Today’s Chief Procurement Officer (CPO) faces a number of challenges relating to the improvement of procurement processes across manufacturing, retail or service operations. A recent report from A.T Kearney identifies four primary challenges on a CPO’s agenda, measuring performance, increasing influence, becoming more strategic and attracting and developing talent.
The procurement department is typically responsible for selecting, on-boarding and managing suppliers on an on-going basis whilst at the same time ensuring they meet cost reduction targets, achieve high quality standards and offer high levels of customer satisfaction. But quite often, outside influences such as supply chain disruptions, changing macro-economic market conditions combined with fluctuating consumer demand levels means that the process becomes one of the most complicated aspects of running a business. Today’s CPO is typically given a number of board level objectives, three of the most important being to:
- Reduce costs across the supply chain in order to boost top and bottom line growth
- Maintain high levels of Corporate Social Responsibility (CSR)
- Increase levels of green and ethical sourcing
The IT infrastructure required to support today’s procurement operations has been built up over many years, primarily with behind the firewall software which has been heavily configured to work with complex internal business processes and systems such as ERP platforms. The increasing need to build flexibility in to today’s supply chains has presented a unique challenge for IT departments around the world, namely how to expand B2B infrastructures to support globally dispersed operations and diverse groups of trading partners whilst at the same time provide the flexibility to scale up or scale down the infrastructure as the business need dictates.
Cap Gemini recently conducted a study on the CPO which highlighted how many consumer based technologies are likely to impact the procurement organisation moving forwards. In fact the study highlighted that 40% of procurement organisations are involved in augmenting their practices with digital tools to:
- Broaden and expedite communication with partners and suppliers
- Automate and integrate procurement tasks and procedures
- Enable procurement professional to work anywhere, anytime
The survey highlighted that many companies have restructured since the most recent economic downturn and procurement organizations have got into a routine of trying to do more with less. Cost reduction continues to be a key focus of purchasing organizations with 75% of survey respondents highlighting it as a focus area. Interestingly, 30% of respondents highlighted that innovation will be a future focus and finally environmental and supplier issues remain top of mind with 33% of respondents indicating that ‘green’ procurement initiatives are also a key focus area.
So how can ‘Digital Procurement’ (using B2B tools and services) help improve the management of today’s procurement processes? Survey respondents said that forward looking CPOs believe that innovative based capabilities such as predictive analytics, mobile solutions and virtual procurement technologies (such as cloud computing platforms) will not only deliver incremental value to their organization but will also become a core requirement to drive a competitive edge in a changing and demanding business climate. In fact 47% of respondents are turning to advanced technologies to stay ahead of globally intensifying competition. With the emergence of innovative solutions, leading companies must do more than automate their purchasing transactions to remain competitive. They need to arm their decision makers at all levels with accessible and actionable data and insights and enable collaboration unhindered by geography. Finally the study highlighted that 26% of respondents are boosting their virtual procurement capabilities by integrating social media and cloud based technologies with in-house resources.
The study also highlights that companies are looking more positively towards cloud and on-demand solutions to accelerate time to value in their procurement organisations. Software as a Service (SaaS) and on-demand solution options can be deployed more quickly, they are scalable, secure and help to promote common practices across the organization while saving on traditional on-premise hardware and run-time licenses. It is expected that more companies will adopt virtual procurement capabilities, moving away from proprietary and on-premise solutions as they strive for a lean and flexible operating model. In short, by combining mobile, social, Big Data and cloud based capabilities, companies can empower their employees and improve collaboration and visibility to better serve their client base. In order to adopt these new technologies, Cap Gemini recommends taking a three phased approach for implementation:
- Develop a roadmap for digital procurement outlining how each emerging technology aligns with their company’s organisational structure and enterprise goals
- Deploy through a thorough change management framework to address the impact of new technology on their organization and workforce and how best to use it.
- Establish an innovative culture and environment for procurement
The increased use of B2B solutions and services presents a major opportunity for CPOs to enhance strategic decision making and workforce efficiency, while elevating procurement’s internal profile within the enterprise. The global nature of today’s procurement organization, for example sourcing from the emerging markets, presents a unique set of business challenges which can be broken down as follows:
- How does an IT department extend support for these new trading partners?
- How do you ensure that you can exchange business documents in a timely manner?
- How do you offer local language on-boarding and on-going support?
- How do you integrate remote trading partners into your ERP platform?
- How do you manage trading partner related contact information?
- How do you maintain business continuity during a period of supply chain disruption?
- How do you manage risk, compliance or corporate social responsibility (CSR)?
- How do you ensure that goods can be delivered on time and to the correct location?
- How can customer satisfaction levels be improved where the ‘customer’ in this case is the CPO’s own manufacturing department, retail outlet or service centre?
Cloud B2B solutions and services can help to address many of the afore-mentioned issues and they will become a central part of Digital Procurement platforms moving forwards. The term cloud computing has been in use since 2010 and many CIOs around the world thought that it would be another IT trend that would diminish over time. Three years later however and the cloud is becoming an integral part of today’s business environments. Many companies have found that the cloud offers significant benefits over behind the fire wall software, however they have taken a step by step approach to implementing their first cloud based platform. In many cases, companies have implemented ‘hybrid’ IT environments which means they still get to use and retain the investment they have placed in their behind the fire wall software environment but where required they also get access to a highly flexible and scalable platform that cloud solutions and services can provide. Today’s IT and B2B environments are in a state of transition, moving from older manual or behind the fire wall processes to automated, globally accessible infrastructures. Modernizing procurement processes and moving towards a more automated business environment will allow today’s CPO to achieve their corporate objectives, namely:
- Introduce a greener more sustainable supply chain through the removal of manual, paper based business processes
- Increase customer satisfaction levels by being able to get the right information to the right place at the right time
- Improve internal business processes through the use of a single, globally available B2B platform that helps to foster collaboration across the extended enterprise
- Reduce costs and improve the efficiency of the procure to pay lifecycle and offer a platform which can scale according to the growth of the business or the macro-economic conditions of the market
- Ensure that more accurate information is flowing through back end business systems such as ERP platforms
GXS has an extensive suite of B2B solutions and services that will help a CPO modernize their procurement processes and achieve their corporate objectives. GXS can help companies address many B2B challenges, but here are the five key ways in which we can help modernize a procurement process, namely offering:
- Comprehensive on-boarding services to ensure that you can trade electronically, anywhere in the world
- A range of B2B enablement tools to ensure that no trading partner is left behind and you can trade electronically with any supplier around the world, irrespective of their technical capability
- Offering a collaboration platform that allows all supplier contact information to be held in a central repository and more regular supplier communications and fostering greater collaboration
- A range of hosted applications that allows business documents to be exchanged electronically with minimal IT infrastructure and hence removing extensive amounts of paper from the supply chain
- Follow the sun, multi-lingual support services to allow any supply chain issues to be resolved proactively before they impact your procurement operations
This blog entry has introduced some of the challenges faced by today’s CPO and in subsequent blog entries I will expand on the five areas listed above to provide more information on how GXS can provide a seamless, fully scalable B2B platform that allows a CPO to work with any trading partner around the world.