Accenture calls for action on the digital procurement revolution
Kristin Ruehle, Accenture’s Global Procurement Business Process Services Lead, talks us through the company’s roadmap for the ‘The Next-Generation Digital Procurement’
Accenture is a company passionate about digital procurement.
In a recent report, the global management consultancy made no bones about the disappointment it feels at what it perceives as an almost industry-wide failure to embrace the technologies available for digitising procurement. It states that “procurement organisation has been largely left behind in the digital revolution. That needs to change.”
The report looks at how bots can be used to automate and streamline manual or routine procurement tasks, how making use of available expertise such as speaking to buying agents and advisors will help people make the best purchasing decisions and deliver optimal value to the business.
Accenture specialises in helping procurement companies to digitise their business operations, and the report shows confidence that the familiar frustrations surrounding procurement today will give way to a simple and intuitive buying experience for users to enthusiastically embrace.
Kristin Ruehle, Global Procurement Business Process Services Lead at Accenture, happily outlined the reasons behind the report and why she believes the future of procurement is “truly digital”.
“We published the report to help cut through industry buzzwords to help businesses understand how next-generation capabilities can transform their procurement organisations,” she explains.
“Businesses are not standing still. They are transforming in unsuspecting ways by selling new and different products and services and delighting their existing client base while creating relationships with entirely new markets and new buyers.
“Procurement is a fertile ground for growth in the digital age – but not in its current form. By digitising procurement and operational capabilities and enabling new digital business models, any company is capable of cutting new ground and making the wise pivots necessary to ultimately become a fully digital business.
“The benefits of digital procurement are clear. Firstly, digital improves the buying experience. Through digital, procurement organisations can create an intuitive buying experience for employees, increasing control and ensuring corporate spend is going to preferred suppliers.
“Secondly, digital procurement enables a data-centric approach to procurement. By looking beyond basic data, such as what was purchased and at what price, and seeking data from outside the organisation, procurement gains contextual insight into buying processes which can improve future decision-making. Procurement teams able to collect data in this way can also use it as fuel for emerging technologies such as AI, natural language processing, analytics and bots.
“To help customers transform to digital procurement, Accenture has made significant investments to enhance our internal capabilities. This includes investments in a proprietary digital platform that captures project data; applications that turn data into actionable insights; advanced automation and RPA (robotic process automation) bots that efficiently connect our experts and execute process steps; and analytics that uncover new insights from outside the organisation to inform decisions.
“As the report sets out, it’s difficult to achieve a successful transformation if you only focus on piecemeal solutions, such as analytics or AI. The key is to look at the full picture and leverage technologies in a unified way.”
In the report, Accenture has outlined its own vision for the future, which it calls the ‘The Next Generation Digital Procurement,’ based on 18 years’ experience of working across hundreds of clients in all industries and regions.
Research figures from the Hackett Group indicate that 84% of procurement organisations believe digital transformation will fundamentally change the way their services are delivered over the next three to five years, while Accenture’s own research has revealed that 85% of executives plan to invest in AI over the next three years, with the technology set to become a critical ingredient of digital procurement.
AI has the potential to boost productivity by up to 40% by eliminating repetitive tasks and supporting people in complex and creative problem-solving. Ruehle is confident that by embracing digital procurement as well as the other new technologies available, the supply chain industry as a whole can thrive.
“Digital procurement will fundamentally change the nature of the supply chain industry,” she asserts. “By improving how goods and services are purchased and increasing insights into spend, digital processes and technologies will help supply chain organisations better mitigate risk and meet compliance requirements.
“Additionally, the insights gained through digital procurement will support corporate objectives and sustainability goals and fuel product and process innovation. From an end-user experience perspective, supply chain professionals can expect to benefit from a more intuitive buying experience and accelerated buying processes.
“In a nutshell, digital procurement means more efficient, effective and transparent procurement processes that are based squarely on big data insights.”
One of the key facets of a fully-digitised procurement organisation is eProcurement software, solutions which support the purchase and payment of supplies, work and services through the internet.
“There are several benefits that stem from using eProcurement software,” Ruehle continues. “From improving visibility into spend, increasing productivity and accelerating transactions, to standardising the buying process, reducing errors, and increasing compliance. As such, eProcurement software is a core foundation of digital procurement, but is not sufficient in itself to truly transform procurement functions.
“Often, these software solutions are focused on enabling a process and can feel cumbersome for users outside of procurement and they lack inherent AI capabilities. The Next Generation Digital Procurement demands tools to work with and around eProcurement, especially when it comes to integrating data silos across the organisation to improve analytics and fuel automation.
“We advise businesses to leverage eProcurement solutions to provide appropriate guidance on the execution of the procurement process. This should include guidance on the supplier, price and channel.
“Businesses should also leverage the solution to ensure control and visibility. The key is to leverage eProcurement software to simplify processes. For example, ensure you don’t need five approvers for a small dollar request, and nor should you treat every category of spend and spend amount as the same.”
This all seems to make sense as Ruehle says. Where is the hold-up coming from, then, in terms of the industry becoming fully self-actualised in optimising digital procurement?
Well, Accenture research has also shown that procurement is something of a laggard when it comes to digital transformation, with companies today least likely to use analytics in procurement in relation to other functional areas, at only 40% as opposed to 59% use of analytics in finance and 55% in customer service.
Rather than looking at the negatives, however, Ruehle’s enthusiasm remains unabashed as she underlines the possibilities that this presents for companies.
“For me, this highlights a significant competitive opportunity. Organisations that start implementing digital procurement today will have a much more efficient and effective procurement operation than their competitors.
“Businesses should start investing today if they’re going to be prepared to be digital. Next Generation Digital Procurement requires wholesale change – it can’t be achieved by flipping a switch. As businesses move forward, there are three key considerations to bear in mind.
“Firstly, transformation takes time. Companies need to collect the relevant data, develop the necessary systems and processes, and build the underpinning analytics and AI to ensure they have in place a procurement operation that’s fit for the future.
“Secondly, it takes real investment. Fortunately, digital procurement capabilities are increasingly available as a service, which could reduce upfront investments and accelerate transformation.
“And finally, transformation takes vision. This is a big departure from how procurement has traditionally operated. An internal champion within the company must define what the future procurement organisation will look like and how the company can make it reality.”
EY and Harvard Law discuss barriers in Contract Management
Contract management is a crucial discussion for procurement professionals as negotiations require a more specific outcome. However, some organisations are experiencing significant barriers to developing their contracting processes. Ernst & Young and Harvard Law School Center have discussed survey results in relation to the current state of contracting and explain where the issues arise.
The Legal Profession survey (part of the 2021 EY Law Survey) highlights the perspectives of 1,000 professionals from across the globe in law, procurement, business development and commercial contracting.
Out of all the major companies surveyed, over half of them say they are experiencing significantly reduced revenue and are missing out on important opportunities due to poorly managed contracting processes.
Some of the key findings from the survey:
- 92% of organisations in the survey said they plan to transform their contract handling procedures.
- 98% of respondents said they face critical barriers in the process of developing contract management.
- 38% of organisations said they have tried and failed already to implement a better contract management procedure.
- 57% said they had experienced less positive revenue due to inefficient contracting systems.
- 50% of respondents said they had missed profitable business opportunities.
Kate Barton, Global Vice Chair, EY, has expressed her opinion on the survey, “Revenue growth is a fundamental goal for any commercial organisation and effective contracting processes play a crucial role in making that possible. Contracting teams around the world know the value they can bring, and they are making real efforts to transform, but the survey brings into sharp focus a whole range of obstacles that they must navigate if they are to make the improvements they are aiming for.”
What will organisations need to address to develop their contracting methods?
Many organisations are under pressure to reduce costs, specifically contracting professionals. This is something that nearly all of the survey respondents will be looking to do in the next two years, while a third of larger organisations aim to scale this to a 30% reduction in contracting costs.
There is a certain lack of clarity among organisations as to who is responsible for contract management. It is unclear to most how the contracting process should be managed; perhaps this could be because it involves an agreement between various stakeholders. Around 59% of legal departments believe they have the leading role, while a similar number of contracting staff also share this view. 39% of business developments professionals believe they are to hold the decision-making power.
Utilisation of Technology
There seems to be a lack of capability among organisations to analyse and manage contracts. According to the survey, around 70% of organisations have a technology strategy in place to manage contracts; the majority still lack the necessary data to utilise it to full capacity. This is likely caused by insufficient knowledge for implementation that is likely a direct result of a skills shortage, which 34% of organisations have reported as an issue that limits them.
Insufficient Contracting Processes
A lack of a defined contract drafting process will significantly limit how effective the contract will be. Global Legal Managed Services Leader at Ernst & Young, John Knox, explains, “the importance of getting contracting right cannot be underestimated.”
Around 49% of survey respondents say they don’t follow a defined procedure, and 78% say they do not have a system for monitoring contractual obligations.
Knox says, “with the right transformation efforts focused around people, process and technology, contracting can actually become a business enabler and differentiator. The survey shows that one way in which organisations aim to tackle these challenges is through working with subject matter leaders and external providers.”
Meanwhile, David B. Wilkins, Lester Kissel Professor of Law, Vice Dean for Global Initiatives on the Legal Profession, and Faculty Director of the Center on the Legal Profession, Harvard Law School, says, “Contracts are at the core of every business. They determine how growth happens and how risks are managed. It is therefore absolutely crucial that organisations have effective systems and processes to manage every aspect of the contracting process, from negotiation and execution to termination or renewal, as well as an accurate understanding of the obligations, benefits, and risks across the entire spectrum of their contracts.
For more procurement insights, check out Procurement magazine.