ERP vendors on one hand, now there’s hundreds of them and all these periphery vendors for AI and spend. The most visionary procurement leaders aren’t just looking at these all-encompassing solutions, they’re bolting on niche solutions into their ecosystems to make their teams more efficient. I think we’ll start to see a consolidation in the coming years of all these little companies into a few larger players to do really an end-to-end type solution. I expect someone to come up with a solution to close the loop in procurement.”
Stefan Dent, Co-Founder, Simfoni
While procurement, like many industries, is still plagued by talent shortages, there is hope that AI could hold the answer. But while its influence is crucial in one hand, is there a risk that the industry could go too far the other way and become over reliant on technology? Stefan Dent, Co-Founder at Simfoni, believes soon Chief Procurement Officers will soon be thinking differently about their workforce. “This is arguably the best time for people to join procurement, as you’ve got this great opportunity to embrace digital and make it happen. Young people can question ‘Well, why can’t it be done by a machine?’ They’re coming in with that mindset, as opposed to fighting being replaced. I think for graduates coming into procurement, they’ve got the opportunity to play with digital which is a wonderful thing.”
Matthias Gutzmann, Founder, DPW Amsterdam
Today, procurement, and its professionals, find itself amid meteoric change. Indeed, its future could be anything. Matthias Gutzmann, Founder of DPW Amsterdam, believes it is time for procurement to create a buzz about the profession. “It’s the best time to be in procurement,” he explains. “It’s the most exciting era to be in procurement and supply chain. We need to get loud about it and celebrate that fact.”
For our first cover story of 2024 we meet with Lloyds Banking Group’s CIO for Consumer Relationships & Mass Affluent,…
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For our first cover story of 2024 we meet with Lloyds Banking Group’s CIO for Consumer Relationships & Mass Affluent, Martyn Atkinson, to learn how an ambitious growth agenda, combined with a people-centred culture, is driving change for customers and colleagues across the Group.
Welcome to the latest issue of Interface magazine!
Welcome to a new year of possibility where technology meets business at the interface of change…
Lloyds Banking Group: A technology & business strategy
“We’ve made significant strides in transforming our business for the future,” explains Martyn Atkinson, CIO for Consumer Relationships & Mass Affluent at Lloyds Banking Group. “I’m really proud of what the team have achieved. There’s loads more to go after. It’s a really exciting time as we become a modern, progressive, tech-enabled business. We’ve aimed to maintain pace and an agile mindset. We want to get products and services out to our customers and colleagues. We’ll test and learn to see if what we’re doing is actually making a meaningful difference.”
AFRICOM: Organisational resilience through cybersecurity
We also speak with U.S. Africa Command’s (AFRICOM) CISO Ryan Larsen on developing the right culture to build cyber awareness. He is committed to driving secure and continued success for the Department of Defence. “I often think of every day working in cyberspace a lot like counterinsurgency warfare and my time in Afghanistan. You had to be on top of your game every minute of every day. The adversary only needs to get lucky one time to find you with that IED.”
OLYMPUS DIGITAL CAMERA
ALIC: Creating synergy to scale at speed with Lolli
Since 2009 the Australian Lending & Investment Centre (ALIC) has been matching Australians with loans that help build their wealth. It has delivered over $8.3bn in loans to more than 22,000 leading Australian investors and businesses. Managing Director Damian Brander talks ethical lending and the challenges of a shifting financial landscape. ALIC has also built Lolli – a broker enhancement platform built by brokers, for brokers.
Sime Darby Motors: Driving digital, cultural, and business transformation together
Sime Darby Berhad is one of the oldest and most successful multinational companies in Malaysia. It has a twin focus on the Industrial and Motors sectors. The company employs more than 24,000 people, operating across 17 countries and territories. Sime Darby Motors’ Chief Digital & Information Officer Tuan Jean Tee shares how he makes sure digital, cultural, and process transformation go hand in hand throughout one of APAC’s largest automotive multinationals.
Also in this issue, we hear from Microsoft on the art of sustainable supply chain transformation, Tecnotree map the key trends set to impact the telecoms industry in 2024 and our panel of experts chart the big Fintech predictions for the year ahead.
Data is the key to unlocking new opportunities and managing risk, but capitalising on the opportunities of data in procurement is not without challenges.
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Over the past few years, the procurement sector has been thrust into the limelight, as CPOs are increasingly being identified as drivers of value creation, cost containment, and risk management.
In addition to business and process innovations, a lot of the changes in the role of procurement are due to a wave of digital transformation sweeping the industry. If digital transformation is the engine driving this elevation of the procurement function, then data is the fuel powering it.
Effectively capturing, organising, and utilising data to generate meaningful insights can produce significant benefits for the procurement process. However, costly investment into data analytics, flawed adoption strategies, and oceans of bad data can turn all the potential for wins into a whole new source of risk for the business. This week, we’ve gathered our top 3 challenges CPOs face when incorporating big data into their operations.
1. Bad data
No, I don’t mean Lore from Star Trek: TNG. Bad Data is a fundamental and pervasive risk to procurement professionals looking to empower their analytics. It’s also a far more widespread problem than many executives would like to believe. Last year, a report by SpendHQ found that 75% of procurement professionals doubted the accuracy of their procurement data, leading to almost 80% of executives outside the procurement function lacking confidence when it comes to making decisions based on that data.
In order for it to make any meaningful contribution to reducing costs, mitigating risk, promoting sustainability and driving meaningful change within the business as a whole, the data used by procurement has to be accurate. Pierre Laprée, chief product officer of SpendHQ, noted in the report that “procurement teams must do more to build and maintain influence within their organisations, including removing the dependency on spreadsheets to become more efficient.”
2. Choosing the right technology
Collecting, managing, and drawing insights from your procurement data is a matter of using the right digital tools. However, choosing the right digital tools—especially with CPOs often facing pressure from stakeholders to transform their operations digitally—can be a complicated prospect with potentially severe negative consequences ranging from sub-par outcomes and wasted budgets to catastrophic data breaches.
A report by Productiv found recently that, while “procurement and IT are being inundated with software access, vendor intake and renewal requests,” the number of applications and subscription services being managed by the average business has risen by more than 30% in the past two years. Combined with growing workloads, skill shortages, and an unclear vision for handling these growing technology stacks, Productiv’s report notes that “this patchwork of tools across various steps of the vendor management lifecycle has created technology, team and data silos. Instead of increasing efficiency, these tech stacks start adding up to a lot of manual work to bring everything together.”
3. Creating spend data visibility
Dark purchasing refers to the phenomenon of procurement expenses incurred outside a business’ defined procurement process. It’s uncontrolled spending that procurement can’t see, but that still gets added to their numbers at the end of the quarter.
Big data and procurement is often thought of in terms of its ability to help understand the world outside the business’ walls—logistics, pricing, supplier behaviour throughout the market in response to market changes—but effectively deploying data analytics to understand why dark purchasing is happening, when, and by whom is a vital step in figuring out how to reduce its impact on the company.
Unfortunately, this presents a serious challenge, as many procurement departments lack a cohesive data organisational strategy; data is often scattered throughout multiple silos in the organisation, hidden from procurement in much the same way that unapproved purchasing hides until quarterly expense reports. Overcoming this challenge and creating a holistic, accurate view of company spend—both within the procurement function and outside it—is one of the greatest opportunities and challenges presented by the infusion of big data into procurement.
B2B procurement is headed for a new, more dynamic, digitalised era defined by a more strategic approach to traditional processes and new challenges.
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The procurement industry isn’t a back-office function anymore. Much like the transition of IT departments from obscurity to the C-suite over the past 10-15 years, procurement is making its way into the limelight.
“We are entering a new era of smart business buying where senior leaders are understanding the impact procurement can have on efficiency and overall company success,” said Alexandre Gagnon, vice president of Amazon Business Worldwide, at a recent Amazon Business event attended by more than 1,000 procurement leaders across the public and private sectors.
“The procurement function is now cross-disciplinary, spanning both functional and strategic purviews as buyers are planning to invest more in technology and optimisation while future-proofing their companies and organisations,” added Gagnon.
Procurement’s transition
The 2024 State of Procurement Report released by Amazon Business in conjunction with the event points to an array of indicators that the nature of procurement is fundamentally changing. From the traditional procurement workloads concerned with day-to-day purchasing, to a more recently emerged responsibility of future-proofing the business against disruption (by another pandemic, for example), procurement’s goals are “ever-growing”.
In order to keep up, the discipline is “transforming at lightning speed,” claims Gagnon in the introduction to the report.
Data gathered from over 3,000 procurement professionals supports this inclusion. Key findings include the fact that 95% of decision-makers say their organisation currently has to outsource at least a portion of their procurement to third parties, the fact that 95% of decision-makers say their procurement function has “room for optimisation”, and 53% of respondents who say their procurement budgets will be higher in 2024 than they were this year.
Tech-driven procurement
Technology investment is expected to be high on the agenda, as procurement leaders attempt to bring increased visibility and resilience to their departments. A remarkable 98% of decision makers said they were planning to invest in analytics and insights tools, automation, and AI for their procurement operations, with the (anonymous) VP of purchasing at a major global bank in the US saying that “Making investments in the right tools and technology [is critical] because you rely on data as a procurement organisation. There is … spend data, contractual data, invoices, and more. Without the right tools in place, you can only do so much [with your data].”
Reflecting on the changing role of procurement in the modern enterprise, Gagnon added that “Ultimately, procurement not only keeps operations running, but plays an integral role in achieving key organisational goals, and with smart business buying, companies have procurement solutions to serve as a growth lever for organisations.”
The assistant will use natural language processes and AI to perform “thousands of procurement tasks”.
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The latest in a small flurry of generative AI-powered virtual procurement assistants is hitting the market. Earlier this month, Relish, a B2B app developer based in Ohio, announced the release of its new procurement assistant—a virtual assistant product powered by generative artificial intelligence and designed to intuitively interact with users while performing “thousands of procurement tasks”.
“What we’re offering is a solution that truly frees users from the menial to engage in the meaningful,” said Ryan Walicki, Relish CEO, in a statement to the press. He added that the Relish Procurement Assistant would revolutionise the way businesses handle their procurement systems and processes, claiming: “By leveraging large language models, this single interface spans all procurement systems and platforms and can be custom fit to any enterprise solution ensuring workflows are never interrupted.”
The rise of generative AI
Relish isn’t the first company to utilise a combination of generative AI and large language models, like ChatGPT, to create a more naturalistic interface between users and complex systems for managing data. In November, Californian tech firm Ivalua released an Intelligent Virtual Assistant powered by generative AI as part of its platform, making similar claims that the technology would eliminate busy work, freeing up employees for more strategic activities.
Relish works in a similar way, plugging into an existing procurement management platform, and using artificial intelligence and natural language processing to “intuitively interact” with users in a conversational way, giving them detailed insight into their workflows.
According to Relish, the technology can perform numerous tasks, including supplier management, sourcing, contract management, supply chain, and purchasing.
Where Relish differs from other offerings on the market is in its alleged ability to “[adapt] to any platform and workflow preference.”
According to Jeremy Reeves, Relish Senior Vice President of Product: “The adaptability helps users get the most out of their procurement enterprise software, maximising their return on the investment… It brings a new dimension to how users will go from being taskmasters to being conductors of their enterprise systems.”
Sapio Research found that just 48% of organisations are confident they are accurately reporting Scope 3 emissions through their P2P process.
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More than half of the 850 procurement leaders in the US, UK, and Europe surveyed earlier this year could not claim to be “very confident” in their organisation’s ability to accurately report Scope 3 emissions, according to a new study conducted by Sapio Research and commissioned by Ivalua.
While 48% of leaders were confident in the accuracy of their companies’ reported emissions figures, nearly two-thirds (62%) of leaders surveyed admitted that “reporting on Scope 3 emissions feels like a ‘best-guess’ measurement.”
A significant majority of the organisations were confident that they are on track to meet net zero targets. However, the report also found that many don’t have plans in place for:
Adopting renewable energy (78%).
Reducing carbon emissions (68%).
Adopting circular economy principles (72%).
Reducing air pollution (67%).
Reducing water pollution (63%).
Procurement’s role
It has long been recognised that procurement has a vital role to play in the reduction of environmental impact in organisations’ supply chains, with as much as 90% of a company’s emissions falling within the Scope 3 band.
“Organisations are aware they must urgently address sustainability and understand the cost consequences of not doing so. But this lack of confidence paints a negative picture,” comments Jarrod McAdoo, Director of Sustainable Procurement at Ivalua.
“A lack of perceived progress could fuel accusations and fears of greenwashing, so it’s important to remember that obtaining Scope 3 data is part of the natural maturation process. Many sustainability programs are in their infancy, and organisations need to start somewhere. Estimated data can help determine climate impact and contribute to building realistic, actionable net-zero plans. Over time, organisations will need to make significant progress on obtaining primary Scope 3 data and putting plans in place, or risk financial penalties as well as ruining reputations in the long run.”
Regulatory and public scrutiny continues to mount against both public and private sector polluters. A report released in December highlighted the devastating annual emissions by militaries around the world, finding armed forces to not only be one of the world’s largest fossil fuel consumers (5.5% of all global emissions), but that the US military alone has a larger environmental impact than some developed countries. The scale of military contribution to the climate crisis, in addition to the lack of transparency when it comes to disclosing those figures, is a major issue that is also echoed in the private sector of the civilian world.
Are some companies ‘unintentionally greenwashing?’
In the private sector, both activism and legislation continues to move (too slowly, but it’s a start) against corporations responsible for the climate crisis and pollution. In the UK, the High Court in London ruled that Nigerians affected by oil spills the corporation promised to clean up can bring legal action against the British multinational. The state of California is itself suing America’s largest oil companies for their role in exacerbating and covering up the effects of climate emissions for decades.
More recently, corporations that rank among the world’s largest polluters have been accused of adopting environmentally friendly rhetoric in order to make themselves appear more committed to environmental sustainability than they, in actual fact, are. The practice, known as “greenwashing”, has been criticised by politicians, activists, and members of the scientific community.
McAdoo notes that the inability to accurately report Scope 3 emissions—taking a “best-guess” approach—could be a contributor to organisations looking to avoid unintentionally greenwashing their emissions data by misrepresenting themselves.
“Nearly two-thirds of U.S. organisations agree that an inability to measure supplier emissions accurately makes it hard to turn words into action,” McAdoo continued. “There is a clear need to adopt a smarter approach to procurement. Organisations need granular visibility into their supply chains to ensure they can measure the environmental impact of suppliers but also collaborate with suppliers to develop improvement plans. Only with this transparency can organisations showcase meaningful sustainability progress and avoid accusations of greenwashing.”
Coupa Software and Acquis Consulting Group has released an eBook offering tips on how to navigate the challenges of the procurement landscape.
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A new eBook from Coupa Software and Acquis Consulting Group providing guidance on how to navigate the challenges of the procurement landscape has been released.
The eBook offers real-life success stories from the likes of Dent Wizard, Sun River Healthcare and Eyecare Partners while uncovering essential strategies for enhancing efficiency and driving growth.
Additionally, the eBook provides expert guidance on mastering procurement and compliance in today’s economic landscape as today’s leaders are forced to re-examine their internal processes, particularly when it comes to business spend management.
As a result of rising inflation, as well as the cost of capital and labour, it has meant businesses need to identify new ways to improve margins, drive sustainable growth and scale productivity. However, many existing solutions at mid-market companies are already stretched to the limit.
This led to Dent Wizard, Sun River Healthcare and Eyecare Partners coming to the same conclusion – digital transformation can take painful and antiquated processes and make them stress-free and efficient.
The new eBook is considered a must-read for leaders seeking to overcome the complexities of today’s procurement space amid a challenging economic climate.
To find out more about how Dent Wizard, Sun River Healthcare and Eyecare Partners recommend organisations can transform their business spend management, download Coupa and Acquis’s free eBook here.
AI and Machine Learning-powered analytics could help security teams flag and prevent fraud in their procurement functions.
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Procurement fraud is costly and hard to prevent, but with the right tools, organisations could see red flags earlier and respond in time rather than too late.
According to the Association of Certified Fraud Examiners (CFE), organisations lose 5% of their annual revenue to fraud, with the median loss per case totalling $117,000, and the average being $1.7 million.
Supply chains and procurement functions are especially vulnerable to fraud—often comprising long and winding networks, intricate webs of relationships, vast inventory assets, and multiple transactions along the S2P journey. The procurement and supply chain functions of retailers and manufacturers are especially vulnerable.
Frequently, procurement fraud is the result of a malicious individual within the organisation, although vendors and partners can also be responsible. Bid rigging, intellectual property infringement, inventory theft, and product counterfeiting are all examples of occupational fraud within the procurement process.
To address these challenges, companies must implement proactive measures. The CFE report noted that nearly half of fraud cases occurred due to a lack of internal controls, or an overriding of insufficient existing controls. It also found that anti-fraud controls were effective, resulting in lower losses and quicker fraud detection.
Fraud is prone to thrive in the procurement process, and can have devastating consequences, but the fight against the threat isn’t hopeless, and new technologies are proving especially effective in stamping out the issue.
In addition to traditional anti-fraud measures like strengthening internal controls, performing due diligence, and conducting regular quality checks, organisations can fight fraud in their procurement and supply chain functions by harnessing the power of AI and Big Data.
Fighting fraud with Big Data
AI analytics of Big Data sets can do more than improve efficiencies and predict trends in the movements of goods; these types of analytics excel at pattern recognition and, once correctly trained, can identify subtle changes in activity within the procurement function and supply chain that could point to fraud.
According to Isabelle Adam, an analyst at the Government Transparency Institute in Budapest, and Mihály Fazekas, founder of the Institute and assistant professor in the School of Public Policy at Central European University, “With the increasing use of electronic and online administrative tools — such as e-procurement platforms — making administrative records readily and extensively available in structured databases, public procurement has become a data-rich area.”
This wealth of data, if improperly handled, can become a place for fraud to hide, but if big data analytics are applied, they argue, it “can serve as a tool for auditors to identify and prevent fraud and corruption.”
The top seven trends driving procurement’s transition from the back-office to the boardroom in 2024.
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The year ahead has the potential to be a watershed moment for the procurement industry, as infusions of leading edge technology and process innovation conspire to enable procurement’s shift from spend management to strategic leadership. Increasingly, leadership is recognising the potential of procurement to guard against risk, drive sustainable practice, and be a key enabler in helping the business identify and capitalise on new opportunities.
Procurement is undeniably on a journey from being a back-office cost-cutting function to a key driver of strategic wins for the business. In 2024, procurement teams should continue to capitalise and build upon existing wins as they continue their optimisation journey. For those lagging behind, the time to begin their transformation from functionary to value orchestrator is now.
2. More space strategic, value-add work
A vast majority of decision makers surveyed by Amazon Business last year revealed that they needed to outsource elements of their procurement function to a third party. It’s a known fact that the current procurement industry struggles with a lack of the necessary human resources, skills, and systems to keep pace with mission critical operational demands. With those demands only expected to get more complex in 2024, procurement teams need to find ways to spend less time on low value manual work and refocus their efforts on high-level, strategic activities. Adopting low-code platforms, AI, process automation, and other technology could be a way to execute on this necessary transformation.
3. More investment (and hype) surrounding AI, automation, and analytics
2023 was the year when generative AI exploded into the spotlight, attracting massive amounts of hype, interest, and investment. However, just a few weeks into 2024, you can see excitement starting to cool, as organisations struggle to find effective applications that justify the price of admission.
In 2024, we can expect to see massive AI utilisation in data analytics, in process automation, and other elements of the S2P process, but generative AI adoption in ways that produce meaningful benefits are likely more than 12 months away.
4. Low code, higher automation in S2P platforms
Managing the source to pay process is increasingly complex, and time consuming to orchestrate. In 2024, with pain points like this increasing complexity (due to climate instability, compliance regulations, etc.) and talent shortage, the adoption of more low-code platforms will increase the ability of procurement teams to automate significant elements of their operations.
5. Scope 3 comes under greater scrutiny
A recent report found that around two thirds of procurement professionals in the US, UK, and Europe feel that their Scope 3 emissions reporting is more “best-guess” than hard fact. With regulatory scrutiny—not to mention public opinion—growing less and less lenient with regard to greenwashing and climate inaction, procurement teams need to make 2024 the year they take meaningful action to create transparency beyond Scope 1 and 2 emissions.
This obviously represents a significant challenge. Scope 1 and Scope 2 emissions are relatively straightforward compared to the sprawling, often opaque morass of Scope 3. Inaction is not an option, however, if organisations are to meaningfully pursue their net zero by 2030 targets.
6. Mission-critical Big Data
Collecting, managing, and effectively drawing insights from big data is and will remain one of the defining challenges for the modern enterprise. A proliferation of data from IoT devices, cloud-based platforms, and a general increase in the amount of technology being integrated into the procurement process (not to mention an increase in awareness of how important it is to gather as much data as possible) is leaving some industry players overwhelmed.
Vast silos of data with no meaningful way to draw insights from the unstructured mass create more problems than they solve. 2024, then, should be the year that procurement not just recognises the importance of data, but the absolute criticality of putting systems in place to manage it effectively.
7. AI achieves greater autonomy in planning tasks
Even as the shockwaves of the COVID-19 pandemic recede from the global supply chain, macroeconomic forces still conspire to place increased pressure on supply chains and procurement teams. Forward planning is more important than ever and procurement professionals are finding themselves increasingly struggling to meet the demands of “a more complex, multi-tiered, more nuanced world.”
Using artificial intelligence to more effectively run scenario analysis could have a transformative effect on the S2P process, allowing low-touch planning driven by AI to eliminate manual work, analyse data at scale, identify and flag anomalies, and even start making suggestions to humans as to how to proceed. There is still some doubt over AI’s ability to handle tasks consistently with minimal human oversight, but the tide of public opinion is starting to change.
New data from Emergen Research suggests the procurement technology market will be worth approximately $17.9 billion in 2032.
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Increased adoption of cloud services, artificial intelligence (AI) and process automation are driving strong growth in the global procurement software market.
According to a report released this week by Canadian market research firm Emergen Research, the global procurement software market is expected to register a rapid revenue CAGR of 10.4% over the decade following the 2022 financial year—from a global valuation of $6.67 billion at the start of the forecast period to $17.90 billion in 2032.
The report’s authors found that “increasing use for cloud-based procurement solutions and rising need for automated and efficient procurement processes are key factors driving market revenue growth.”
The talent challenge
In the face of a talent shortage—exacerbated by growing demand and increasingly supply chain complexity—the report expects to see cloud-based procurement systems attain widespread adoption.
“Cloud-based procurement systems have many benefits such as easy deployment, flexibility, scalability, and lower infrastructure costs. This software allows for real-time access to procurement data, leading to better informed and timely decisions,” note report authors. “In addition, this software also makes it possible for companies to access procurement software at any time and from any location, which makes it easier to manage procurement procedures globally.”
Is automation the solution?
Artificial intelligence and machine learning will also support procurement teams in overcoming the pain points presented by the skill shortage, stricter regulations, and supply chain instability. The report suggests that the technologies—if correctly adopted—could be instrumental in “helping companies to automate increasingly complex procurement processes while enhancing decision-making.”
However, high up-front costs may present an insurmountable barrier to entry for some organisations, and a deterrent for others, the report notes. These costs include software licensing fees, implementation costs, training expenses, and any required hardware upgrades. Emergen researchers also note that concerns over data privacy and cyber security could slow adoption of cloud-based solutions.
Kathleen Anne Harmeston discusses some of the key items sitting on the 2024 agenda amid seismic digital transformation.
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Procurement, in my opinion, has experienced one of the largest direct knock-on effects of unprecedented inflation and geopolitical issues over the last two years (including supply-chain issues caused by Brexit, the US-China Trade War, and European instability of the Russia-Ukraine War).
Procurement’s challenges
We are seeing this impact in the form of cost increases across nearly all industries and challenges in securing and maintaining reliable, dynamic, and cost-effective supply partners.
Boardrooms are struggling to understand why they should invest further funds to bolster the CPO remit, including investment to help them technologically revolutionise the business and the function. Possibly this is due to a lack of visibility on how procurement can be a high performing business partner, which offers a proactive, seamless, automated and value-adding service supporting profitability and ESG efforts. CPOs are now tasked to sell the benefits of investing in procurement over and above the safety blanket of ‘cost reduction’ as the signature sell.
The above obstacles will also be underpinned by the phenomenal opportunity of integrating AI into the procurement function alongside many other digitisation opportunities. Those companies who welcome technological innovation of their P2P systems and supplier management processes are likely to have better competitive advantage and risk management as a consequence.
The general consensus I have gained from speaking with my peers are:-
Profitability (of course).
Agility and digital readiness within the P2P and business management systems.
Delivering ESG for the firm and not just giving “lip service” to the exercise.
Risk management within the elaborate complex web of supply chain networks.
Driving Innovation through the supply chain.
2023 saw the same old issues in limited control over and transparency in third-party spend. This was due to supply instability, semi manual processes, rising costs and value leakage from off-contract spend. With this in mind, boardrooms are more likely than ever to push back on the CPOs call for further investment. But this creates a circular argument of investment needed in the function, combined with business’ commitment to approved supplier compliance to meet the board challenges in 2024.
Moving to 2024
Digital readiness has become imperative as team members continue to work in hybrid or remote ways, but also because inefficient manual processes and limited digital visibility and automation of spend management causes significant lost opportunity and risk. Recent studies from KPMG and SAP show that 37% of procurement processes are still semi auto and manual and 77% of Executives complain they cannot access a good spend data real time. These studies have been further supported by research from Ivalua which states:
53% of procurement and supplier management processes have yet to be digitised.
22% of procurement teams estimate that they are wasting their time each year dealing with paper-based or manual processes.
50% of procurement leaders think the rate of digitisation within procurement is too slow.
47% say existing procurement systems are not flexible enough to keep up with constant change and market uncertainty.
Inefficient procurement processes often result in disorganised data management and reporting -ultimately leading to executive frustration. These issues further invite problems such as duplication of payments or delays in payment.
What are the technological innovations for 2024?
The shape and structure of the procurement division in the future will change quite dramatically with the ever-increasing integration of AI. When the second wave of more sophisticated generative AI software arrives – which improves its reliability of output, data leakage, and data security – AI and machine learning may well plug the gap of manual human input for certain portions of the procurement division. With AI (or any kind of automatic digitization for that matter) we will soon embrace the automation and celebrate the headcount savings in procurement, and instead ask for investment in greater strategic skills and the next level of development for our procurement staff.
AI truly has the potential to transform procurement. From specifically supply chain management, to helping with demand forecasting and inventory management to logistics optimisation, new product development cycle time improvement, and supplier engagement. AI will also help with managing our spend via creating predictive reports for cost reduction opportunities.
Specifics for CPOs look for in 2024
Advanced AP Invoice Automation Platforms
Advanced accounts payable invoice automation platforms process invoices in any format with good speed and accuracy. It means going touchless eliminates the pain of managing paper invoices. By reducing the cost per invoice, shortening cycle times, and increasing spend control, these cloud-based electronic invoicing systems offer built-in matching and automatically identify errors, duplicates, and overpayments. They ensure payments are only made for ordered and received goods. Many APIA platforms can be tailored to specific organisational needs. This is with features like cognitive OCR invoice capture, smart coding, and invoice approvals to further streamline the process. These platforms can integrate with existing financial or ERP systems for seamless digital payments. While their advanced features like duplicate invoices and fraud checks, along with integrated exception handling, demonstrate the future of invoice processing in the P2P cycle.
Mobile P2P solutions
Mobile platforms are becoming more useful and available in the P2P process by shifting to cloud and software-as-a-service (SaaS) solutions. The convenience of mobile apps allows users to manage procurement activities on the go. This is also while offering real-time access to crucial data and processes. This mobility not only increases efficiency but also enables quicker decision-making. CPOs can also integrate their P2P systems with other cloud-based applications, such as ERP, CRM, and BI, to create a seamless and holistic view of your procurement performance.
Data analytics and visualisation
Data analytics tools are the applications that enable you to analyse your P2P data in an actionable way. These tools will help you improve your decision making, performance measurement, and reporting. For example, you can use dashboards, charts, and graphs to visualize your spend patterns, savings achievements, and compliance levels. You can also use predictive analytics, machine learning, and natural language processing to generate forecasts for your P2P strategies. Visualisation software has also made huge strides in being able to share new product development ideas. This is also while helping progress the supplier collaboration and management agenda.
Integration of blockchain for greater transparency and security
Blockchain technology is rapidly transforming the P2P sector with its unparalleled transparency and enhanced security features. By integrating blockchain, businesses are able to establish immutable records for every transaction. This will significantly boosting both transparency and security within their procurement processes. This technology is particularly effective in fraud prevention and compliance adherence and supply chain tracking. It ensures that each transaction is reliably recorded and easily verifiable, underscoring its growing importance in the P2P landscape.
Supplier collaboration
Supplier collaboration is the practice of building long-term and mutually beneficial relationships with your key suppliers, based on trust, transparency, and value creation. It can help you improve your supplier performance, reduce risks, and drive innovation. For example, you can use supplier portals, e-procurement platforms, and digital contracts to communicate with your suppliers more effectively. You can also use supplier scorecards, feedback mechanisms, and incentives to monitor and reward your suppliers for their performance.
Sustainability and social responsibility
Global supply chains are complex and can be multi-tiered. This presents a serious challenge for CPOs with limited visibility into the supply chains for sustainability and social responsibility. AI-powered reporting will enable teams to keep track of supplier and product information. This is via using global data sources from different countries, regions and languages. The key is to raise the issues and gain the sponsorship to address the risks proactively. Mapping systems and technology can help but only if this policy is embedded within the business. There is movement from tier one contract management of supply chains to managing the supplier networks.
User experience and engagement
User experience and engagement with your P2P system, such as ease of use, functionality, design, and feedback is important for the function. Alongside engagement, it can help you increase your user adoption, satisfaction, and loyalty. For example, you can use mobile apps, chatbots, voice assistants, and gamification to make your P2P system more accessible, intuitive, responsive, and fun.
Concluding remarks
The P2P landscape in 2024 will be shaped by technological advancements and a shift in business priorities. From the integration of AI and blockchain to the emphasis on sustainability and mobile solutions, these trends are redefining how companies approach procurement and supplier relationships. Despite executive reluctance to engage in further investment, during periods of inflation and market stagnancy, digitisation must be embraced with the option to either pivot or perish. Adoption of new systems and processes requires training and capacity planning within procurement departments. This is so that the business-as-usual services can continue without a downturn in service levels. Businesses that adapt to these changes will enhance their operational efficiency and position themselves strategically for future growth and success.
The five most important challenges for procurement teams to meet in 2024 and beyond, according to Amazon Business.
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It’s no secret that procurement is undergoing the same backroom-to-boardroom transformation (dare I say “glow up”) that the IT department went through over the last decade. If every business in 2023 is a technology business, then by the end of the decade, it doesn’t feel unreasonable to claim every business will be a procurement business.
However, with prestige and importance comes pressure. The modern procurement function already faces challenges, from supply chain disruptions and rising prices to the existential need to reduce emissions, which will only grow more complex as the discipline moves close to the forefront of the modern enterprise. It’s no wonder that, while Amazon Business’ “2024 State of Procurement” report found that the majority of procurement budgets (54%) were set to rise next year, an overwhelming number of respondents confirmed that their procurement functions are in need of optimisation.
With 2024 still in its first month, we’ve broken down the five highest priorities for procurement leaders to focus on over the next 12 months, as well as heading into 2025.
1. Retaining and developing existing talent
Lastly, even more important than attracting new talent, the number one priority for procurement teams in 2024 will be retaining the talent they already have, and developing those procurement professionals to marry knowledge of the business and industry with an understanding of new trends, techniques, and technologies.
2. Attracting top talent
A report released by Gartner in December found that more than 85% of procurement directors and executives believe that their teams contain “adequate talent” to meet the future needs of their organisations’ procurement function. The demands placed on procurement professionals are changing, as the adoption of new technologies make the profession more data-driven and strategically focused on business value creation than ever. An evolving profession means attracting new talent will be a vital priority for procurement leaders in the coming years.
3. Reducing purchasing costs
Cost was king before the pandemic and, while procurement teams may have more than just their bottom line in mind, it’s still one of the most important differentiators for the function. Not only is procurement a key driver of efficiency within the modern enterprise, but costs are rising across the industry, with Amazon Business reporting that “Costs and Budgets” were the leading risk factor facing procurement over the next two years.
4. Refining procurement practices across organisations
Even as a newly celebrated discipline with a greater role to play in the modern organisation, a key indicator of a successful procurement strategy is that, most of the time, other departments don’t know it’s there. A successful procurement function empowers other parts of the business to make purchases with autonomy, supporting them in making decisions that are compliant, efficient, and cost effective. Developing the procurement practices that create good procurement habits across an organisation—not just in the procurement department—will be a key priority for procurement teams going forward in 2024.
5. Building more resilient, agile supply chains
If the 2020 COVID-19 pandemic taught us anything it’s that disruption is not a matter of “if” but “when”. Global supply chains—driven almost exclusively by cost-cutting parameters for decades—were decimated by the pandemic, and in the wake of lockdowns it has emerged as hard-won wisdom that the procurement departments of the future need to look at more than cost when building a supply chain. In the Amazon Business report, 81% of respondents revealed that they have internal or external mandates to purchase from different types of certified sellers.
Blockchain promises added transparency and security for the procurement process, but are the benefits worth the price of admission?
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Blockchain—the decentralised ledger technology that powers cryptocurrencies and NFTs—could be an immensely disruptive force in the procurement and supply chain management sectors. We’re going to take a look at how blockchain might impact procurement, and whether it represents a meaningful innovation or if the costs outweigh the benefits.
Blockchain: the hype
Using a combination of different technologies, including distributed digital ledgers, encryption, asset tokenization, and immutable record management, blockchain creates an unbroken and tamper-proof (in theory) chain of information.
For example, storing the entire service history of a vehicle, the transaction history of a house, or the provenance of a piece of art on a blockchain theoretically renders it trustworthy and incorruptible. A potential buyer could review the timestamped information included on the blockchain and be confident in its accuracy. In principle, blockchain could reduce or remove the need for intermediaries in highly regulated and complex transactions—like real estate, for example.
“Have you bought a house lately? Imagine if you could have transacted with the seller directly, even though you had never met, confident that the deal would be recorded in a way that neither of you could change or rescind later,” write Gartner analysts David Furlonger and Christophe Uzureau, suggesting that “You wouldn’t have to reconcile rafts of personal information with a real-estate agent, mortgage broker, insurance agent, property inspector and title company” if you were making a transaction using the blockchain.
Furlonger and Uzureau suggest that record keeping and verification is just the beginning and, once developed and combined with other technologies (characterised by lots of hyper and limited real world applications) like artificial intelligence (AI), the Internet of Things, and the Metaverse, the real potential of the technology will be unleashed, creating “whole new social and economic constructs in the peer-to-peer age of Web3.”
Blockchain: the reality
In actuality, Blockchain outside of applications for cryptocurrency isn’t actually… very interesting? It’s certainly not new. Blockchain technology not used to underpin a cryptocurrency is just a distributed append-only data structure. Often there are some users that are allowed to make additions to the structure. In the real estate example used Furlonger and Uzureau, that might include the homeowner, a surveyor conducting an appraisal of the property, the utility company providing electricity and water to the house, and professionals hired to perform maintenance on the property. A private blockchain could collect and verify the history of a property like rings on a tree, and provide an authoritative account that is, in theory, free from tampering. The thing is, that sort of verification is called a consensus protocol, and they’ve been around since before the 1960s—as have append-only data structures.
The reality is that the new, shiny applications for blockchain aren’t actually very useful. Supposedly, Blockchain technology offers up a way to verify information (or conduct a transaction) without relying on an intermediary, or blindly trusting a third party. “Trust-less” is the phrase that gets thrown around a lot. However, the result is often that you’re just trusting the technology underpinning the blockchain over a human or a public institution.
Building trust
As Bruce Schneier pointed out in an article for WIRED, “When that trust turns out to be misplaced, there is no recourse. If your bitcoin exchange gets hacked, you lose all of your money. Your bitcoin wallet gets hacked, you lose all of your money. If you forget your login credentials, you lose all of your money. If there’s a bug in the code of your smart contract, you lose all of your money. And if someone successfully hacks the blockchain security, you lose all of your money.”
One glaring example was the 2019 case of cryptocurrency exchange CEO Gerald Cotten, who died while being the only person with the password necessary to access US$145 million worth of other people’s Bitcoin. Far from being trustless, it would seem the people who lost access to their money were placing their trust in a single individual who died, leaving them no physical or legal recourse to get their money back.
There’s also the very valid criticism of blockchain-based technology that it’s an environmental disaster. NFTs caught most of the heat for this over the past few years, but all blockchain-based technology needs to be stored somewhere in a constantly active server. As noted by the NASDAQ in a report from earlier this year, “The energy consumption of blockchain technology results in significant greenhouse gas emissions, which contribute to climate change.”
So, blockchain is bad?
Not necessarily. I, personally, will stake what reputation I have on the fact NFTs and cryptocurrencies are misguided and valueless gimmicks at best and insidious, cynical techno-cults (that burn fossil fuels more enthusiastically than the UV lights at the Bored Ape convention burned out crypto bros’ retinas) at worst.
However, remember the boring version of blockchain technology? The append-only data sets we talked about before may not be new or especially sexy, but they’re an element of blockchain technology that could be incredibly useful for the procurement sector.
Blockchains in procurement
The procurement sector has traditionally struggled with opacity. Sourcing goods—especially from overseas markets—through networks of distributors and middlemen can muddy the waters and conceal vital steps in the source-to-pay process. The origin of goods, labour practices, contact with modern slavery or deforestation, can all be concealed in a murky supply chain.
Tracing the progress of an item from its raw materials through to a finished product is “often a challenge for today’s supply chains due to outdated paper processes and disjointed data systems that slow down communication. The lack of data compatibility exposes supply chains to problems like visibility gaps, inaccurate supply and demand predictions, manual errors, counterfeiting, and compliance violations,” notes an AWS report. However, with blockchain, procurement and supply chain management organisations can “document production updates to a single shared ledger, which provides complete data visibility and a single source of truth. Because transactions are always time-stamped and up to date, companies can query a product’s status and location at any point in time. This helps to combat issues like counterfeit goods, compliance violations, delays, and waste.”
Global network
If the documentation of, say, a shipment of EV batteries, can trace a direct line from a lithium mine in Australia to a factory in China through a global network of suppliers, all the way to their arrival at a factory in Ohio, the procurement department sourcing those batteries can scrutinise every piece of the value chain much more effectively for quality control, potential counterfeiting, and ESG compliance.
It’s not as flashy as Dogecoin, but it’s actually useful, especially as corporations make efforts to divest major polluters or other parties with poor ESG practices from their supply chains in an effort to reduce Scope 3 emissions and stop propping up reprehensible practices like modern slavery and deforestation.
Next generation AI tools can offer unparalleled visibility into the sustainability of organisations’ supply chains.
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There are increasing pressures on procurement departments to be a driving force in their organisations’ sustainable goals.
The process of buying, shipping, and generally moving physical products about is one of the larger sources of carbon emissions for the modern enterprise.
For consumer companies, supply chain operations typically account for more than 80% of greenhouse gas emissions, creating “far greater social and environmental costs than its own operations”, according to a study by McKinsey. The environmental impact of a company’s operations, and their extent into Tier 2 and Tier 3 emissions, is also becoming a more prominent part of the conversation, making the decision of who to partner with and for what more pertinent to an enterprise’s sustainability goals than ever before—especially as T2 and T3 emissions become the target of new ESG regulation.
The path to sustainable practice is increased visibility into procurement practices, supply chain impact, and the supply chains of ecosystem partners. Increasingly, procurement teams are artificial intelligence (AI) for these insights.
Responsibly sourced startups
The demand for AI-powered sustainability in the procurement sector is already driving investment in promising new tools. The Copenhagen-based startup Responsibly was founded in 2021, and in October 2023 managed to leverage its work on AI-driven sustainable procurement tools into a $2.4 million funding round, aiming to further develop its project of “democratising access to sustainable procurement”.
The company combines an AI model with large data sets to allow users to analyse their suppliers and potentially take action to restructure their procurement practices. The data analysed relates to suppliers’ carbon emissions and links to deforestation, but also their gender pay gap, human rights records, and more. The company has already accumulated several high profile clients, including the CERN research facility.
Data-driven, sustainable decision making
The success (and sustainability) of a supply chain is, first and foremost, an issue of visibility. Decision-making to reduce carbon emissions, cut costs, and improve resilience is almost universally a matter of understanding the factors affecting what has traditionally been a very murky, complex, impenetrable system. Using AI to maintain visibility into upstream manufacturing, purchasing, and logistics channels is critical in a world where supply chains are more complex, and the critical eyes of regulators and other organisations within a company’s ecosystem are more prone to scrutiny, than ever before.
For any organisation looking to operate more sustainably—especially in a climate of net zero commitments and increased regulatory scrutiny—the next generation of AI models, powered by advanced analytics, intelligent algorithms, natural language processing, and real-time processing of huge data sets, represents a way to understand the source to pay process on a more granular level than was previously possible, and a path to making the necessary decisions for a more sustainable supply chain.
In a press release on Tuesday (January 9th), Sphera, which is a leading global provider of ESG performance and risk management software, revealed it has purchased the supply chain sustainability software firm.
Supply chain network
Founded in 2012 and headquartered in Santa Cruz, California, SupplyShift has built a supply chain network of over 100,000 suppliers, where buyers and suppliers engage and share information quickly in order to manage risk and facilitate supplier regulatory compliance.
The solution provides supply chain transparency and supplier mapping at any tier as well as data analytics, supplier scoring and traceability.
SupplyShift has customers and business partners globally, and the company’s portal is used by a variety of customers across industries, from worldwide retailers to Fortune 500 brands.
Growth journey
Paul Marushka, CEO and president, Sphera, said: “SupplyShift has seen tremendous growth with its software solution that allows for direct communication with suppliers and customers and enables the seamless collection of their Scope 3 emissions data, which helps suppliers improve their supply chain ESG performance.
“As more regulations are passed that demand transparency, the SupplyShift solution will become indispensable in meeting global regulatory requirements and stakeholder expectations. Bringing SupplyShift’s portal into the Sphera family will expand our current offerings and enable us to provide unparalleled Scope 3 and ESG tracking and reporting capabilities. We are pleased to welcome SupplyShift’s customers, colleagues and solution to Sphera and look forward to helping our combined customer base accurately track and report their Scope 3 emissions and be compliant.”
Alex Gershenson, SupplyShift’s CEO and founder, added: “SupplyShift was founded on the idea of leveraging software to drive sustainability initiatives, and for 11 years we have been empowering companies to understand their supply chain ESG risk and performance.
“We are excited to join the Sphera family and take data availability to a new level through the combination of Sphera’s industry-leading ESG data and SupplyShift’s Scope 3 data collection abilities. Through SpheraCloud, Sphera’s SaaS platform, and its LCA solutions, we can help even more customers track their Scope 3 emissions and manage their supply chain sustainability.”
Keith Hartley, CEO of LevaData, discusses why procurement’s golden age is now amid the rise of transformative tech solutions.
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“This is the golden age to be in procurement.”
Keith Hartley, CEO of LevaData, doesn’t hold back.
Similar to his passion for surfing, he is constantly on the lookout for the next challenge to tackle. The company he leads is an integrated, AI-powered supply management software platform that is transforming direct material sourcing by helping companies reduce costs, mitigate risk, and accelerate new product development.
Given the trajectory of the procurement function’s journey over the past 10 years, few could doubt the change the space has seen. Indeed, procurement was once a back-office function siloed out of sight, but today it stands front and centre in business operations as a key cog in the machine. Hartley recognises that while it is an exciting time, procurement is still a laggard and restrained. “I would say we’re woefully behind in procurement,” he admits.
“The function’s teams are typically not ones to raise their hand and demand the tools they need to do their job. If you’re a salesperson and you work in a Customer Relationship Management system, it’s a given you need a system to do your job, and if you’re in finance, it’s a given you need an ERP system. When you turn to procurement, there’s not widespread acknowledgement that you need a tool like LevaData to do your job.”
LevaData powers the smartest supply chains in the world by constantly analysing business objectives against real-time market activity and community intelligence. The company is trusted to deliver improved margins, control risks, generate new product velocity, and achieve multi-tier supplier engagement with purpose-built tools for quick collaboration and decisive actions. LevaData creates a competitive advantage with transformational and predictive insights. “What we are replacing are spreadsheets and emails, but some major companies are still 100% reliant on them,” discusses Hartley. “It’s an antiquated way of doing business. Macroeconomic shocks aren’t new, and obviously Covid was a significant one. With these shocks in the global supply chain, you must understand the impact on your specific business.”
Hartley speaks to how at the end of the day, companies still need to make a profit. “It’s about finding alternative sources of supply and buying the parts at the right price. These are challenges that don’t go away; in fact, they were heightened during Covid and have continued with ongoing geopolitical tensions. The reality is there are always macroeconomic shocks that cause supply to be constrained and prices and lead times to be variable. This has a direct impact on how organisations deliver results and drive revenue growth. Covid really heightened the need for companies to get this workflow in order, and that’s what LevaData has been addressing. The procurement people have been thrust into the light. If they don’t have the tools they need, then they’re stuck. The job is incredibly complex, and procurement needs all the help it can get in today’s world.”
The arrival of generative AI
As generative AI continues to emerge in conversations in procurement and beyond, its rise has caused much excitement within organisational structures. Indeed, OpenAI’s ChatGPT’s launch in late 2022 has only amplified this conversation, with many eager to harness the benefit of efficiency and cost savings as quickly as possible. But just because it’s new, does it make it right?
“It’s early days. It’s mostly hype so far in terms of how it’s being adopted and brought forward, but I’ve never seen a faster accelerated hype cycle than gen AI [has] right now,” explains Hartley. “LevaData is a leader in AI and is using it in two areas of our product. We’re still in the early infancy of AI and what it can do. We use AI to help us contextualise all the different data sources. We take over 154 data sources and blend them. This is data that doesn’t make sense together. Most data-heavy people tap out at about 12 or 14 data sources because the mathematics gets so complex. The complexity has kept the indirect procurement providers away from this space.
“The second part where we use AI is where we identify parts based on savings potential. There’s a lot of potential for the generative piece incorporating an even larger number of data sources. This is huge. AI is going to change a lot and will take some time, but I’ve never seen such a rapid hype around AI before.”
Procurement’s golden age
Looking ahead, Hartley is full of optimism and enthusiasm for procurement’s future and believes we are entering the “golden age.” “The best part is that we’re just at the very start,” he explains. “If you’ve been in indirect procurement for the past 50 years, you’ve been wowed by Coupa, JAGGAER and Ariba, as they have sold the world on the benefits of source-to-contract and procure-to-pay workflows. That works well for indirect procurement, when you are buying pencils, chairs and laptops in volume. But the more complex workflow of sourcing direct materials, the very materials that you turn into products to sell in the market, has largely gone unnoticed. Fortunately, companies have realised the direct sourcing opportunity, and started investing in AI-powered tools like LevaData.
“Legacy spreadsheets and email should no longer be the de facto standard for direct material sourcing. With the convergence of AI, big data, and analytics platforms, procurement professionals can be the heroes they and their company deserve. The next decade is going to be a wild ride in procurement.”
At DPW Amsterdam 2023, we chat with procurement leaders to find out why the conference is regarded as one of the most influential tech events in procurement today…
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Koray Köse, Chief Industry Officer, Everstream Analytics
“When you go to events that are this disruptive that are actually giving you an environment like a concert where people have a very positive vibe, that’s when the best experiences are shared and people open up. If you listen, you now understand what the real challenges are. If you’re at a conference that is very formal, then you get a very different feeling. It is the casualness of DPW that helps the authenticity of every company and its challenges.
“It’s a unique environment where you get very authentic, bold, blunt, but truthful statements of perception of actuals, desires, future vision, and also conversations about how can we as a community do things differently? How can we as potential future partners do things differently? And how can tech concatenate value and how can we actually now do that in a partnership with companies that we don’t even consider clients at this point? They’re not clients, but they share exactly what they want and those are benefits.
“I think it’s almost like an incubator environment because a lot of ideas are formed here. Lots of connections are made and a lot of deals for vendors are done too. You look at the floor and there are about 120 vendors all here for the same reason, it’s amazing. To get that concentrated over 48 hours, a lot of people will walk away and need to process what happened and the conversations they had. Then we look forward to next year.”
Koray Köse, Chief Industry Officer, Everstream Analytics
Ashwin Kumar, Vice President, GEP
“DPW has given me some insight into what kind of options there are. Sometimes I go through the booths and I see two solutions and question how they’re different. At first, I think they’re doing the same thing. And then once they start explaining, you find out the nuance. Now I understand this may not be applicable for this client of mine that I’m working with maybe this is for a company that’s growing at 30%, not for someone who is already there and growing at 2% or 3%.
“I think that way DPW has helped me understand how do you stitch different things together and then take it to a client and say, ‘this is the ecosystem you need at this point in time. It could change in six months, or three months, we don’t know. Go with it for now and you don’t have to worry about being married to that solution for too long.’”
Ashwin Kumar, Vice President, GEP
Kathryn Thompson, Partner, Deloitte
“I think DPW shows us the art of the possible in digital procurement. It shows us if you were unconstrained and you could do anything, what would you choose and build? You don’t have that in some of the other tech conferences that are a bit tied into an infrastructure they need to build. I love this what if idea we have here. I think it’s fabulous we have this confluence of organisations that need these tools, all the different startups and solutions to bounce ideas off and work out the future. DPW has real energy and passion like no other. You must get your message across in three minutes or it’s gone, that passion is brilliant because there’s nothing similar.”
Kathryn Thompson, Partner, Deloitte
Scott Mars, Global Vice President of Sales, Pactum
“This to me, especially for Europe, is the premier procurement technology event. All the main vendors, our competition as well as our peers are here. There’s many CPOs in attendance alongside procurement and digital transformation leaders so for us as a vendor, it really is a great audience. We love having the ability to network with our peers or other vendors, potential partners and these procurement leaders and visionaries so it’s definitely a great opportunity to do that. It is certainly one of the best procurement events I’ve ever been to. They do a great job here at DPW.”
Scott Mars, Global Vice President of Sales, Pactum
Karin Hagen-Gierer, Chief Procurement Officer, Scoutbee
“Whenever I go to conferences, I get to see the latest technology exhibited. I can have conversations with many people in a very short period of time. Number two, for me as a CPO, I come here as well to meet my peers and have good conversations. Amsterdam is always a good place to come and maybe combine business with pleasure.”
Karin Hagen-Gierer, Chief Procurement Officer, Scoutbee
Gregor Stühler, CEO, Scoutbee
“Procurement people are incredibly busy and getting a hold of them is quite difficult. Having them all in one spot is super helpful. One key challenge for procurement software providers is that the buying centre is not the same. If you sell sales software or whatsoever, it’s usually the same buying centre. You approach the Chief Revenue Officer or something like that. In procurement, it’s not always the CPO that decides on the tech. But DPW is filtering out and attracting the talent that is making those tech decisions and it’s extremely valuable for the startups and for the tech companies as well.”
Gregor Stühler, CEO, Scoutbee
Alan Holland, CEO, Keelvar
“This event has actually been a catalyst for some of the transformation we’re seeing in procurement. Matthias and his team have grown together best-of-breed vendors and they realised early on that change is afoot and legacy systems are going to become part of the history of the space. He embraced these vendors which are coming up with exciting new developments and provided us with a venue to put our best foot forward and present ourselves to other large enterprises with an appetite for understanding what innovation was required. We’re very grateful to Matthias, we’ve worked with him from day one and we think he’s done fantastic work here.”
Alan Holland, CEO, Keelvar
Prerna Dhawan, Digital Lead, Procurement, The Smart Cube
“I think DPW raises the profile of procurement. DPW has elevated the function because procurement is no longer seen as the industry that thinks of digital at the end. It’s not a laggard anymore. I attended the first DPW event pre-Covid and thought it was brilliant then but it’s got bigger and better since. We talk about this in procurement, you get innovation from your suppliers but if you think about innovation when it comes to technology you have to be open to talk to vendors and that doesn’t happen in other conferences the way it does here. I think DPW has created that platform for learning from each other to happen.”
Prerna Dhawan, Digital Lead, Procurement, The Smart Cube
CPOstrategy explores this issue’s big question and uncovers what the impact of gen AI is in procurement.
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The true possibilities of what can be achieved via AI is still being unearthed.
Indeed, the influence of new technology will only grow from here and new digital tools are being introduced all the time.
When it comes to generative AI, there is perhaps a misunderstanding that it is a new innovation. But the history of gen AI actually dates back to the 1960s. Among the first functioning examples was the ELIZA chatbot which was created in 1961 by British scientist Joseph Weizenbaum. It was the first talking computer program that could communicate with a human through natural language. It worked by recognising keywords in a user’s statement and then answering back through simple phrases or questions, in likeness to a conversation a human would have with a therapist. While ELIZA was seen as a parody and largely non-intelligent, its introduction has paved the way for later advancements in Natural Language Processing (NLP) and the future of generative AI.
Fast forward to today and the gen AI conversation and wider tech landscape looks very different. In late 2022, OpenAI launched ChatGPT – technology which has shaken the procurement function and beyond. ChatGPT interacts in a conversational way with its dialogue format making it possible for users to answer follow-up questions, admit mistakes, challenge incorrect answers and reject unsuitable requests. As such, the chatbot has created quite a buzz which has been felt across the globe.
Generative AI’s misconception
Speaking to us exclusively at DPW Amsterdam, Gregor Stühler, CEO at Scoutbee, believes there are some misconceptions around ChatGPT and the nature of how accurate the data it provides actually is. As is the case with any new technology, these things take time. “It’s always the same. It happened with electric cars, nobody thought that would solve the battery issue,” he discusses. “I think we are right at the peak of the hype cycle when it comes to those things and people have figured out what they can use it for. With wave one of gen AI, it is fine to have hallucinations of the model and if something is spat out that is not supported by the input.
Gregor Stühler, CEO at Scoutbee
“But by the second use case, hallucinations are not okay anymore because it’s working with accurate data and should not come up with some imaginary creative answers. It should be always supported by the data that is put in. This is very important that people understand that if you train the model and if you have the right setting, those hallucinations will go away and you can actually have a setting where the output of the model is 100% accurate.”
Data security
Michael van Keulen, Chief Procurement Officer at Coupa, agrees with Stühler and despite obvious benefits such as time and cost, he stresses caution should be used particularly when it comes to valuable tasks. “If you look at ChatGPT, it’s fine if you’re looking for recommendations for something low-risk. I need something for my wife’s birthday next week, you input three things that she loves and ask it to help. It’s great,” he tells us. “But it comes from data sources on the web that aren’t always governed, controlled or trustworthy. It’s whatever is out there. What about the algorithms that come with ChatGPT? I don’t know what’s influencing the search criteria. On Google, if you pay you are at the top of the search bar. But I don’t know what ChatGPT is governed by.”
Michael van Keulen, Chief Procurement Officer at Coupa
Managing data leakage
Danny Thompson, Chief Product Officer at apexanalytix, explains that one of the biggest challenges with generative AI is being aware of a leakage of sensitive information combined with a contamination of important data. “We have a database of golden records for 90 million suppliers who are doing business with Fortune 500 companies and that is the best information we’ve been able to accumulate about the suppliers and their relationships as a supplier to large companies,” he tells us.
Danny Thompson, Chief Product Officer at apexanalytix
“We want to make sure we’re not loading sensitive information into a generative AI function that might allow just random people to access that data. Ultimately the customers in the space that we’re operating in are serious companies moving around large amounts of money and facing real risks that they have to manage. It’s really important that the data that they have is either highly accurate or at least they understand the degree to which it’s accurate. This means if you’re using the solution that you don’t understand the level of trust you can have in it, then you shouldn’t be using it yet.”
Can generative AI bridge the talent shortage?
Amid talent shortages in procurement, there are some sections of the procurement space questioning to whether AI and machine learning can plug the gap and reduce the necessity of recruitment. Naturally, this raises the debate of whether robots will replace humans. Stefan Dent, Co-Founder and Chief Strategy Officer at Simfoni, adds that while AI and machines won’t replace humans, it will mean people will need to find new forms of work and take on higher-value roles.
Stefan Dent, Co-Founder and Chief Strategy Officer at Simfoni
“The shape and structure of the modern procurement function will change quite dramatically and people will need to upskill,” he discusses. “A lot of the work will be taken over by the machine eventually either 20%, 50%, and then a hundred percent. But the human needs to have that in mind and then plan for that next three to five years. The procurement function of the future will be smaller, and they should purposely be doing that, to then look at solutions to find a way to enable it to happen naturally.
Future proof procurement
“For someone who’s joining procurement now, you’ve got this great opportunity to embrace digital. Young people can question ‘Well, why can’t it be done by a machine?’ They’re coming in with that mindset as opposed to fighting being replaced by a machine. I think for graduates coming into procurement, they’ve got the opportunity to play with digital and actually change the status quo.”
As we look to the future, gen AI and new forms of technology will continue to change the world and the way we work. In the short term, work is expected to continue to upgrade the user experience and workflows through gen AI in order to build greater trust for the end user. As transformation continues to happen, businesses and wider society must embrace new types of AI to thrive and stay ahead of the latest trends. The potential that gen AI tools possess is expected transform the workplace of tomorrow while delivering value-add such as time and cost savings on a day-to-day basis.
Given the speed of evolution and development, it is yet unimaginable exactly what form the digital landscape will take in years to come. However, that horizon brings with it fresh opportunity and excitement revolving around a whole new world of technology at our fingertips. The future is digital.
RPA promises increased efficiency, lower costs, and an end to staffing issues, but can procurement teams implement successfully?
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Though it’s less frequently associated with automation than its more robot-friendly cousin logistics, procurement is a discipline that’s undergoing a radical transformation.
“Your new procurement employee will work 24/7, never call in sick, rarely make mistakes,won’t complain, and never ask for a raise. Of course, this is not your typical worker, but a procurement software robot—or bot.”
Although it reads like the opening paragraph of an abandoned Nanowrimo project started by someone who’d just finished I, Robot, I assure you this report released in 2020 by consultancy KPMG is an entirely serious endeavour. Although the global clamour to replace employees with robots may have died down a little now that a few million professionals have been dragged kicking and screaming back to the office, the benefits that automating elements of the procurement function could deliver are hard to deny.
RPA is big business and isn’t going anywhere. In 2022, the global robotic process automation market was estimated at $2.3 billion. It’s expected to grow at a CAGR of 39.9% between this year and the end of the decade.
From multinational corporations to the US Department of Homeland Security, robotic process automation (RPA) is emerging as a popular way to manage complexity within a large supply chain, automate repetitive tasks, and enhance the capabilities of a procurement department. The US DHS’ procurement department, for example, spent just under $24 billion across about 60,000 transactions in 2022, and is increasingly handing the responsibility for contractor responsibility determinations, as well as automating tasks for the Customs and Border Protection—allegedly cutting jobs that took an hour down to just a few minutes.
As KPMG’s report stresses, “leveraging procurement bots is the next logical step as organisations look to benefit from advancements in digital capabilities.”
RPA adoption in procurement—the Benefits
Added visibility
Improved efficiency
Reduced costs
Large amounts of traditional procurement processes involve repetitive tasks like requisitioning, purchase order management, checking compliance, andanalysing spend, supplier onboarding, and more can be automated using an RPA bot. This is not only because RPA is getting smarter, but also because businesses’ procurement functions tend to be more consolidated within a single platform that is more closely integrated with the business in a modern enterprise. In a sufficiently digitalised system, there’s little to stop RPA from creating efficiencies by eliminating menial tasks.
Likewise, by integrating RPA into a company’s enterprise resource management (ERP) platform, it gains access to vast amounts of data that can then be tracked, analysed, and used to draw insights faster than a human could hope to tackle the same task. Most modern supply chains comprise several different pieces of specialised software, and making each one talk to one another smoothly can create serious pain points for procurement teams, but RPA can do a great deal to smoothe over the cracks.
RPA Risks and How to Overcome them
Data exposure
Lack of oversight
Misguided direction and overspend
As mentioned above, RPA works best when fully integrated into as much of your system as possible, with access to as much data as you can feed it—especially with modern RPA using AI to make more and more intelligent decisions based on raw and unstructured data sets. Obviously, this creates a potentially huge, glowing weak point in your company’s cyber security framework. Because RPA bots replace human workers, they need access to the privileged information that humans have, and those bots are just as—if not more—vulnerable to attack.
RPA bots can automate a great deal of tasks, but it’s easy to lose track of the fact that they’re just bots and, without proper oversight and direction, they could create inefficiencies, security flaws, and breach compliance—all costly problems, especially if the typically costly technology fails to address the original inefficiencies or issues it was bought to resolve.
Automating procurement processes could undeniably lead to increased efficiency, lower costs, and a more resilient procurement function, but only if implemented with intentionality, and given proper oversight once up and running.
Wary of overdependence on overseas suppliers, the South Korean government is investing heavily in increasing the resilience of its public procurement process.
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The South Korean government announced last month plans to establish a commission to oversee and coordinate plans to make the country’s procurement process more resilient. This announcement comes on the back of concerns over the vulnerability of South Korea’s “critical industrial” supply chains.
A state-backed fund expected to exceed 5 trillion won ($3.79 billion) is being set up to “secure stockpiles of critical supplies and support investment in relevant businesses and facilities”, with a long-term goal of divesting Korean industries from overdependence on procuring materials from single country suppliers.
Specifically, urea (like ammonium phosphate used in fertiliser manufacturing) and graphite (used in the production of batteries for electric vehicles) are both considered critical materials for Korean industrial activities, and supplies of both originate almost exclusively from China.
An Editorial published in the Korea Times noted that a recent export restriction of urea product shipments from China has caused a spree of panic buying. “What matters is that China accounts for 95 percent of Korea’s ammonium phosphate imports. Desperate to cope with a growing sense of crisis especially among farmers and relevant industries, the [Korean] government came up with a package of measures designed to secure key materials on a stable basis.”
The government will procure a reserve of 12,000 tonnes of urea in order to create a 130 day buffer to safeguard against future disruptions.
The way ahead
At a meeting of the new commission on Monday, Korean Finance Minister Choo Kyung-ho commented that “Recently, supply chain risk factors for items directly related to core industries and people’s livelihoods—such as urea, diammonium phosphate and graphite—are increasing,” suggesting that devising a national procurement strategy less reliant on Chinese exports would be essential, given the fraught economic and political histories between the countries.
Moving forward, the commission said it would designate materials and items for intensive monitoring, selected from among 200 options identified as being of critical importance and potentially vulnerable to supply chain disruption by a government study conducted in 2021. Magnesium, tungsten, neodymium and lithium hydroxide were included in the previous listing. In addition to urea products, the Korean government is expected to increase its stocks of graphite, 90% of which comes from China.
Protect your procurement function in the year ahead by avoiding the biggest risks on the industry’s radar.
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The last few years have seen unparalleled disruption to the source-to-pay process, from resource shortages and pricing hikes, to new regulatory restrictions and changes in consumer tastes. In the Amazon Business 2024 State of Procurement report released in November, researchers point out that “Many of the top risks … have the potential to disrupt procurement operations with little warning, underscoring the need for preparedness.”
1. Rising Costs and Inflation
The past year has been defined by runaway inflation in the US and beyond, and while it has translated into record corporate profits (researchers estimate now that corporate profits are responsible for around 60% of inflation, following a Kansas City study in 2021) it has been biting from the supplier side as well, with the price of everything from materials to labour rising over the last 18 months. Procurement teams should analyse their budgets and plan accordingly, in order to ensure they can secure the goods and services the business needs without compromising cost containment.
2. Supply Chain Volatility
War, genocide, unrest, and other sources of market volatility can smash a supply chain overnight. The procurement process works best when things are reliable, consistent, and predictable. The very best procurement teams know that this is a fantasy, and that geopolitical, economic, and environmental changes can all contribute to risk that needs to be met with agility and resilience.
3. (Failed) Technology Disruption
From self-driving cars to the metaverse, the last few years are littered with more examples of technological megatrends that failed to disrupt anything or really even materialise than a Phoenix, Arizona parking lot is littered with Waymo crash test dummies. Failing to adopt new and disruptive technology is a risk to your business, but overspending on hype is a much easier trap in which to stumble.
4. Cybersecurity
Data remains one of the most precious resources on the planet, and with the rise of generative AI sparking fresh debate over intellectual property and privacy, organisations will need to be more mindful of their data than ever before. This isn’t unique to procurement, but it remains a function of the business that has a lot of contact with the outside world, especially third party organisations soliciting contracts. Procurement staff should receive regular cyber security training and departments should conduct regular risk assessments in order to avoid presenting an easy target.
5. Increased Regulatory Pressure
Despite the lacklustre Cop28, record profits for the oil and gas industries, and all signs pointing towards a failure to prevent an era of “global boiling”, regulations got a little bit stricter for corporations in the last few years. Compliance will become an increasingly challenging target for corporations to hit as the decade continues. Procurement teams—as functions with some of the biggest sway over scope 3 emissions—will play a large role in keeping their organisations on the right side of the regulations, and could even be a big part of meaningful sustainability-focused change.
6. The Skill Shortage
As procurement becomes a bigger driver of innovation and profit margins for organisations, the gaps between existing skills and future requirements are showing wider and wider. Five out of six procurement leaders don’t believe they have the talent on tap to meet the challenges of the near future, and the increasingly digital-first, strategic nature of the role threatens to place demands on existing functions that they never expected to face.
Procurement leaders who recruit, develop, and retain skilled professionals will have a profound leg up over the competition in 2024 and beyond.
Procurement has the potential—and the responsibility—to go beyond switching out plastic straws for paper in the quest for Net Zero.
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Across the public sector—and increasingly in the private sphere as well—organisations are committing to the necessity of a net zero future. While emissions reduction efforts often begin with scope 1 and scope 2 emissions, analysis of holistic environmental impacts in supply chains often expose scope 3 emissions as being the source of as much as 90% of an organisation’s greenhouse gas emissions.
With the majority of an organisation’s carbon impact originating outside the organisation itself, it increasingly falls to the procurement function to make intelligent, sustainability-motivated decisions in order to draw down indirect emissions and foster a culture of sustainability within their supplier ecosystem.
However, while investment in increasingly sustainable source-to-pay processes is rising, many procurement teams describe the pursuit of net zero as a serious challenge. In Europe, companies earmarked an average of 27% of their total investment budget into improving sustainability this year, a 16% rise in sustainability investment.
Nevertheless, more than 43% of companies surveyed in a recent report had not set a net zero goal, and, within the 32% of organisations with a net zero target of 2030, many procurement professionals reported that “limited data, complex supply chains, and limited control over supplier emissions” presented serious obstacles.
The report notes that, while “procurement organisations firmly have net zero on their agenda,”, other factors like the need to keep costs low are impeding their efforts. Another report by the World Economic Forum—this time focusing on public institutions as drivers of sustainable procurement—also acknowledges the trepidation with which public and private sector organisations view the possible costs of pushing for net zero.
However, the WEF notes that “Pursuing net-zero goals in public procurement will boost the green economy,” estimating that “the private investment and new jobs triggered by greener public procurement, in aggregate, will boost global GDP by around $6 trillion through 2050 – a significant proportion of the green economy’s total GDP of $70 trillion.”
While the short term might represent an increase in costs, the long term benefits for organisations that manage to drive a successful net zero green transition, both in their own organisations, and supply chains, will be substantial. Adopting procurement practices that require green certifications from suppliers (even subsidising green activities within their ecosystems by paying higher prices for suppliers who can demonstrate their green credentials) can drive meaningful reductions in the scope 3 emissions for organisations throughout both the public and private sectors.
Incorporating SEO techniques into your procurement strategy can empower and optimise your organisation’s source-to-pay process.
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In the wake of the COVID-19 pandemic, digital transformation has emerged as a more critical strategic goal for procurement executives than ever.
Now, resilience, agility, and visibility have become vital qualities of the modern procurement function alongside the drive to lower costs and increase speed. Integrating a digital-first approach into more stages of the procurement process can, according to a Gartner study, lead to a 20% increase in revenue and a 50% reduction in process costs.
However, digital transformation needs to be considered and intentional—haphazardly adopting new tools and processes for the sake of something new and shiny will cost more than it saves, and cause more problems than are solved.
One highly effective form of digital transformation that’s often applied outside of the procurement process is search engine optimisation (SEO). Applied to the procurement function of a business, SEO techniques can help buyers reach either a wider pool of suppliers, or a more specific set of suppliers more tailored to their needs—or both, as necessity dictates.
SEO has a lot of potential to help automate routine procurement operations, allowing for procurement staff to focus on more strategic objectives and partner relationship management. Supplier discovery, as well as other elements of sourcing, can be automated with an SEO integration, and the correctly optimised online presence can be used to attract suppliers.
Four steps to SEO optimisation in procurement
Know your terms. By identifying the key phrases and terms associated with your business and objectives, you can start to define an SEO strategy.
Embed your terms. Take your chosen SEO terms and ensure they are a part of your brand identity across existing websites, social platforms, etc.
Create content. White papers, blog posts, and media placements all increase your visibility and presence within the procurement sector.
Assess, Adjust, Optimise. Constantly measure your engagement, work to understand your suppliers and partners, and iterate improvements of your strategy in response to results and the changing context of the marketplace.
By implementing an SEO strategy, procurement teams move beyond the confines of their immediate ecosystem, casting a wider net that can lead to increased competition between suppliers, lower costs, and access to new goods or resources that may have significant knock-on benefits for the business at large.
As AI continues to emerge in a big way, Vicky Kavan, Vin Kumar and Nicolas Walden explores what the AI opportunity is in procurement?
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Procurement is a hard function to impress. Other parts of the business can afford to get carried away now and then, but not procurement. Everything in procurement comes down to finding value and then making sure you don’t overpay for it.
Artificial intelligence (AI) might seem like just the kind of emerging new technology that procurement would shy away from. But, as many procurement leaders already understand, this would be a big mistake. In our work with the world’s largest companies, we see two kinds of major emerging AI opportunities you won’t want to miss. The first group – how we execute our procurement using, for example, new autonomous sourcing systems – can save millions today. While the second – the advent of AI-driven automation and enhancements across almost every industry and areas of spend – will help save you even more tomorrow.
Savings today
In terms of the impact of AI, procurement executives predict that supply market intelligence (50% of respondents), contract management (43%) and bid optimization (37%) will be some of the greatest opportunity areas for AI technology.
Despite this, and even as most AI and generative AI systems remain pilot projects, autonomous sourcing systems are already transforming how procurement functions operate at large multinationals. Many procurement executives have told us that they find these systems, which can automate execution in either tactical or strategic areas and provide enhanced decision support, extremely valuable:
Clients tell us these systems are helping them reduce cycle times dramatically – from months to weeks or weeks to days – and cut costs by 10% or more. Supplier discovery? Shorter. E-sourcing? Shorter. Contract development? Shorter. While it is in the early days, time savings of 30% or more can be possible.
When MTN Group, an African multinational telecommunications giant, installed its Procurement Cockpit platform, the system paid for itself in four weeks because the AI-enabled software quickly identified new opportunities, consolidated pricing insights from around the sprawling corporation and accelerated negotiation preparation.
These systems are now making themselves useful across a range of sectors. Procurement executives at a major U.S. retailer, major European telecom and major European energy company all told us that these systems have saved time and money. Use cases include replacing the need to write detailed requirements, sourcing questions and even contracts through the use of modified templates through to tactical price negotiations.
Strategic drive
From strategy to insights, sourcing and negotiating – to contract drafting and supply risk management – AI-enhanced systems will make procurement faster and simpler. Although feature sets and value propositions vary from vendor to vendor, promising autonomous sourcing systems fundamentally change how technology engages with stakeholders using chatbot-style interfaces to summarise requirements as an output of discussions; search and identify providers of products based on a variety of market, process and business considerations; prepare request for proposals and contracts; and maintain a higher degree of compliance with regulations. Some of these systems can even execute simple one-round negotiations. At the moment, Globality, Fairmarkit and Pactum (for negotiations) are three of the biggest names in this space.
Savings tomorrow
Eventually, we expect that AI-enhanced functionality is likely to yield major cost savings in almost every spend area, business function and industry sector.
Contact centres or marketing services, for example, could already send out automated posts and even voice responses that mimic the voice of your choice. A travel agency might be able to supplement human customer service with a robot concierge, making it possible to achieve a much greater level of service than ever before. Such changes won’t happen immediately – implementing them is not a quick win – but AI enhancements will be a huge source of value and service improvements down the line.
Category managers, be advised: the general consensus among purchasing executives we polled recently is that fleet, digital tech, advertising and general equipment are the categories that will benefit most from AI-enabled technology.
Of course, as with most powerful tools, AI-powered services also create new sets of potentially considerable risks. For example, you will need to make sure that your contracts are clear about what your vendor can do with your data – can it be aggregated in a large language training model? If that model leads the company to develop a more advanced service, do you want to be compensated for your contribution? Are you covered for potential liabilities if you transfer customer data to your AI vendor and your customer’s information is somehow revealed? If you work with an AI vendor and create intellectual property on its platform, who owns that new product? There are many new angles and issues that you will need to consider.
Looking ahead
Over the next five to 10 years, AI is likely to transform many aspects of business, including procurement. Based on The Hackett Group’s analysis of 44 Level 2 processes across the source-to-pay, end-to-end process – for a company performing at the median of our database – there is a potential to reduce staff by up to 46% over the next five to seven years.
Clients have told us they see digital technology (including AI) as the most transformative trend facing procurement in the next few years (71%) – more important than data (51%) or environmental, social and governance, and sustainability (47%). For procurement professionals, how the work is done and where they will find value are both likely to change dramatically. Given the speed with which we expect these opportunities and their attendant risks to develop, now is a good time to start thinking about the opportunities AI can create for your team.
Just how much of the procurement process can be automated, and who does it help?
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It’s hard to argue that 2023 will be remembered as the year that generative AI exploded into the public consciousness. Image and text generation in the form of ChatGPT and Midjourney ignited excitement, controversy, contempt, and a fervour to adopt in equal measure. The generative AI industry is predicted to be worth more than $660 billion per year by the end of the decade.
But while there’s no denying that generative AI will be a part of the economic landscape of 2024 and beyond, it’s not yet clear what that will look like. More importantly, it’s no guarantee that generative AI will, uh, generate any ways for the technology to make back the hundreds of billions already spent to develop it.
It wouldn’t be the first major trend to be backed to the hilt by big tech firms, only to dissolve into nothingness like that racoon who drops his cotton candy in a puddle. In stark contrast to 2022, this year’s tech roundups and trend predictions have put a conspicuous lack of emphasis on the metaverse. Now, to be clear, the fact that Yahoo Finance calculated that “Mark Zuckerberg’s $46.5 billion loss on the metaverse is so huge it would be a Fortune 100 company” is great news for those of us who didn’t want to spend our thirties attending meetings in a glowing virtual mallscape surrounded by cutesy, animated versions of our bosses and coworkers. Huge relief. It’s also quite funny. More relevantly to the topic of generative AI is the cautionary tale that, unless big, expensive technological developments can be monetised, they will disappear.
So, how do we monetise generative AI?
How to make generative AI useful
Technology is most valuable when it solves problems, and saves time and money, or at least improves people’s quality of life—when there’s a measurable benefit of some kind, sometimes to humanity, and usually to shareholders. That’s the stuff that sticks around.
While its applications and capabilities—especially when it comes to creative tasks or just the ability to make something actually original—are limited, generative AI may actually be a good fit for the procurement sector, potentially solving a major issue the industry is currently experiencing.
Generative AI and the Procurement Skill Shortage
The procurement sector is short on talent—with five out of six procurement leaders claiming they will lack skills, staff, and other vital human resources in the near future. This is the case for several reasons, but primarily: an ageing workforce is starting to retire faster than new hires can skill up; also, the requirements of the job are becoming more technology centric as procurement digitally transforms, leaving departments underskilled even if they’re no understaffed; and lastly, the amount of work for procurement functions is increasing overall, as it becomes more of a driver of business efficiency and innovation.
If generative AI could be used to reduce procurement teams’ workload by automating certain aspects of the job, it could be a key piece of the puzzle when it comes to solving the skill shortage.
Retail giant Walmart has been successfully running pilot projects using its AI-powered Pactum solution to automate supplier negotiations. According to Deloitte, not only did Walmart find it “helpful for landing a good bargain, three out of four suppliers prefer negotiating with AI over a human. This strongly indicates that the ecosystem is ready to embrace this disruption.” While I’m not sure if this example is an endorsement of AI or an indictment of Walmart’s procurement team, the ability for generative AI to take over routine communication, negotiation, and other interactions in the source-to-pay process could free up huge amounts of time to focus on more strategic activities.
Gen AI’s future
It’s not hard to imagine that both buyers and suppliers could input their desired results and parameters into a generative AI negotiator and outsource the relationship management entirely. Out of curiosity, this morning I set up ChatGPT in two windows and had it conduct an RFP, tender negotiation, and sale agreement for the sale of an order of self-sealing stem bolts between O’Brien Enterprises and Quarks. It was a very civil, if slightly roundabout affair, and everyone seemed to come away happy—hacky business journalists especially.
Goofy demonstrations aside, there’s real potential for significant elements of routine communication and relationship management in the procurement process to be automated, or at least assisted by generative AI. If correctly combined with data analytics on contextual information ranging from weather patterns, commodities pricing, and supplier behavioural history, a generative AI could offer useful insights to procurement professionals while its generally low threshold for usability allows less tech-savvy procurement professionals to harness more powerful digital tools.
How Big Data can increase resilience, mitigate disruption, and help procurement teams spot danger before it’s too late.
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In the procurement sector, successfully managing risks while achieving your other strategic objectives is what sets a successful procurement function apart from those that can expect to experience disruption. Today, however, procurement teams face greater risk than ever before as supply chains become more complex, ESG goals become more ambitious, and the parameters for compliance get narrower.
Technology—powered by artificial intelligence and big data analytics—is radically digitalising the procurement process. While this has the potential to increase efficiency, revenue, and accelerate the procure-to-pay process, it has also driven complexity. Luckily, digital transformation also holds the key to managing this complexity. Digital tools, powered by artificial intelligence and machine learning, can tackle larger and more complex amounts of information than ever before. These analytical tools and their more powerful capabilities in turn have seen viable data sets balloon to include vast quantities of structured and unstructured data from throughout the supply chain, gathered together under the umbrella of Big Data.
Data source
Big Data, in gathering together vast amounts of information about every aspect of the source-to-pay process, in addition to broader contextual information ranging from economic instability to weather patterns, can help procurement professionals build up a more comprehensive, nuanced understanding of their procurement process than ever before. The level of visibility is unprecedented, even in a sector where supply chains are more complex than they’ve ever been.
Complex supply chains are more prone to disruption. More moving parts and longer distances to travel mean higher likelihoods of things going wrong. Michael Higgins, founder and CEO of Clutch, wrote recently that “risk is inherent at every step of the supply chain, from moving raw materials to manufacturers and between manufacturers and the distributor,” adding that “The added value of big data analytics is predicting potential disruptions, giving procurement managers time to make intelligent decisions.”
Procurement transformation
Advanced analytical tools can be used to track the weather, potential disruptions to agricultural or construction operations, political unrest like demonstrations or riots, and changing legislature that may affect everything from compliance to price. Because Big Data analytics are increasingly capable of collecting and analysing all of these factors and more, procurement professionals have the capacity to counteract sources of risk that traditionally would have seemed as inevitable as an act of divine wrath.
The risks to a supply chain are really representative of risks to your suppliers and their networks. Big Data analytics is also granting insight into the workings of—allowing a huge number of variables tied to each supplier to be tracked and used to make decisions. The result is a more agile and reactive procurement process that can analyse and respond to data analytics in real time, as opposed to trying to make best guesses based on past results and limited human judgement.
Procurement is truly transforming from the back office to the boardroom—becoming more strategic, digitally empowered, and complex than ever before—and Big Data analytics are increasingly a vital part of the function within the modern source-to-pay process.
Jamie Ganderton, Vice President at Proxima, examines the future of sustainable procurement going into 2024.
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As we step into a new year and inch closer to the global sustainability targets set for 2030, the spotlight on sustainable procurement will only continue to intensify. The aftermath of COP28 has placed an even greater emphasis on the role that large corporations play in global decarbonisation. This, coupled with incoming rules and legislation across Europe and the United Kingdom, such as the European Corporate Sustainability Reporting Directive (CSRD), has underscored the critical need for agile and proactive approaches to corporate sustainability action.
The Scope 3 Benchmark, a tool developed to enable organisations to collaborate to advance progress on sustainability targets, has shown that Scope 3 still remains a challenge and 2024 will be a pivotal year in addressing some of the fundamentals as we move within just two short contract cycles away from 2030. Looking ahead, the focus will sharpen on bridging the gap between sustainability objectives and procurement strategies, with an emphasis remaining on translating lofty sustainability goals into actionable procurement strategies. As we navigate 2024, collaborative advancements, data-driven insights, and the proactive evolution of procurement practices will be critical drivers, propelling sustainable procurement into a new role of implementing purposeful action.
Embedding sustainability targets into procurement strategies
Whilst it seems like an obvious starting point, many procurement teams have not yet fully embraced the need to translate sustainability requirements into procurement strategy. Even for those that have, challenges remain to translate sustainability language into effective procurement strategy. There is a tendency for organisations to panic and jump straight into supplier engagement, without first planning who they are going to engage and what are they going to need from them.
The goal for many in 2024 should be to plan out how the next six years are going to look and begin progress as soon as possible, because we know that change takes time and never happens as quickly as we intend. Sustainable procurement transformation is going to require focus and investment to get right. The core focus areas should be measuring emissions to drive action, developing the functional enablers to support the change, and developing the strategic levers for decarbonisation.
Leveraging emissions measurement to drive action
The primary starting point is to understand your emissions, in detail. Embrace carbon emissions measurement and start reporting them, ideally across all categories of Scope 3, but at least the core supplier-related areas. Following the GHG Protocol’s spend-based methodology is an adequate starting point, provided the outputs you develop allow you to drive insights into your emissions “hotspots” and start evolving greater accuracy as data quality and supplier maturity improves. Procurement teams can then begin to develop the strategic decarbonisation levers they will need for their categories.
Making procurement functional enablers
Building a sustainable procurement function requires the right support pillars, but evidence coming from the Scope 3 Benchmark suggests that some key foundations are missing. Firstly, there is a lack of directly invested resources, and there are also limited numbers of support team members. The volume of interaction with suppliers on Scope 3 is high, therefore you need someone to set the strategy and have an effective team to enact it. Even medium-sized businesses will have a reasonable number of material emitting suppliers who need engagement and management, which creates an increased workload for supplier management teams.
Additionally, many organisations have limited Scope 3 learning and development capability plans to support team members in developing their carbon literacy and bridging the skills gap.
At some point procurement needs to be bold and make carbon a key consideration throughout decision making, from up-front category planning, through to RFx and sourcing processes, negotiations and contracting, and post-contact supplier management. If there is no consideration given to carbon with equality to the classic cost, quality and service evaluation, then we will never make different decisions. There will never be a commercial incentive to suppliers to support decarbonisation efforts and we will inevitably fail. In 2024, we will begin to see more forward-looking CPOs begin to build carbon pricing into their decision-making, paving the way for processes to change.
Developing policy to help suppliers face reality
Traditional procurement policies are usually written once and then set in stone without the need to revisit them any time soon. Over the coming years, the old Procurement Policy is a tool that has the power to make a huge impact and one that needs its own evolution. This policy development will enable a blanket application of sustainability to be adopted without procurement intervention in every sourcing decision. Between now and 2030, we need to strengthen the requirements annually to allow suppliers to gradually get used to the changes and ratchet up the pressure over time. At some point in the future, there will be a decision not to trade with some companies if they have not met minimum standards. This tough line should motivate those to change or risk losing business.
Once procurement teams get to grips with what is driving carbon emissions in the supply chain, they then needs to develop the right approaches to motivate, encourage, and sometimes force suppliers to act. Some suppliers will be on board with the need to decarbonise and happily support the process, whereas others will need significant levels of ‘encouragement’. Some categories will be relatively straightforward to plot a pathway to decarbonisation, whereas others have more complex challenges and require more strategic levers. Category teams will need to build a comprehensive picture of their suppliers and in many cases begin the co-development of solutions to tomorrow’s problems. Research and innovation, product reengineering, and demand management can all play a significant role in reducing emissions, but release of value may be some time in the future, which places a greater emphasis on 2024 being the year to truly put weight behind the efforts.
A green future
As we look to 2024, a lot needs to change if we are going to meet the looming global sustainability targets. Many procurement teams are still grappling with integrating sustainability into their strategies. The next few years mark a critical juncture and demand meticulous planning and swift action. Transforming procurement practices to align with sustainability goals requires measured steps, starting emissions measurement and building a strategic decarbonisation plan from there. Whilst there is a lot to be done, with the right strategies in place, procurement teams are poised to play a pivotal role in accelerating organisations’ progress towards net-zero.
Walmart turns to Indian suppliers to meet procurement needs, aiming to buy $10 billion worth of goods per year by 2027.
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US retail giant Walmart is shifting its procurement strategy in response to a sea change in fast moving consumer goods (FMCG) manufacturing from the Global South.
Broadly speaking, Walmart’s strategy is to accelerate its procurement of goods from “categories where India has expertise.” These include food, consumables, health and wellness, general merchandise, apparel, homewares and toys. Additionally, Walmart spokespeople have noted that India—which is home to the third largest pool of scientists and technicians in the world—“has some of the brightest minds in innovation, and we want to explore potential solutions to challenges in our value chain with these innovators and startups.”
Andrea Albright, Executive Vice President of Sourcing at Walmart commented: “India is well-positioned to support increased demand for products by Walmart customers, and we are excited about our partnership with Hero Ecotech. This collaboration furthers our work to strengthen resiliency in our global supply while contributing to economic growth worldwide.”
Accelerated growth
India’s manufacturing sector is booming. Led by the automotive, electronics, and textiles sectors, Indian manufacturing is projected to reach $1 trillion in the next three years, according to a report by Colliers. A surge of investment—both domestic and international—is driving this growth, with the state of Gujarat receiving the lion’s share of the growth as the region is “becoming India’s manufacturing powerhouse.”
In order to support the development of its procurement network among Indian suppliers, Walmart has also announced plans for an invite-only event to be held in New Delhi this February, where “Indian export-ready suppliers are invited to apply to pitch their products to our buyers for Walmart U.S. stores and Sam’s Clubs,” and “Innovative Indian companies are invited to pitch solutions addressing sourcing challenges across apparel, general merchandise, fresh and packaged food, health and wellness, and consumables. Pitches may lead to pilot projects within Walmart’s value chain.”
Our final cover story for 2023 explores how Deputy CIO May Cheng is accelerating a digital customer and product-centric approach…
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Our final cover story for 2023 explores how Deputy CIO May Cheng is accelerating a digital customer and product-centric approach to IT management for the International Trade Administration (ITA).
Welcome to the latest issueof Interface magazine!
Interface showcases leaders at the forefront of innovation with digital technologies transforming myriad industries.
We connect once more with the tech trailblazers at the International Trade Administration. Deputy CIO May Cheng and her team areaccelerating adoption of ITA’s customer and product-centric approach to IT management. In addition, their focus is on Agile, DevSecOps, Value Proposition, and Human Centred Design. “In 2023, we launched 13 products, three MVPs and saw enhancements operationalised. Moreover, the digital model has enabled a partnership between business and IT. The result is clearer lines of shared responsibility, transparency in resources, and a continuous learning culture across the agency.”
Businessman touching data analytics process system with KPI financial charts, dashboard of stock and marketing on virtual interface. With American flag in background.
Royal Papworth Hospital NHS Trust: Digitally transforming patient care
The Royal Papworth Hospital NHS Foundation Trustis centred on bringing tomorrow’s treatments to today’s patients with a clear mission to provide excellent, specialist care to patients suffering from heart and lung disease. We hear from Andrew Raynes who took up his role as CIO in 2017. He is overseeing a digital transformation program bringing value to staff and patients. “Using the global language of interoperability… we’ll see greater efficiency in terms of use of technology and sweating our assets. Furthermore, exploiting the benefits to support seamless care by allowing standards to do the heavy lifting.”
Toronto Community Housing: Supporting tenants with tech
Toronto Community Housing houses tenants in 106 of Toronto’s 158 neighbourhoods. It ensures over 43,000 low and moderate-income families are supported in their continuously managed homes. Luisa Andrews, VP Information Technology Services tells us it’s the best role she’s had in her career. “It’s the most challenging, and where I’ve seen the most progress in a short amount of time. I’m proud of my team and what we’ve accomplished in five years. We, and our partners, have enabled the corporation, through technology, to do what it needs to do for our tenants.”
Marshfield Clinic Health System:
Marshfield Clinic Health System provides care at over 50 locations across the US state of Wisconsin. Chief Data & Analytics Officer Mitchell Kwiatkowski explains its tech mantra to us: “We’re trying to toe that line while examining new technologies as they come out. We’re aiming to understand what they are, how they can help, and implementing things that are mature enough and show promise. I don’t think healthcare is necessarily risk-averse; it’s a highly regulated area that doesn’t always have deep pockets for investment. However, it’s people’s health at stake, so we have to be careful…”
Also in this issue, we get the lowdown on the tech trends for 2024 from Hitachi Vantara innovation guru Bjorn Andersson. We also hear from the WatchGuard Threat Lab research team with their cybersecurity predictions for the year ahead.
A consortium of volunteers from California have slowly restructured their state schools’ digital procurement process. Next year, it plans to go national.
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Procuring digital goods and services for public schools in the US has reportedly been a fraught process for decades. A fractured landscape between underfunded public institutions and a private tech sector has struggled to even accurately assess students and regulators’ needs, let alone finding the right edtech (education technology) to meet those needs.
This is all made harder by an increase in the amount of technology being integrated into schools—whether that’s good, bad, or maybe both, it’s undeniably expensive. The global education technology market was valued at $123.40 billion in 2022 by Grand View Research. It’s expected to expand at a rate of 13.6% between now and the end of the decade.
The power of education for procurement
Edtech is also a wide umbrella, with examples ranging from apps, overhead projectors, and chromebooks for students to thousands of screens, digital signage, and “content management platforms” like those found in Christopher Columbus High, an all-boys prep in Miami which the South Korean tech giant Samsung has transformed into a “connected campus”. In the US, procurement functions working for individual school districts are often forced to work with smaller budgets, fractured regulatory landscapes, and to compete with private schools with larger budgets that drive overall prices in the sector up.
The Education Technology Joint Powers Authority (Ed Tech JPA) was formed “out of frustration” with the existing system, or lack thereof, in 2019. The volunteer group, made up of procurement specialists and school purchasing professionals, has spent the past four years streamlining procurement for digital products and services, leveraging the buying power of multiple schools to negotiate prices, buy in bulk and save money.
From a grouping of school districts located in Irvine, San Juan, San Ramon Valley, Fullerton, Clovis, El Dorado County and Capistrano Unified districts, the consortium has grown to include 163 member districts that educate around 2.3 million students. The organisation has been awarded 23 procurement contracts to date, and is growing rapidly in education.
At the California IT in Education (CITE) conference, held in Sacramento during November, JPA President Brianne Ford, predicted that next year would see the program expand beyond California and make group bargaining procurement for edtech a national feature of the US school system.
The HS2 rail project promises over 300 work packages, ranging from £1 million to £500 million for 2024.
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The 2024 procurement pipeline for the HS2 rail project promises a £1 billion “boost” for British businesses, as the project administrators reveal details for a slew of contracts available over the coming year and a half.
The contract opportunities, collectively worth over £1 billion, give a heads up to potential suppliers looking to boost their order books and grow their business in the year ahead. So far, UK businesses have secured over £17 billion worth of work on HS2 and 2024 promises even more opportunities to get involved.
“Forward planning is absolutely crucial for businesses, so we’ve worked closely with our stations and civils contractors to develop a simple procurement pipeline setting out what we’ll need and when,” commented Robin Lapish, HS2’s supply chain lead.
HS2 – London with Manchester
HS2—a 140 mile high speed rail network project originally slated to connect London with Manchester—was first announced under the UK’s Labour government in 2009. In the 13 years since its announcement, the project has experienced delays, cost overruns, and controversies. Construction began in September of 2020.
According to the UK’s Institute for Government, while the project was initially estimated as “delivering £2.40 of benefit for each pound of public money spent, the government had revised the BCR down to 1.8 in 2013,” and “Lord Berkeley estimated that HS2 would only deliver £0.66 for each public pound spent, predicting both higher costs – at £22bn more than the 2019 Chairman’s stocktake – significantly reduced benefit from both passenger demand and train frequency, and less ambitious predictions of economic growth.”
As of February 2023, HS2’s total cost to date was calculated at £24.7 billion, and its BCR was calculated as having dropped to .80 following a reduction in rail use after the pandemic—prompting Prime Minister Rishi Sunak to announce the cancellation of the Birmingham to Manchester leg of the line.
This presumably goes all the way back to when every company was a sharp rocks and oxen firm. For the modern enterprise, identifying how the technology du jour empowers successful organisations in your industry and harnessing it for your own ends is just as vital to success today as it was for the Egyptians in 3,500 B.C. to figure out as quickly as possible where the Sumerians were getting all those cool, new, super shiny and sharp new rocks.
Nowhere is this more true than in the procurement sector. A place where harnessing Big Data can drive new efficiencies, improve resilience and agility in the face of disruption. This is done all while helping procurement teams understand their business in real-time.
However, this doesn’t mean that Big Data analytics adoption has been simple, easy, or without risk. The disruption caused by the COVID-19 pandemic highlighted most of a company’s value chain is dependent on external third parties. There’s only so much you can get done without engaging with organisations up or down your value stream.
Procurement teams can typically find themselves managing expenses accounting for about 50% of a business’ revenue — sometimes overseeing spend in the billions of dollars. Procurement’s ability to maintain and navigate increasingly complex networks of relationships can be hugely enhanced by the power of analytics. However, adopting the wrong analytics platform, feeding it the wrong information, and drawing the wrong conclusions can be disastrous.
By gathering data from both internal and external sources, then analysing it with the appropriate tools, procurement teams have the capacity to create powerful insights in less time than ever before.
Combining environmental information (weather patterns, crop cycles, raw materials pricings, political unrest, etc.) with rich data generated within a company’s operations, mean that procurement teams using Big Data analytics have a significant leg up when it comes to predicting trends, finding favourable prices for buying, and sourcing inventory from a diverse network of suppliers so as not to place undue stress on their partner network. Reduced costs don’t hurt matters, either.
A closer look at some of the best tools to help your procurement function capture the potential benefits of a world powered by big data.
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Procurement is becoming an increasingly data-driven field. Correctly gathered, organised, and analysed, Big Data sets can help a procurement department do everything from increase efficiency and reduce costs, to make more ESG-conscious decisions or shore up their supply chain against unexpected disruption. However, managing huge amounts of structured, unstructured, internal, and external data can present a significant challenge for procurement staff. This is especially true when procurement professionals haven’t needed to also be data analysts until recently. This means there might be understandable skill gaps in your team.
Luckily, there exists a wealth of digital tools designed to capture, analyse, and generate insights from massive amounts of data. This is all specifically catered towards enhancing and elevating your procurement function. Here’s a closer look at five digital tools to help maximise the potential of Big Data in your procurement function.
1. GEP Smart
With AI-powered spend analysis, as well as strategic sourcing, purchase order processing, and invoice management, GEP Smart is one of the more broadly capable and robust procurement tools on the market. The platform is capable of absorbing, collating, and converting large data sets into everything from compliance procedures to supplier management strategies.
2. Kissflow
For smaller organisations still in the process of growing their procurement teams, Kissflow can help bridge the gap between a legacy or underdeveloped procurement function and where it needs to be with less emphasis on learning complex new digital tools. Kissflow is all about being simple, accessible, and customisable. The platform handles basic procurement functions natively, but integrates with a huge variety of other tools and programs.
3. Coupa
Focused largely on spend management, Coupa unified, streamlines, and empowers the source-to-pay process. The firm uses Big Data analytics to manage working capital and forecast budgets, giving procurement professionals more visibility over finances.
4. Tamr Procurement Analytics
Tamr Procurement Analytics specifically targets the problem of siloed data within the supply chain, helping procurement professionals quickly unify their data sets and start using artificial intelligence to generate insights at speed. The AI and machine learning decision engine underpinning Tamr’s platform enriches user data while also curating it against a rigorous set of standards to ensure quality.
5. TARGIT Decision Suite
TARGIT is a business intelligence and analytics tool that can gather observations from throughout the supply chain. This allows them to be more easily converted into actionable insights. The platform embeds directly into internal and external-facing portals, allowing a procurement team to share dashboards with the entire supply chain network. By creating a holistic impression of the entire supply chain, TARGIT improves the results of its predictive analytics, increasing efficiency and resilience.
At DPW Amsterdam, Kathryn Thompson and Fraser Woodhouse, Partner and Director at Deloitte, discuss the rise of generative AI and the impact on procurement.
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Procurement is changing.
That’s something that isn’t lost on Kathryn Thompson, a Partner at Deloitte.
As part of her role, she leads the Sourcing and Procurement Market Offering within Deloitte’s Consulting division in Europe, Middle East and Africa. Originally from Australia, Thompson has worked in procurement since 1996 and has observed quite the evolution over the past two and a half decades.
Procurement’s transition
Over the years, procurement has shifted from a traditional back-office function to an entity operating at the fore of a company’s strategy. Having been involved in the industry for more than 25 years, Thompson has had a front-row seat to procurement’s digital transformation. While she affirms that AI has changed procurement, she isn’t convinced that generative AI is changing the space – yet.
Kathryn Thompson speaking at DPW Amsterdam 2023
“We see lots of AI tools pulling from different data sources to apply intelligence to different decisions,” she explains. “But the generative part, beyond contract summaries or pulling together draft RFPs, remains to be seen at scale. One of my more sophisticated clients has run 300+ Proof of Concepts in AI across their business, including and beyond procurement, and admits they are yet to scale or drive meaningful ROI from any POC. At the moment, the generative AI side for us, isn’t getting past proof of concept or the pilot stage yet.”
Fraser Woodhouse is a Director at Deloitte and has been with the firm since February 2019. He believes that procurement and sales teams will use gen AI for RFPs over the next six months. “I think they’ll do it without telling anyone,” he explains. “It will eventually get to a point where I think that sort of crutch will become a necessity. When it’s built into the enterprise platforms, people will forget how to write contracts because the AI does it automatically. People will even use it to write their emails.”
The AI dilemma
AI on its own is pointless – it simply doesn’t operate the way you need it to. That’s why the importance of making tech work in a way that creates efficiency has never been more important. For Woodhouse, he insists it’s about putting a human at the right place in the process. “One of the solutions I saw was a gen AI assistant helping write an RFP built in, but then the supplier has a gen AI assistant helping do the response to the RFP as well,” he tells us. “Very quickly you’ve got two AIs negotiating with each other, and that doesn’t work unless a human is curating stuff at that point in the middle.”
Given the ease of AI usage, there is a discussion as to whether tech implementation could go too far the other way. Could humans lose the ability to perform simple tasks they previously wouldn’t have thought twice about? But Woodhouse is quick to dispel that myth and believes that despite the growing reliance on technology, people won’t be rendered useless. “People didn’t forget how to communicate when spellcheck came around, they could communicate better,” he explains. “If you are a supplier and are responding to an RFP and you’re pressing their generative AI button to build the response and five of the other suppliers are doing the same thing, who’s going to stand out? The ones who wrote it themselves or at least edited it and had meaningful input.”
“You can use AI for the transactional, easy stuff but there must be a value underpinning it,” adds Thompson. “The winners are going to be the ones that are human about things.”
Fraser Woodhouse and Kathryn Thompson speaking to CPOstrategy at DPW Amsterdam 2023
Procurement’s place
With such significant innovation happening, it is seen as a transformative time to be in procurement. As automation speeds up, the necessity to upskill new graduates coming into the workforce and encourage them to learn higher-value work earlier in their career journeys is becoming increasingly important.
“Covid and the following work from home attitude has a lot to answer for,” explains Thompson. “Pre-Covid, you would rarely work from home. Consultants, suppliers, delivery partners always went to the client’s site. That’s where innovation, creativity, results that are more than the sum of their parts happen. That’s not replicable by generative AI. We need to get everyone back out there and doing things. Rather than replacing jobs, we’re replacing tasks. The tasks that we’re replacing are the likes of data analysis, synthesising, and summarising. Hopefully, it means we’re doing real-life negotiations, brainstorming and innovation instead which are the things that people love to do. Fingers crossed, it just means the bar goes up.”
Automotive supplier Continental has chosen to work with JAGGAER to implement its global purchasing strategy while driving digitalisation.
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Spend management firm JAGGAER has announced it is working with automotive supplier Continental to push its digitalisation agenda.
In a press release published on Monday (December 11), it was revealed the manufacturer will use JAGGAER’s spend management tools to implement its global purchasing strategy. The JAGGAER ONE suite will counteract previously isolated solutions and harmonise the areas of purchase-to-pay, source-to-contract and business partner management.
A multi-stage rollout is set for launch, beginning in Germany and the United States before being slowly expanded globally.
The release detailed that one of the most important factors for Continental choosing JAGGAER was due to the extensive and highly standardised range of functions of JAGGAER ONE, which already covers many existing requirements. In addition, this not only ensures a quick time-to-value, but also ensures a low implementation risk. Continental confirmed it found JAGGAER’s multi-ERP capability “particularly impressive”, with a total of 30 ERP systems needing to be connected.
Following the project’s launch earlier this year, the implementation of JAGGAER solutions within Continental will take place in several stages. Initially, the company will focus on the procurement of non-production materials and raw materials. It will start with the optimisation of the source-to-source contract process. In the next project phase, Continental will focus on the procure-to-pay process to ensure security of supply for employees globally. This is done via predefined catalogues and to optimise follow-up processes.
As well as the global rollout and digitalisation, there are also plans to expand the use of software to direct purchasing.
Efforts to address climate and social issues in the procurement process don’t have to be siloed, argues a new report from Business Fights Poverty.
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With more than 90% of a company’s environmental impact originating within its supply chain, not its internal operations, corporations are under greater pressure than ever to divest and draw down their Scope 3 emissions.
At the same time, other Environmental Social and Governance (ESG) issues concerning gender disparity, minority representation, and workers’ rights are also more clearly in the spotlight than ever before alongside climate change.
However, a report published on 5th December by social impact-focused network organisation Business Fights Poverty, argues that while there is “an urgent need for transformative action on environmental and social issues such as climate change, biodiversity loss, poverty and inequality,” there exists a tendency in the corporate sector to tackle these “complex and fast-moving challenges by simplifying them and breaking them down into separate, smaller issues”.
The result is often that solving issues of climate, social, and ecological justice becomes a zero-sum game, with one issue neglected at the expense of others, because of a siloed approach manifesting itself beneath the ESG umbrella. The report argues that, not only is this approach antithetical to the ideals of ESG initiatives, but “an integrated and systemic approach that recognises the interconnectivity of the challenges across environmental and social issues” is more effective at tackling these issues.
The report, titled Supply Chain Decarbonisation with a Gender Lens: Practical Guidance for Global Businesses, notes that vulnerable groups, especially women, are especially vulnerable to the effects of climate change. It goes on to provide guidance for corporate procurement strategists and leaders, describing how to ensure that “women are both unharmed by decarbonisation strategies, and that their participation in any benefits generated in the process is secured.”
Four Gender-Sensitive Routes to Procurement Process Decarbonisation
Supplier incentives: Recognise and co-brand with suppliers who are emerging as leaders on decarbonisation and/or gender.
Procurement policies and choices: Source from and encourage women-led businesses that are providing low carbon solutions
Product and services design: Switch to renewable energy and upskill women to participate in the switch.
Business model innovation: Promote a circular economy that includes women, for example decent work for waste and recycling pickers.
The need for decarbonisation in the procurement process is pivotal. As of Q4 2023, nearly 40% of Fortune 500 companies have now set Net Zero targets. It’s not good enough, and the actual meaning of Net Zero is being eroded and worked around by corporations looking for ways to continue harming the environment and damaging the global social fabric while making record profits. But it’s a start.
“Whilst a growing number of companies are investing resources to better understand, account for, manage and reduce their supply chain emissions, little attention is being devoted to the role of, and impacts of interventions on, the people working in those supply chains,” urges the report. “The decarbonisation strategies of large multinational companies with complex global supply chains have impacts on workers around the world, both positive and negative.”
Only one in six procurement teams have “adequate talent” to meet their future needs, as industry demands grow and evolve.
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Fewer than a fifth of procurement directors and executives believe that their teams contain “adequate talent” to meet the future needs of their organisations’ procurement functions.
In a recent survey of 111 procurement leaders, analyst firm Gartner found that, while procurement leaders remained fairly confident in their current talent pools, when asked about their ability to meet future demand, confidence plummeted.
“Procurement leaders are generally confident in the current state of their talent and the ability to meet their near-term objectives,” commented Fareen Mehrzai, Senior Director Analyst in Gartner’s Supply Chain Practice. “However, our data shows that chief procurement officers (CPOs) are worried about the future and having sufficient talent to meet transformative goals based around technology, as well as the ability to serve as a strategic advisor to the business.”
The threat of an industry-wide talent shortage has been looming for several years, and isn’t constrained to the procurement and supply chain sectors.
In the UK, half of all employers expect to face talent and skills shortages when recruiting procurement and supply chain professionals—something 20% of firms believe will be exacerbated by Brexit. In Europe, firms say they already lack “highly qualified procurement personnel”, with 78% of procurement leaders surveyed as part of a recent Accenture report “increasingly confronted with skills shortages in their procurement departments.”
A Different Beast: Procurement Professionals’ Key Competencies “Shifting”
One of the key reasons that procurement leaders lack confidence in their industry’s talent pipeline to meet future demands is reportedly the shifting nature of the modern procurement function.
“Procurement leaders are aware that the competencies required to drive transformation are different from traditional procurement skills, and that there are significant gaps between their current and future needs for the most important competencies,” Mehrzai said. Only 4% of surveyed leaders said that no gap existed between their current capabilities and their need for technology and data skills, with 68% of leaders saying technology and data skills had become more important to the operation of their procurement function in the past year.
Increasingly, procurement is a data-driven, technology-focused sector, but it appears the development and recruitment of available talent lacks behind the sector’s need to not only drive transformation within the business but also serve as a strategic advisor to its key decision makers. As generative AI and data analytics are adopted in greater concentrations across the sector, the demand for professionals who are primarily equipped with technology and data-centric skillsets — at the potential expense of a traditional procurement background — will only increase.
At DPW Amsterdam 2023, Prerna Dhawan, Chief Solutions Officer at The Smart Cube (a WNS company), tells us about the importance of remaining focused on fixing the problem and not leveraging technology for technologies sake.
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“You don’t need AI or even gen AI for the sake of it.”
In today’s world, everyone is obsessed with what’s new and fresh. Like in most other functions, in procurement, the latest craze is generative AI, with ChatGPT being one prominent example. Despite new technology’s clear benefits, such as cost and time savings, it’s important to keep the problem you’re trying to solve and the business impact you’re looking to make front of mind.
Prerna Dhawan is the Chief Solutions Officer at The Smart Cube. Like many of her peers, Dhawan recognises the potential that new technology brings but also shares concerns. “Like everyone else, we’ve been on that bandwagon as well,” she tells us. “For us, there have been two key learning so far. We have already done one live deployment of gen AI. We went live with our gen AI model earlier this year, which enables users to skip the stage of manually searching for content on Amplifi PRO, our on-demand procurement intelligence platform. You just ask the question and our platform leverages a custom NLQ framework and gen AI to provide a natural language response. Using a combination of our own AI models and gen AI provides a more dependable, accurate response as pure Gen AI isn’t fully functional for all types of analysis and can’t be trusted completely.”
Navigating AI adoption
Indeed, there has been criticism from some sections about ChatGPT providing hallucinations and making key data up. For multi-million pound organisations responsible for high levels of spend, this isn’t good enough. A second learning Dhawan is keen to get across is that she believes that gen AI is being dominated by hype. She explains that with any “new shiny object”, it should be treated with caution.
“I’ve tried to explain this a little bit, but everyone is excited about new things. A recent example is another use case where we were experimenting with our digital assistant,” she explains. “There was a point where we used a 100% gen AI approach, and we were still getting issues and hallucinations where the queries weren’t being answered correctly. The team said we needed to make it work and I explained that, ultimately, a client needs to solve the problem, they’re less hung up on how this is done. Sometimes people get lost with the technology and the approach. You have to ask yourself, are you solving the problem? If the answer is to just input a human and you don’t need AI, then do that.”
Prerna Dhawan, Chief Solutions Officer at The Smart Cube, sits down with CPOstrategy at DPW Amsterdam 2023
The journey
Armed with more than 16 years of experience in developing client solutions, managing strategic relationships, defining product strategies and driving profitable growth, Dhawan has worked with procurement, supply chain and corporate strategy teams across many global 2000 companies. Throughout her career, she has helped them embed intelligence and analytics as enablers of competitive differentiation and business transformation, along with The Smart Cube’s co-founders Gautam Singh and Omer Abdullah.
The Smart Cube is a WNS company and is considered a trusted partner for high-performing intelligence that answers critical business questions. The Smart Cube works with clients to figure out how to implement answers faster through customer research, advanced analytics and best-of-breed technology. The firm transforms its data into insights – enabling smart decision-making to improve business performance at the top and bottom line. Together with WNS, expert resources are combined with leading digital technologies, merging human intelligence and AI with innovation.
Digitally-enabled future
While AI’s challenges should be acknowledged, Dhawan is in no uncertain terms about the importance of stepping out of comfort zones and meeting fear head-on. Change can be a divisive topic with human nature being to cling on to what’s familiar. However, this can result in becoming reactive and failing to keep up with competitors.
Prerna Dhawan, Chief Solutions Officer, The Smart Cube
“As leaders, if we want to change the game of procurement and redefine the value we create for a business, we have to be more open to embracing new things,” she explains. “If you learn what the capabilities of new technology are and where you can actually use it, everything has strengths and weaknesses. Ask yourself – do you want to be an early adopter or do you want to be a laggard in your industry? All of this has the potential to give you that competitive advantage. It’s about being open, experimenting at pace, but also not being blinded by the magic and assuming everything will just work. There will be changes needed to your processes and people’s mindsets.”
Procurement’s future
With the future of procurement set to continue to be digitally-enabled and full of innovation, Dhawan believes the function now has its seat at the table and is ready to thrive.
“If I look at my journey from when I started in procurement, clients were asking questions like ‘Who are the suppliers in the market? How do I get the best price?’ Procurement is now getting involved at the new product development stage and is even advising the business on what ingredients to use while taking a more total value approach,” she discusses. “When you’re thinking about the product, do you want to put in palm oil or sunflower oil based on sustainability considerations, and how can you justify additional costs of a sustainable supply chain? Procurement isn’t just supporting the bottom line but also influencing the broader business goals of sustainability, innovation and resilience. It’s a great time to be here.”
Conrad Smith, Founder and CEO at Graphite Systems, discusses the similarities between Formula One and procurement amid significant digital transformation.
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“Our business, like the F1 driver, knows to go fast.”
You’d be forgiven for thinking that procurement and Formula One are worlds apart at first glance. However, to Conrad Smith, Founder and CEO at Graphite Systems, they are actually a lot closer than initially meets the eye. A petrolhead by his own admission, Smith shared the stage with Haas Team Principal Guenther Steiner at DPW Amsterdam 2023. As a purchaser with almost 30 years of experience, Smith has overseen quite a transformation during his procurement career. He says that with everything going digital, you would assume that purchasing would accelerate. But it is, in fact, the opposite.
The pace of purchasing
“Over these 30 years, you would think purchasing would be getting faster,” he tells us. “Business is speeding up, but purchasing is slowing down – that’s stunning. When you think about it, where else in the world is slowing down when everything’s going faster and faster? Even though we’re investing in Coupa and Ariba and all of these expensive purchasing tools, it’s still slowing down. Our business stakeolders know business is speeding up, and so their tolerance is going away. In the nineties, when you onboarded a supplier, you just needed commercial data, name, address, tax, and banking.”
Conrad Smith (left) with DPW founders Matthias Gutzmann and Herman Knevel
Having been founded in February 2019, Graphite Systems is the premier supplier life cycle and risk management solution. The emergence of risk and due diligence has become a primary function within procurement. Vendor due diligence during the procurement process ensures users can identify and mitigate the risks present with a vendor they want to do business with during the contracting process. For Smith, he believes that this transformation has been 15 years in the making.
“I think that it was typical that a purchasing leader would point to other stakeholders and say it’s legal that’s holding this up, privacy or security. They’re the ones stopping the process from happening,” he explains. “And quite frankly, I’ll admit, those were my early thoughts. This is like a hot potato – I don’t want to be owning it. I look stupid because of the slowness I described. Think how stupid the business thinks we are when they come and say, I’m working on a project, I need this consultant here on Monday. And our best response is that it’ll take weeks or months to onboard the supplier”
“Weeks matter, and we need to go through all this risk and due diligence. It’s really important to do the risk and due diligence, but we can’t do that at the expense of the speed of business. While business is quicker, in every measure that you look at, purchasing is going slower. It’s dumb, and the business knows that, and it means we lose credibility. It needs to happen, but we need to be very intelligent about it and not just do things the same ways we’ve always done them.”
Conrad Smith with Haas Team Principal Guenther Steiner at DPW
Procurement’s changing
Smith explains that one of the reasons he can relate to the F1 analogy is that while cars are going faster than ever, the drivers are far safer today. “Every year, we see massive accidents take place,” he tells us. “I think last year, a car that was flipping head over heels tumbling and hit the fence before slamming into the ground but the driver was okay,” he explains. “There’s this principle that is very important in almost any situation where somebody says, you can have this or you can have that. It’s a false choice.
“You have to pick speed, or you have to pick safety. If you go in with a requirement that says it has to be fast and it has to be safe, that’s the F1 example. You have to go into purchasing and say it’s a non-negotiable. It has to be fast and safe. How can we rethink the design so it can go fast and be safe? That’s really my passion, and it’s possible. It doesn’t mean it’s easy, but it’s possible. Frankly, in the case of this purchasing problem, it’s way easier than it should be. But we’re still stuck on passing paper back and forth instead of just saying, there’s my profile. Everything you need is in my Graphite profile – just like everything you need to know about me [as a professional] is in my LinkedIn.”
The future of creation, management, and sharing of data and documents between buyers and suppliers absolutely needs to evolve from emails, spreadsheets, and PDFs into a modern social network architecture. This transformation of information sharing has already proved its speed and efficiency in most other aspects of our lives. It’s time to quit wasting time and money on supplier onboarding and embrace modern technology in this critical procurement process.
Costas Xyloyiannis, CEO at HICX, discusses why the time is now for supplier experience in supply chain and procurement and its rise to the top of conversations in the space.
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“I feel like the focus is shifting.”
Gone are the days of supplier experience being hidden away in the background. Today, it sits as an increasingly important target area within the procurement and supply chain space. But it hasn’t always been this way.
For Costas Xyloyiannis, CEO at HICX, he is pleased to see supplier experience’s conversation grow. “I’ve been in this space for 23 years and even if we go back three or four years ago, no one was talking about it,” he tells us. “It’s great to see a movement beginning to happen.”
Speaking with CPOstrategy at HICX Supplier Experience Live in Amsterdam, a day before DPW Amsterdam kicked off, he revealed how satisfying it was to see its evolution take place. And clearly there’s a market for it. Scores of people filled the Tobacco Theatre in Amsterdam all eager to listen to the many discussions and speakers attending the half-day event. “It is very satisfying because you see people’s minds changing in the same way that it did for the customer and employee experience,” he explains. “What you have to think about is that almost every company is also a supplier so it’s in your interest to focus on the supplier experience side. In another context, you’re also a supplier and people should understand that we’re all in it together. If you don’t think about solving it, then you’re going to have that pain yourself.”
Driving Supplier Experience
Indeed, it’s an issue that needs solving. Xyloyiannis explains that not understanding the necessity of supplier experience is a common misconception because it affects everyone in different ways. “Sales and marketing are the ones likely to understand what it means to be a supplier but they’re detached from the problem,” he says. “They are probably going into a portal and filling things in many times, it’s just not procurement doing it so that’s why they can’t make the connection. What we all need to realise is that focusing on supplier experience is in all of our interest. Ultimately, you have to think it’s just the right way of solving a problem because I create efficiency for myself and I’m also a supplier.”
HICX Supplier Experience Live in Amsterdam in October 2023
Xyloyiannis goes on to explain that if the focus is on supplier experience, an opportunity has been presented to create net efficiency – which is a massive win for all. “This benefits everyone because it’s not a zero-sum game,” he says. “If you think about business cases of other solutions, it’s we’re going to fire people and cut headcount. If I take the US government example of 150 million a year to DNB, this would’ve been a saving they would make without impacting any other functions internally. No heads would have to be cut; nothing would have to be outsourced. In a way, it’s free money for everyone when you can create net efficiency.”
Moving forward
Today’s Chief Procurement Officer has a lot on their plate. Amid navigating continuous innovation and transformation, ESG’s ever-increasing influence and battling inflation concerns all on the back of an already disruptive few years, procurement finds itself at an interesting moment. But looking ahead to 2024, supplier experience has its seat at the table and will only become a hotter topic in the years to come, according to Xyloyiannis.
“A lot of leading companies are putting huge amounts of focus on it,” he tells us. “Henkel posted on LinkedIn last year that they were driving their whole strategy around supplier experience. Then you’ve got Heineken and Unilever who are getting more involved in the space too. I think it is very much at the forefront, particularly in companies which produce goods and services. Supply chain has become very global and there’s a benefit to outsourcing and all these things, but it does make it very fragile. That’s why now it’s become important to focus on supplier experience because we have such a high dependency on one another.”
Maarten van der Borden, Customer Transformation Director at Celonis, discusses the influence digital tools such as generative AI is having on procurement’s workforce.
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“When something new arrives on the scene, people have a tendency to immediately think of the worst-case scenario.”
Maarten van der Borden is a Customer Transformation Director at Celonis. As AI gets increasingly complex and advanced, there are concerns from some sections of the workforce that robots will take human jobs in procurement. Indeed, one of the biggest draws of automation is the cost savings and efficiency it brings, with AI able to complete some tasks almost instantly. But van der Borden challenges that notion and believes technology should be used as an enabler.
AI’s impact on jobs
“AI will, in my opinion, not replace anyone anytime soon,” he reveals. “What it will do is make life easier and change the way we operate. In the late 90’s, we couldn’t envision what having a mobile phone would be like. When those were first introduced, we thought how annoying it would be that you would always be reachable. Now we can’t imagine living without a phone.
“I don’t envision the elimination of procurement positions due to AI. Rather, a significant shift may occur in the transactional aspects of process analytics. Currently, individuals proficient in creating complex Excel macros or adept at extracting and transforming data into actionable insights are highly valued. These roles are likely to undergo changes, but this should be seen as an opportunity for enhancement, not a threat. It’s crucial to recognise this. My belief is that AI won’t be replacing jobs, particularly in procurement where human involvement is key. The role of technology should be to empower and improve processes in procurement, not to replace the human element.”
Maarten van der Borden, Customer Transformation Director at Celonis
The journey
Over the years, Van der Borden has distinguished himself through a series of impactful transformations and strategic developments, primarily at the nexus of IT, business operations, and finance. His journey has been marked by the successful management of large-scale programs, where his ability to engage cross-functional teams and collaborate with stakeholders at all organisational levels has consistently led to the achievement of key goals. Notably, he has a history of taking on complex and challenging projects, steering them from concept to completion under stringent conditions. This track record has established him as an influential change agent, known for transforming underperforming organizations into models of high performance and efficiency.
Having began his career in the Dutch Military, he experienced a similar journey to many procurement practitioners. Van der Borden fell into the space by a “happy accident” and never left.
He shares, “I didn’t know much about procurement initially, but I quickly grew to love it.” His journey led him to DS Smith, a major packaging organisation, where he successfully spearheaded a comprehensive global procurement transformation. Subsequently, he transitioned to head the finance transformation within the same company. In this role, he sought a tool that could effectively navigate the unique challenges of procurement compared to finance.
“I needed something that would show me how our financial processes really ran. It meant finding the most impactful inefficiencies and developing an action plan to deal with them.”
Celonis today
This search brought him to Celonis’ process mining capability, a product that resonated with him so profoundly that he decided to join the company. “Right now, I am a Customer Transformation Director at Celonis, which means I help our customers organise themselves around this solution because I firmly believe implementing a tech solution by itself doesn’t do anything. We will always need the human element to make the change and create value, based on the insights tech provides. I’m very happy to be here.”
Today, Celonis is the global leader in process mining, providing companies with a modern way to run their business processes entirely on data and intelligence. The firm pioneered the process mining category more than a decade ago when it first developed the ability to automatically X-ray processes, find inefficiencies and implement immediate, targeted, and automated action to resolve them.
Gen AI drive
Procurement is in a transformative moment. At DPW Amsterdam, generative AI was the buzzword on attendees’ lips everywhere you looked. For van der Borden he acknowledges how rapidly the space is changing as a result of an increased influence of digital tools.
“To me, the first big thing to realise when we talk about gen AI is the democratisation of data and process analytics,” explains van der Borden. “I think what’s really important is that procurement realm to me is a prime example of where gen AI can have a huge impact. I think what gen AI will do is open up the capabilities of analytics to a much wider audience than today. People who may previously have trusted some Excel sheets or PowerPoint slides presented to them to make decisions can now freely explore, or even converse with their own data and make informed decisions themselves. You start to build a community of data analysts rather than just having consumption of data analytics. That to me is the big game changer that gen AI is actually providing procurement with.”
Procurement’s perception
CPOstrategy sits down with Maarten van der Borden, Customer Transformation Director at Celonis, at DPW Amsterdam 2023
By its own common admission, procurement used to be boring. A function hidden out of sight and kept far away from the c-suite. Now, it’s front and centre, firing on all cylinders. Indeed, the Covid pandemic helped drive it towards the top of the agenda, in addition to other enablers such as transformation and ESG. For van der Borden, he believes procurement is beginning to shake off that old skin and be seen as more of a strategic function.
“We’ve received a bad reputation in the past because the impact has not always been clear,” he tells us. “Some analysis that people do on procurement as a strategic function is to ask what’s the real impact? Yeah, you manage the supply and demand but as long as I have my blue ball point where and when I need it, you’re doing a good job. If things start to fall over then procurement used to get the blame. What I’m really happy to see is that more and more CEOs are seeing procurement as a strategic function, not only driving value in the financial domain but also more and more as the primary contributors to a more sustainable future and the guardians of our corporate brands.
An evolution
“There’s been a noticeable evolution in procurement, particularly in the merging of processes like source-to-pay, procure-to-pay, and purchase-to-pay. Our definitions in these areas haven’t always been crystal clear. However, when you delve into purchase-to-pay, it’s apparent that this is where the transactional activities occur. Due its very transactional nature, this phase is measurable and reveals the outcomes of our upstream actions in sourcing. I’ve observed that these areas, despite often being managed by separate divisions or functions, are intrinsically linked. The transactional aspects are commonly seen in shared services, while the sourcing aspects represent traditional procurement.
“Bridging these two areas, in my view, is a significant shift. This is where technology truly demonstrates its value. By integrating and examining the transactional processes to understand their shortcomings, we can trace back to the root causes, often found in sourcing. This integration is fascinating to me. It allows us to assess the real impact of our efforts.”
DPW has announced it is expanding into North America following the success of its Amsterdam offering.
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DPW has announced it is expanding into North America following the success of its Amsterdam event.
Founders Matthias Gutzmann and Herman Knevel revealed the news via LinkedIn to confirm a move that will see significant growth into new territories.
Gutzmann exclusively told CPOstrategy: “Marking a pivotal moment for DPW, our expansion to the US isn’t just about growing our footprint, it’s about building on our ongoing momentum over the last few years and bringing the enthusiasm and expertise of DPW.
“We aim to bridge procurement organisations with innovative startup founders and change makers, fostering the growth of a digital procurement and supply chain ecosystem in North America.”
Accompanied by a photo of the duo outside Google offices in Silicon Valley, California, he posted on Monday (27th November): “I am currently in #SilliconValley together with Herman Knevel, gearing up for an exciting week filled with meetings with tech giants, founders, visionary partners and future collaborators.
“Having previously led the expansion of Procurement Leaders | A World 50 Group Community into North America, I must say I feel extra energised to bring my experience and strong relationships within the North American market for the benefit of DPW.
“Stay tuned for more updates as we embark on this exciting phase of growth and innovation!”
Founders Matthias Gutzmann and Herman Knevel
Since launching DPW in Amsterdam in 2019, the conference has grown from strength to strength and is now widely regarded as the biggest and most influential tech event in procurement and supply chain on the planet. The conference welcomed over 1,250 procurement professionals with more than 2,500 virtual attendees watching along at home in its 2023 edition in October.
Last year’s event was held at the former stock exchange building, the Beurs van Berlage, with the theme called “Make Tech Work” which focused on turning digital aspirations into a reality. DPW Amsterdam has already been announced for October 9 and 10, 2024, next year.
Further details about DPW North America will be revealed in due course.
At DPW Amsterdam 2023, Sigbjørn Nome, CEO and Co-Founder at Ignite, discusses the importance of a people-first mindset in procurement.
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“It’s super important to get the right people in procurement.”
Sigbjørn Nome, CEO and Co-Founder at Ignite, is passionate about talent. The company is now armed with 60 employees and has become an organisation of choice for many graduates in Norway. According to Nome, building a positive environment that empowers staff holds the key to long-term success and growth in procurement.
“We’ve managed to get a good reputation in Norway and recruit top talent,” he tells us. “In the beginning, we used the best students and offered internships to help us build the first version of the product. Then we built a good relationship with the universities in Norway and we’ve also recruited lots of senior hires too. There’s a great combination of talent within Ignite.”
Ignite is an advanced yet simple spend management solution that gives customers the power of correct and holistic data, transparency, and actionable analytics to empower data-driven decision-making. This way, customers not only save money and avoid risk but also make smarter choices and drive value across their organisation. Ignite provides a one-stop shop to consolidate, clean, and enrich data, get advanced procurement analytics, conduct supplier assessments, as well as holistically managing suppliers and contracts and quickly and automatically estimating their Scope 3 CO2 footprint.
With a background in consulting, Nome worked on a variety of procurement transformation projects and has witnessed significant potential in the space. Having decided to form Ignite in 2016, the organisation began as a consulting firm but it was later decided to be delivered as a software-as-a-service (SaaS) company. “As a consulting business, you are cashflow positive and you earn money from the get-go. While for a SaaS business, you need to invest a lot in product and productive development,” he tells us. “It is quite a challenging change. As a business owner, you also need to sell and be more out there to get customers. There’s been a lot of challenges and one of those has been building the team which I’m really proud of.”
Procurement’s evolving function
Procurement is changing. Traditional procurement revolved around delivery, cost and quality. Now, given the nature of environmental challenges as well as the necessity of data analytics, people with diverse skill sets are needed more than ever before. Nome believes it’s about changing the mindset of procurement. “You’ve got to shift that mentality because the function is so different today,” he explains. “In the future, it’s going to be a more collaborative function because procurement teams cannot win alone.”
With that future in mind, Nome recognises the space is a different beast today than it was a decade ago. Change dominates the industry and the players that embrace transformation will be the ones who win. “You need to use procurement as a lever to get change done,” he tells us. “It’s not enough anymore to look at your business only, your responsibility also extends to your suppliers. It’s about where you spend your money and your negotiation power because customers will look at that. I would say the regulation demands will offer a broader perspective, not only looking at your business but also how you spend your money.”
At DPW Amsterdam 2023, Alan Holland, CEO of Keelvar, tells us about the acceleration of digital transformation in procurement and what it means for the next generation of the workforce.
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Keelvar’s mission is simple – to help procurement teams globally to scale sourcing excellence.
Keelvar is powered by unique artificial intelligence, designed by category experts, to deliver significant savings and operational improvements for global enterprises such as the likes of Siemens, Coca-Cola, Samsung, Novartis and more. The company was founded in Europe’s largest AI research lab by a team of computer scientists and engineers specialising in AI, optimisation and game theory applied to strategic sourcing. Keelvar has raised $42 million to date in funding to accelerate product development and global growth.
The company is led by Alan Holland who has served as CEO since the company’s foundation in September 2012. Indeed, in his first year, he led the organisation to win the Cork Company of the Year in the small company category, and the firm has more recently been awarded a Gartner Cool vendor.
Having previously served as a lecturer in artificial intelligence in University College Cork’s Computer Science Department, Holland specialised in Optimisation, Game Theory and Algorithmic Mechanism Design. Such experience has helped give Keelvar an edge in terms of innovating with offerings that exceed competitors’ technical capabilities. This enables Keelvar to define an entirely new category of the solution, putting Keelvar in an ideal position to lead this new category that Keelvar has called autonomous sourcing.
CPOstrategy sitting down with Alan Holland, CEO at Keelvar, at DPW Amsterdam 2023
Evolution at scale
Procurement is in a state of flux. The industry is experiencing unprecedented amounts of innovation and change in a way which has ripped up the playbook of what went before it. However, Holland believes it is only in the past half decade or so where transformation has really started to take place. “If we look at the last 10 years, the first five of those procurement was very slow to change,” he discusses. “What we saw were technology landscapes dominated by a small number of large suites vendors who had acquired many companies, but most enterprises were satisfied in buying all the modules they would need to run their procurement function from one vendor. Rarely was it the case that the various modules did what their customers needed. Some of them might have worked in some ways, but others just didn’t serve the need at all.
“In the second five years of our being, things started to change. We did start to notice an increasing acceptance that best-of-breed was the way forward and that enterprises needed to accept that if they were to get the buy-in from their stakeholders, then they needed to work with a combination of best-of-breed vendors and piece together their specific technologies landscape rather than just buying it in bulk from one. I would say it was gradual at first and then suddenly, but it’s only been suddenly in the last couple of years. The pandemic likely accelerated some of that change.”
Trust first
Holland explains that in recent years, large multinationals are placing an increasingly important level of trust in smaller, best-of-breed vendors such as Keelvar to allow them to run their sourcing events and meet niche demands. He believes that in the past it simply wouldn’t have happened and strives to prove that faith right. “I suppose that’s a process where enterprises are gradually increasing their trust in what are smaller vendors, but these smaller vendors are becoming bigger because we’re serving hundreds of large enterprises,” he explains. “We’re gaining in strength and momentum and the barriers to adopting best-of-breed at scale are lowering and the market willingness to jump those barriers is increasing. That momentum is just gathering more and more force.”
Alan Holland, CEO at Keelvar
Using tech as an enabler for talent
Procurement’s talent shortage and the ways to bridge has been a hot topic for years. Whoever you speak to within the industry, everyone will have a different viewpoint. Some say procurement needs a rebrand, others say it’s a lack of education while others think technology could hold the key. For Holland, he believes it’s about making tech work and freeing up people in procurement’s time to focus on more value-add work that will help solve strategic goals.
“What is attracting graduates to procurement now is working with intelligent systems that are powered by AI and that allow them to be strategic and not working on routine or tactical tasks because machines are taking over the data-intensive areas of processing these workflows,” he tells us. “Our second product, which we launched about three years ago is autonomous sourcing. These are sourcing bots that are intelligent software agents that you can now design, build, and operate your own sourcing bots. If you’re somebody who understands best practices in sourcing, you can now build automated workflows so that instead of having to run sourcing events one by one and get through 15 or 20 a year, now you could design bots that are running hundreds of these events per annum.”
Procurement’s bright future
While not only opening up people’s day, using technology as an enabler to make life easier also acts as a way of encouraging the next generation into the industry. “What you’re doing is freeing up many other people’s time to spend on relationship management or innovation discovery and talking to the market, finding out what new suppliers you should be dealing with, visiting suppliers to check things are in order,” he says. “And that is the type of work that people enjoy doing. Machines are taking more of the data-intensive work off their tables, and machines are not good at work related to establishing trust. Machines have no empathy, but people do. The soft skills in procurement are becoming ever more important because the machines are taking over the harder skills. That is leading to a transformation in the type of work that procurement is doing.
“It’s also leading to a transformation in the interest levels that graduates emerging from universities have for this sphere. When it used to be that they were first introduced to a legacy system and told that this is what they needed to use to do their job. Young workers are coming with higher expectations about software and rightfully so, and enterprises are reacting to the need to satisfy the technology requirements of younger recruits now, which is a very good thing. It’s accelerating that digital transformation that we are seeing.”
The next step
Looking ahead, Holland is full of positivity for the future and believes decision-making in procurement is easier than it’s ever been. He believes tomorrow is “very bright” as procurement enters an era with intelligent software agents which can automate workflows and make the human workday more efficient. “There’s a whole new range of possibilities where creative and thoughtful planning will provide a competitive advantage for organisations and procurement can be far more influential in how successful their companies can be. It’s a game-changer.”
At DPW Amsterdam 2023, Danny Thompson, Chief Product Officer at apexanalytix, tells us about the art of developing trust amid significant innovation in procurement.
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Trust.
Apexanalytix needs to build quite a bit of it. As a company which protects $9 trillion in spend and prevents or recovers more than $9 billion in overpayments annually, its client portals actively support over eight and a half million suppliers.
Indeed, apex has revolutionised recovery audit with advanced analytics and the introduction of first strike overpayment and fraud prevention software. Today, apex is a leading global force in supplier management innovation with apexportal and smartvm, now the most widely used supplier onboarding, compliant master data management, and comprehensive third-party risk management solution in global procure to pay. With over 250 clients in the Fortune 1000 and Global 2000, apex is dedicated to providing companies and their suppliers with the ultimate supplier management experience. A big part of that experience is based on building trusted supplier-buyer relationships.
Danny Thompson is the Chief Product Officer at apexanalytix and has been with the organisation since July 2015. Now in his third role with the company in eight years, Thompson reflects on his journey with the organisation with positivity. “I came in as a product manager working on our portal product,” he tells us. “And after a short time, because I was a former customer, at Pfizer and International Paper Company, and was an internal voice of the customer, they ended up having me drive messaging with marketing. Recently, we hired a great new leader of marketing who has taken that over fully so I’m dedicated full time to product again. So it’s been a great experience for me.”
Gen AI surge
One of the hottest topics on the CPO agenda in recent months has been ChatGPT. Wherever you go within the industry, you’ll likely find a conversation being had about the technology’s possibilities, as well as perhaps its limitations or challenges – and Thompson is equally keen to explore.
Danny Thompson speaks with CPOstrategy at DPW Amsterdam 2023
“There is certainly a lot of attention being paid to gen AI in the industry, and within our company as well,” says Thompson. “I think it’s because of the shock value of ChatGPT hitting the world and people are really stunned by its ability to interpret natural language and come back with really good information in response to questions that are being lobbed at it. There’s a lot of excitement around what it could do as well as what other generative AI solutions can do to help solve procurement, supplier risk and supplier information problems. We are making progress, and have introduced some generative AI functions, but Generative AI presents some challenges right off the bat that we are working hard to solve as quickly as we can.”
One of these issues is the hallucination problem that is being questioned within the space. This is where AI tools like ChatGPT lack factual support for some of the information provided. “There’s a statement at the bottom of the page which states you can’t rely on results being factual,” Thompson affirms. “When it comes to supplier information and risk management, that’s a problem.”
Managing risk
And it is such an important sticking point that Thompson stresses when it comes to supplier risk information, it is about being careful that the usage of generative AI, in its current state, is used for guidance rather than fact-finding. “Another challenge is around leakage of sensitive information combined with contamination of sensitive or important information,” reveals Thompson. “We have a database of golden records for 90 million suppliers who are doing business with Fortune 1000 and Global 2000 companies. That is the best information we’ve been able to accumulate about suppliers and their relationships as a supplier to large companies. Some of that data is publicly available and some of it is more sensitive. We want to make sure we’re not loading that sensitive information into a generative AI function that might allow random people to access that information. We’ve got to be careful about that leakage of data.”
The opposite is true, as well. Thompson reveals that his team asked the generative AI-tailored questions which they assumed would be pulled from their own database. The findings were less than ideal. “The responses had been contaminated with public information which was full of inaccurate data,” he tells us. “We’re figuring out how to draw those boundaries, as well—to protect sensitive data while also preventing contamination.”
Trust first
This showcases the importance of trust once again to an organisation like apex. The companies it serves are moving significant sums of money around and the potential risks are sizeable. For Thompson, there can be no greater responsibility when using AI tools. “The data must be either highly accurate or at least they understand the degree to which it’s not,” he says. “If you don’t understand that level of trust you can have in it, then you shouldn’t be using it yet.”
With an unprecedented amount of technological innovation at procurement’s fingertips, the industry is evolving at a rapid pace. It’s placed at a unique moment with digital transformation being swept up throughout the space. While this brings obvious advantages such as time and cost savings, it also means increased cybersecurity threats. “There are more threats coming in as a result of AI,” says Thompson.
“One of the biggest challenges our clients us our solutions to solve for is fraudsters trying to take over a supplier’s account and intercept their payments by submitting fraudulent account change requests. One of the typical ways companies catch these is very often the request is coming through very poorly formatted emails with bad grammar. But what we’re seeing is the bad guys have started using generative AI to create really convincing bank account change requests so there are increased threats to be aware of. But this increase in the availability of information is also make easier the whole process of knowing your supplier and knowing the risks associated with them. And Generative AI is going to allow you to quickly get help to understand how to mitigate a given risk much faster and easier than it’s ever been before.”
At DPW Amsterdam 2023, Daniel Barnes, Community Manager at Gatekeeper, discusses the evolution of the procurement function and the influence tools such as generative AI are having in the space.
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“It might sound harsh, but people just won’t have a job if they don’t change.”
For Daniel Barnes, Community Manager at Gatekeeper, his thoughts are clear. Technology is here and it’ll only get more advanced.
Barnes has been the Community Manager at Gatekeeper since June 2022. The company he works for is a next-generation Vendor & Contract Lifecycle Management (VCLM) platform that was born in the cloud and works on any device. Gatekeeper has a strong focus on collaboration, clear actionable data, obligation and compliance tracking, email alerts and most of all ease of use. The firm has a ‘zero training’ mantra driving a fanatical focus on usability that results in an application internal stakeholders and suppliers can use effortlessly.
The Gatekeeper Platform provides a suite of vendor management, contract management, kanban workflow, collaboration and reporting features. Customers can extend the functionality of Gatekeeper with additional modules to meet their required use cases, as well as integrating with over 220 third-party solutions.
Technology potential
Since joining the company, a key consideration for both Barnes and Gatekeeper has been the influence of generative AI. However, Barnes explains that while the potential of the technology is exciting, they are being strategic about how to leverage AI.
“We’re probably taking it a little bit more of a slower approach,” he tells us. “We have a contract summary function at the moment which means for any contract we summarise it so that anyone in the business can get a really quick understanding of that contract. We’re also exploring whether we’re going to bring in a Gatekeeper bot that allows us to get insights analysis in a very conversational manner. One thing we really believe is that contract and vendors aren’t just for procurement or legal. Everyone in the business has to contribute to make these successful. A lot of the issues, data and information behind these are legally complex. Procurement language is difficult when you’re talking about RFPs or you’re talking about risk. Someone in the business doesn’t care about that, they just want to get whatever they have brought, they want the service, they want it performed, they want it on time and they want a good relationship. We’re trying to figure out how to use AI like that.”
CPOstrategy speaking with Daniel Barnes at DPW Amsterdam 2023
The rise of Gen AI
Generative AI isn’t exactly new. In fact, it actually dates back to the 1960s. Among the first functioning examples was the ELIZA chatbot which was created in 1961 by British scientist Joseph Weizenbaum. It was the first talking computer program that could communicate with a human through natural language. But, given the introduction of a far more advanced model – ChatGPT – gen AI is the name on not only procurement’s lips but the wider world too. Barnes questions what you need to make AI successful at implementation.
“You get data and most procurement and legal teams have an issue with data because they don’t have it in one place,” he explains. “We fundamentally believe in this three-pillar approach. It’s to restore visibility and to have all your vendors and their contracts in one place. From there, you take control of that by digitalising all of your processes. Once they’re digital, you can track and automate them from various data points that you have in your vendor and contract records. That allows you to safeguard compliance, whether that’s regulatory, legislative or by contractual obligations. They’re all different forms of compliance that you need to track. Most teams are really struggling just with those. When we talk about gen AI, the reality is most teams are still so far away from even being able to realise those benefits. Today, gen AI looks powerful once you have the pillars in place and I’m really excited about its future.”
Procurement’s evolution
Indeed, procurement stands at a unique moment. With some in the space used to operating a certain way through legacy systems and others embracing a digital transformation and the technological innovation that brings with it, Barnes recognises that people who are reluctant to change could be left behind. “I think there has to be a willingness to change,” he tells us. “I’ve been talking about change in procurement since 2019, and I would say 80% of people who are engaged are hesitant and don’t want to change. That’s a really big concern. But my biggest worry is they don’t want to know in the first place. One of my fears is you’ve got so many solutions that genuinely can eliminate work in procurement teams. I’m worried for those people who don’t want to change because what are they doing when their work’s automated?”
The future
Barnes, who also hosts the World of Procurement podcast and YouTube channel, believes there is a current cultural divide in procurement and the industry is at a make-or-break moment. He affirms procurement will go “one of two ways”.
“You’ve got people who are stuck in the past that are archaic with what they’re doing. Then there’s those who are really pushing the profession forward,” he explains. “I see it as a moment in time where procurement kind of goes one in two ways. It’s extinct in terms of how it used to be. There’s solutions that I’ve seen which have automated workflows and are doing the work that traditional procurement people used to do. We can pull people along, but there has to be an initial willingness to change too or it’s not going to happen. That’s why I think it’s great to see people that are showing that willingness. They may not have the answers, but they want to learn.”
Last month, CPOstrategy travelled to DPW Amsterdam. Here are five takeaways from the biggest and most influential tech event in procurement.
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1. Digital transformation isn’t just about tech
David Rogers, author of The Digital Transformation Roadmap, delivered an important keynote that highlighted that digital transformation doesn’t just mean technology. He told the audience, “The hard part about transforming organisations isn’t about tech. It’s about making the technology work for your customers and for your business.”
He expressed the importance of delivering value in your organisation while also describing the art of rethinking business to define what growth opportunities there are by thinking differently about customers, competition, data, innovation and value. Rogers provided guidance to the audience and unveiled a five-step digital transformation roadmap. These are: define a shared vision, pick the problems that matter most, validate new ventures, manage growth at scale and grow tech, talent and culture. Rogers explained to the attendees gathered before him, “ChatGPT is not your strategy. Fall in love with the problem and not the solution.”
2. Building connections
DPW welcomed more than 1,250 procurement professionals over the two days while also hosting more than 120 procuretech solutions. New digital cards which were worn as lanyards around an attendees’ neck allowed for instant connections to be made and eradicated faffing about for contact details or losing important business cards. The buzz and hum of chatter in the air across the conference was audible. A walk around the two expo halls, both kitted out with dozens of tech solutions each offering something different to engage with ensured plenty of choice of destination. Many booths provided gifts which added a personal touch, such as Gatekeeper’s dragon or Omnea’s socks.
While the virtual only events in years gone by during the Covid period served a purpose, nothing could beat the sense of community and valuable face-to-face meetings that attendees were provided with.
3. Gen AI is a game-changer
If you were a fly on the wall in most conversations, a common theme would appear more often than not – generative AI. Indeed, the technology dominated thoughts at DPW Amsterdam 2023 which has only been accelerated given the ever-increasing influence of OpenAI’s ChatGPT which only launched a year ago. But gen AI isn’t only about chatbots, AI adoption was prevalent across the floor with each procuretech ecosystem showcasing its own spin on new technology as well as fresh and innovative ways of offering services.
Generative AI is firmly on the tips of people’s tongues. While its possibilities appear limitless, its rise to prominence has led and will continue to cause debate about how far its capabilities can reach in its current form. Expect that to continue.
4. People are still the secret sauce
As exciting as new technology is, without good people your operations are doomed to fail. While there have been concerns from some sections of the space that robots are here to replace humans, DPW Amsterdam’s conversation revolved around making tech work for us and about using technology as a tool to make day-to-day life easier.
Ultimately, even chatbots require a human at the other end to make the correct inputs otherwise all the end user receives is data without direction. While discussions were had as to whether AI can help plug talent gaps, all it means is that boring, outdated data-entry tasks will be taken over by machines and allow the next generation of the workforce to focus on greater value-add work that will lead to increased efficiency for themselves and the company they work for.
5. Now is the greatest time to be in procurement
In comedian and host of DPW Amsterdam Andrew Moskos’ opening speech he reflected on procurement’s evolution and transformation. “Procurement used to be boring but now we’re all rockstars. We run the company, we’re in the c-suite, we run ESG, sustainability, risk, and 80% of the spend of a company goes through us.” It was quite the welcome – and set the tone for the subsequent two days.
With an unprecedented amount of innovation at a practitioner’s fingertips in today’s ever-evolving and transformative world, the future is what procurement makes it. Gone are the days of procurement being some boring back-office function hidden out of sight, the industry has had a sudden injection of life via digitalisation.
Matthias Gutzmann, Founder of DPW, exclusively told us: “It’s the best time to be in procurement. It’s the most exciting era to be in procurement and supply chain so it’s an amazing time that we need to celebrate and get loud about it.”
Michael van Keulen, CPO at Coupa, discusses the emergence of gen AI and whether procurement is in a golden era amid technology transformation.
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Generative AI, or gen AI for short, is one of the hottest topics in procurement today.
Indeed, the introduction of ChatGPT has only accelerated its prominence into wider consumption. Gen AI allows its users to quickly generate new content based on inputs. These models could include text, images, sounds, animation, 3D models or other types of data. One of its biggest draws is the ability to understand different learning approaches and allows organisations to move quickly to leverage large quantities of data.
But despite obvious benefits such as time and cost, Michael van Keulen, Chief Procurement Officer at Coupa, stresses caution should be used particularly when it comes to valuable tasks. “If you look at ChatGPT, it’s fine if you’re looking for recommendations for something low-risk. I need something for my wife’s birthday next week, you input three things that she loves and ask it to help. It’s great,” he tells us. “But it comes from data sources on the web that aren’t always governed, controlled or trustworthy. It’s whatever is out there. What about the algorithms that come with ChatGPT? I don’t know what’s influencing the search criteria. On Google, if you pay you are at the top of the search bar. But I don’t know what ChatGPT is governed by.”
Van Keulen is a passionate and seasoned procurement evangelist with a comprehensive track record of driving value through business transformation at global companies. Since March 2020, van Keulen has been the Chief Procurement Officer at Coupa, a leader in cloud-based business spend management software, where he is responsible for driving best-in-class procurement practices across the company, supporting business development and being a source for peers looking to elevate and transform procurement. Van Keulen is especially passionate about building teams, driving value, organisational transformation, CSR, and diversity and inclusion.
CPOstrategy speaks with Michael van Keulen, CPO at Coupa, at DPW Amsterdam
The rise of AI
In the case of Coupa, the firm has been conducting its community.ai platform for the past decade which has been at the heart of the company’s strategy. Community.ai analyses real-time spend data, applies AI to compare company’s metrics against others and offers ways for organisations to be more efficient, profitable and sustainable. Van Keulen believes that the biggest difference between what Coupa offers and what gen AI provides is the trust factor.
“At Coupa, we measure information based on real spend, data and suppliers that are doing real business together – the internet isn’t doing that,” he discusses. “We’ve got nearly $5 trillion of spend under management from real transactions and real suppliers. That number continues to grow as customers and suppliers join the Coupa community. Pretty much all of our customers have trusted us with access to their sensitive data which we anonymize and then share back with the entire Community. As a member of the community I know I can trust it because it comes from a source that is reliable, sanitised, relevant and well-governed. As well, we have certain standards and algorithms that we built-in all based on outcomes that our customers are looking to receive.”
Van Keulen believes there is a misconception in procurement that ready-made data sets are out there that are capable of meeting customer requirements. “The truth is most tech companies out there today don’t have access to customer data because their customers won’t let that happen,” he explains. “But at Coupa, our customers have already given us access to their data. This means we now have a real, reliable, accessible, governed and structured data set that has been anonymized. When we then apply AI, you actually get prescriptions that are meaningful and relevant to procurement. I think the misconception is that this type of data set is easily found, but it’s not, we’ve been building this for over 10 years. There’s no other company out there that has the same level of spend data as Coupa.
“It’s the same as Google Maps. The only way that Google Maps works is because everybody uses it. It allows me to get from A to B to C to D, back to A in the quickest time and with the least amount of disruption. The only way that that works is because we’re all using it. And I look at AI no differently in spend as I do with AI in my private life.”
Michael van Keulen, CPO at Coupa
Bridging the talent gap via AI
The need for fresh talent in procurement has never been so important. Procurement, like many industries, is lacking a defined path to welcome the next generation of talent, a feeling which has only been amplified on the back of COVID-19. This means the need to find ways to meet that shortage head-on, whether that’s through education, an industry rebrand or via AI. In van Keulen’s mind, he believes developing the correct tech landscape could hold the key.
“I’ve actually said this for a while,” he explains. “For too long, we brought in super smart people and then we would let them work in some antiquated old-school ERP, in Excel and run RFPs in emails. Nobody wants that, especially the current workforce because they’re used to and have been raised with Amazon, they all have TikTok accounts and are used to all these other e-commerce websites which have very seamless systems. If they come into the workforce and I let them work in some outdated ERP environment with email as the means of communication, that talent is either going to leave procurement because they think it’s boring or they’re just going to leave the overall organisation and work somewhere else. We don’t want that to happen, so you need to have the right tech landscape in place.”
Once the strategy is formed, van Keulen explains that is where the fun of procurement begins. “Then procurement’s the coolest function in the world and we will close the talent gap,” he says. “The talent is out there, they’re just not coming to procurement. They’ll go to finance, marketing, legal or IT instead. If you execute procurement properly, it’s the best because you’re right at the heart of everything. But you need the right people, operating model and operationalisation of your procurement process as well as the right technology. You need all of those elements or it’s never going to work.”
The greatest time in procurement?
Given the disruptive nature of global challenges and its ripple effect on procurement and the supply chain over the past few years, organisations are increasingly waking up to the importance of developing greater strategic relationships with suppliers. COVID-19, inflation issues, natural disasters and wars have meant today’s CPOs have been forced to firefight and think more strategically than ever before. Van Keulen recognises the turbulent nature of recent years and believes major transformation is already underway in procurement. “Historically most executives in any company would pay very little attention to their supply chain,” he reveals. “Due to recent events, companies are realising that they need to be closer to their suppliers. Perhaps in the past, the CEO would only spend a small fraction of their time with suppliers but those metrics are changing rapidly.”
As the ground lies in procurement, some sections of the industry now believe it is the industry’s greatest era given the level of possibilities. Widely considered a back-office function tucked in a corner and working in a silo, procurement is a totally different beast in today’s world. For van Keulen, he likes the variety.
“I wear so many different hats every single day,” he explains. “I always say sometimes I’m an accountant, others I’m an environmentalist. Sometimes I’m the treasurer or a finance person, but I’m also sometimes a psychiatrist. Sometimes I’m a doctor, a nurse, a lawyer, a judge, an environmentalist and yes even a wizard. I never know what my day looks like. I can plan it, but something may happen where everything goes out the window. Procurement will always be going through some type of disruption and it’s about how you drive the competitive edge and how you drive value despite that. Procurement really is the best gig in the world and it’s great that more people have started to see that now too.”
Matthias Gutzmann, Founder of DPW Amsterdam, discusses the conference’s rise to prominence, reflects on challenges and reveals future plans.
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“Our challenge is always around asking ourselves how can we make DPW Amsterdam better every year?”
It’s fair to say Matthias Gutzmann, Founder and CEO of DPW Amsterdam, doesn’t believe in standing still and resting on his laurels.
Since launching DPW in 2019, the conference has grown from strength to strength and is now widely regarded as the biggest and most influential tech event in procurement and supply chain on the planet. And despite welcoming over 1,250 procurement professionals with more than 2,500 virtual attendees watching along at home in its 2023 edition in October, Gutzmann is eyeing continuous improvement.
In 2018, Gutzmann was researching procurement conferences to showcase his then-employer, Vizibl, a startup. He was frustrated by the options. The existing conferences were prohibitively expensive for a limited startup budget, lacked investors, and failed to attract an audience of startup businesses, which is critical for the development of digital capabilities and to drive innovation. Identifying this gap in the market, Gutzmann left his job in New York, moved into his parents’ house in Germany, and invested his entire personal savings to launch DPW Amsterdam.
“As soon as one conference finishes, we’re already thinking about the next one,” he explains. “We all sit down and think about how we can improve the experience and what new technologies we can bring in next time. It really is a 12-month process to bring it all together.”
Bringing DPW to life
Held at the former stock exchange building, the Beurs van Berlage in Amsterdam, this year’s theme was “Make Tech Work” which focused on turning digital aspirations into a reality. There was a deep dive into discussions surrounding AI and machine learning in procurement, digital transformation strategies, sustainable procurement, supplier collaboration, risk management as well as innovation and disruption. The two-day event was centred on ensuring the vision of digital procurement happens now and how organisations can be challenged to deliver results instantly instead of only concepts and theories.
Despite significant success, Gutzmann maintains that there are some difficult aspects to get right in order to make the magic happen on the day. DPW Amsterdam builds client booths themselves instead of allowing sponsors to bring them themselves. “That’s a massive undertaking to get this done because we need all the design elements from the sponsors,” he says. “It’s that quality standard but we know it comes with more work instead of just allowing people to bring their own stuff. We have Simone Heeremans, Head of Production, who is amazing and oversees logistics such as catering to the suppliers.
“There is also the sales part of the conference which is selling the tickets and sponsorships. We have created this pull for the conference that we didn’t need to build a proper sales team around it. That said, there’s always a stress factor to get the numbers we want every year and grow it. So far, so good.”
The uniqueness of the conference, the problem it solves, and the timing of the launch in 2019 were the basis for today’s success and fast growth.
WHAT MAKES DPW AMSTERDAM SO UNIQUE?
Matthias Gutzmann:
1. THE AUDIENCE
Traditional procurement conferences only attract procurement professionals. But, DPW Amsterdam recognised the need for breaking this silo and for more collaboration in order to harness the potential of new digital technology, targeting an audience of procurement professionals, business leaders, suppliers, startups, data scientists, investors, and young talents No other procurement conference brings this variety of people together.
2. WORLD’S BIGGEST STAGE FOR PROCUREMENT STARTUPS
DPW Amsterdam is built to bring startups into the procurement ecosystem. In 2023, we displayed over 50 startups, giving delegates a unique insight into procurement innovation.
3. ATTENDEE EXPERIENCE I always thought procurement events felt boring – and I felt lost in a sea of guys wearing suits and ties. So, at DPW, our goal is to make procurement cool and sexy. Not an easy feat, I know. Our dress code at DPW Amsterdam is strictly “startup casual.” You’ll see t-shirts, hoodies, and sneakers from attendees, exhibitors, sponsors, and speakers alike. This dress code embodies our entrepreneurial spirit. But it also breaks down barriers– and levels the playing field between big-shot enterprise CPOs and 20-something startup founders.
Better than ever
A large focus for Gutzmann and his team has been tweaking the formula of the virtual experience. Due to the impact of COVID-19, DPW was forced to cancel its 2020 conference before offering a virtual-only event in 2021. The experience, although different, was praised for its ‘TV feel’ and still created a buzz for those watching at home. However, with day-to-day life returning to a new normal, DPW Amsterdam reverted to an in-person conference in 2022 but offered a hybrid solution for those keen to watch the action from afar. “There wasn’t really anything special about it,” he discusses. “If you run an eight-hour live stream from only one stage, you aren’t likely to keep people watching. That’s why this year we asked ourselves: what can we do to increase the virtual experience? So we did just that.”
This year, Gutzmann and his team set about creating a pop-up broadcast studio to generate a television feel with live coverage from podcaster and host of Let’s Talk Supply Chain Sarah Barnes-Humphrey, as well as a reporter conducting interviews on the expo floor. “Now we’ve got cameras moving around which helps bring the whole conference to life,” explains Gutzmann. “We’ve really ramped it up this year and turned it into a large production.”
Up until this point, DPW has run solely in Amsterdam which Gutzmann believes has acted as his organisation’s competitive advantage. It is this approach that has enabled DPW to allow it to reach the level it is today. Hosted at the Beurs van Berlage, Gutzmann is full of admiration for the historic building which was built in 1896. According to Gutzmann, he believes it is what sets DPW Amsterdam apart from other conferences operating in the space.
“We love it here, it’s unique and I feel it’s a key part of the experience,” he says. “But we’re becoming bigger and we might need to build something completely from scratch. Every year, we think about how we can do things differently. I don’t know if bigger is necessarily better, it’s also about the quality of the solutions we bring in. My goal is to map out the entire end-to-end tech ecosystem and bring in that diversity of solutions.”
Bright future
Procurement, like many industries, is suffering from a talent shortage. The need to find ways to plug that gap, whether that’s through education, industry rebrand or AI, has never been so crucial. With an eye on the future, Gutzmann believes in procurement’s workforce of tomorrow and gave out around 100 free student passes this year. “When we talk to CPOs everyone’s talking about talent shortages so we understand the need to bring in that next generation and show them that procurement could be the way forward for them,” he says. “I think in the context of digital, who better to do digital than the next generation? They are more tech savvy so we need them and it’s a great opportunity for both sides because they can meet CPOs and it’s also becoming a place for recruitment too. We are doubling down on young talent 100% and it’s a win-win.”
Gutzmann is candid about the future of DPW Amsterdam and is always open to feedback while striving for continuous improvement. He believes in the value of innovation and shaking things up in order to best meet attendee’s needs. “I always think we can always bring in new speakers, but this year’s agenda was incredibly strong,” he discusses. “It’s really about listening to the people. Ultimately how can we be more relevant around the solutions as well here? How can we better matchmake people? I was wondering about how we can work pre-event with some of the corporate attendees that are coming to the conference around mapping out their challenges to then have more meaningful matchmaking at the event because it’s an innovation showcase here as well. There’s more value to be had but we know that also comes with more work. There’s always more we can think about.”
With an unprecedented amount of technology at procurement’s fingertips today, Gutzmann is in no uncertain terms about what the next chapter of the space holds. “It’s the best time to be in procurement,” he explains. “It’s the most exciting era to be in procurement and supply chain. We need to get loud about it and celebrate that fact.”
CPOstrategy examines why replacing legacy systems could hold the key in procurement to achieve long-term success.
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As technology evolves, modernising legacy systems in procurement becomes essential.
Change management is never straightforward or linear. Indeed, legacy systems are familiar to an organisation and the workforce might be reluctant to embrace a new way of working, or at least at the very beginning.
But how much damage is clinging to outdated processes doing to an organisation?
Replacing legacy systems
“For many organisations, legacy systems are seen as holding back the business initiatives and business processes that rely on them,” according to Stefan Van Der Zijden, VP Analyst at Gartner. “When a tipping point is reached, application leaders must look to application modernisation to help remove the obstacles.”
People often like their routines and a preferred methodology of how something is completed. This can lead to pushback from the workforce about the purpose of ‘fixing something if it isn’t broken.’ And the point of change for the sake of change is a valid one, up until an alternative which is going to demonstrate tangible benefits. The truth is that most legacy systems don’t allow for growth with older technology often not able to interact with newer systems and processes. In ‘7 options to modernise legacy systems’, Gartner pointed out six main drivers of application modernisation with three from a business sense and three from an IT perspective.
These are business fit, value and agility as well as cost, complexity and risk. If a legacy application isn’t meeting new requirements needed by a digital business, it needs to be modernised to fit properly and should be enhanced to offer greater value to the business. Without agility, a digital business will struggle to keep pace with the latest trends or craze and put the organisation at risk of falling behind competitors. Whereas from an IT side, if the total cost of ownership is too high or if the technology is too difficult to use, then modernising could be vital.
Overcoming resistance to change
Ultimately, change management is an essential component of any Chief Procurement Officer’s role. It can range from a small swap, such as a change of supplier, to wide-scale amendments such as altering the way goods and services are acquired or implementing a procurement or software transformation. According to data from group purchasing firm Una, 70% of change management efforts fail. In order to combat this, there are three key steps to overcoming resistance to change. These are engagement, managing resistance and not neglecting training.
Market disruptions, evolving customer demands and the necessity for a digital landscape has forced businesses’ hands. They are now faced with the task of completing legacy modernisation as a matter of urgency to deliver innovative products and services quickly and efficiently. Failure to do so could lead to being reactive instead of proactive – a risk that in today’s fast paced and ever-changing world that should be taken with caution.
Erik Oberländer (DE), Manager, Procurement Advisory, PwC, discusses how to combat inflation and maximise savings through game theory.
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Material scarcity, rising inflation, exploding energy prices, and an unstable geopolitical situation pose procurement challenges like never before.
The right negotiation strategy is not only essential for companies to achieve cost savings but is also absolutely vital for survival.
In the current market situation, securing material availability often takes top priority. In this case, negotiations with suppliers must be based on partnership and close cooperation. On the other hand, if contract volumes have been awarded in competition between multiple suppliers with a high degree of shiftability, the use of game theory should be considered.
But what does the game-theoretical negotiation approach look like? In a classic bilateral negotiation, the focus is on convincing the other party with the right strategy and tactics, a convincing storyline, and compelling arguments for one’s own position. In contrast, the game-theoretical approach involves developing a bidding mechanism that maximises the competitive dynamics between suppliers. The design of the bidding mechanisms is based on insights from numerous scientific theories.
In fact, since the 1990s, several Nobel Prizes in Economics have awarded in the field of game theory. This scientific approach opens up new perspectives in complex negotiations and makes it possible to forecast how people tend to behave. In strategic procurement, many companies use game theory in bids and negotiations. After realising unimaginable savings results, procurement teams are electrified and absolutely convinced of the effectiveness of game theory.
Game theory in procurement
The two most relevant and commonly used bidding mechanisms in procurement auctions are the Dutch (ascending bid increments) and English auction (descending bid increments). In combination with other elements, such as qualification and ranking rounds, they can maximise competitive pressure through credible market transparency.
However, when developing any game-theory-optimised bidding mechanism, many questions should be asked. For example: How should the lots be formed to create the greatest possible competitive pressure? What decision will a supplier make if it is assumed that they want to maximise their own benefit – and how do you optimise the bidding design to take this into account? With what bidding design can you put the best suppliers under pressure?
These criteria are met:
Game theory is fascinating – with demonstrable successes that cannot be achieved through classic negotiations, with the consistency and “purity” of its systematics, and with the surprising realisation that some game-theoretical approaches have been intuitively and unconsciously used to increase strategic competition and minimise risk aversion.
Many procurement teams believe this approach only applies to certain categories of goods. This is a misconception. Generally, only three criteria will be met. We call them the 3Cs:
•Comparability: All relevant decision parameters will be taken into account and is monetised through a bonus-malus evaluation. The offers of participating suppliers are comparable, and award decision is based on total cost of ownership.
•Commitment: The award decision is completely open. All participating suppliers are released by the department, and all cross-functions can win the contract on their own. In addition, it is clearly communicated that there will be no renegotiations or vetoes in further procurement committees.
•Competition: There must be more than one supplier interested in the scope of the award. Only this way can a competitive situation be created that is maximised with the help of a tailored award design. The right incentives for suppliers must be identified, and the appropriate signals set.
Possibly, not all of these criteria are met at the beginning of the project, but they can be developed together in cross-functional teams (consisting of colleagues from procurement, engineering, quality, logistics, and sales).
How the award is carried out:
Once the 3Cs are met, suppliers must be prepared for the award event. In transparent communication, the mechanism and rules are explained, and any uncertainties are clarified. No supplier should be unsettled, because only if the supplier has fully understood the mechanism, can he behave optimally, and the award mechanism can achieve its full effect.
The award day is then carried out with suppliers on-site or virtually via eAuction tools. Especially for larger award volumes, it is advantageous to have suppliers on-site, as signals are also sent to suppliers between rounds. In addition, you can literally feel the tension level and adjust the bid steps accordingly.
Virtual implementation facilitates the scaling of the approach with multiple providers. Smaller award volumes are carried out quickly and without great coordination effort. The selection of the appropriate tool provider is crucial. Not all tools can map more complex award mechanisms and adapts to specific individual starting situations.
Here are the first steps:
It must always be considered that game theory is a complex science and cannot be simply applied. The preparation time for the design of award strategies is often underestimated and set too low. To become a good game theorist, it is not enough to attend a weekend course or read a book. In fact, the unprofessional application of game theory can do more harm than good. Therefore, it is strongly recommended to be accompanied by a coach during the first use – only with this expertise are amazing negotiation results possible.
It is not always easy to delegate final decision-making authority to a mechanism, but it is worth it. Successful awards can ignite the fire in procurement teams. It is important to generate maximum enthusiasm, support cross-functional cooperation, and institutionalise negotiating skills in procurement teams.
By Erik Oberländer (DE), Manager, Procurement Advisory, PwC
CPOstrategy compiles five ways that ChatGPT can transform procurement amid the rise of generative AI in the space.
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ChatGPT is seen by many as a catalyst for the next wave of technology transformation.
The technology, which was developed by OpenAI, has quickly become the buzzword of the year and one of the hottest topics on the c-suite agenda.
And its promise extends to procurement – an industry that relies heavily on the need for achieving efficiency, transparency and cost savings. Having already made its mark on a variety of industries already, procurement hopes that by embracing ChatGPT it will allow teams to make greater strategic decision-making to drive long-term value.
Here are five ways ChatGPT can transform procurement.
1. Rapid research
Through ChatGPT, time-consuming and cumbersome tasks such as research can now be completed almost instantly. Generative AI tools such as ChatGPT can analyse significant amounts of data and provide insights on market fluctuations while also searching for new suppliers, products and capabilities to secure better deals.
2. Automated procurement processes
ChatGPT can be used to discover patterns and identify trends which will allow procurement teams to make data-driven forecasts. Through leveraging predictive analytics, organisations can anticipate demand, optimise inventory levels and manage their supply chain more effectively.
3. Easier communication with suppliers
Tools such as ChatGPT can improve supplier performance tracking through automating data collection and analysis. Its focus on cooperation and transparency throughout the procurement process allows for stronger supplier relationships and more innovative thinking.
4. Enhanced risk management
A major benefit of generative AI in procurement is improved risk management and the ability to foresee potential dangers. Through identifying potential hazards such as financial instability among suppliers or non-compliance with procurement processes, ChatGPT can help businesses manage and reduce risks.
5. Cost savings and increased efficiency
ChatGPT can help organisations to save costs by automating operations, increasing stakeholder participation and allowing real-time data analysis. By reducing the amount of time and effort for tasks like evaluating bids and selecting a vendor, ChatGPT could shake up the procurement process immeasurably.
