Procurement organisations have seen a shift in their top priorities. Initially centred around cost reduction, compliance, operational efficiency, and risk management, today’s landscape demands a broader scope. Procurement businesses now need to incorporate digital transformation and forge closer partnerships with strategic suppliers to drive innovation, accelerate time to market, and champion sustainability.
Nevertheless, significant obstacles persist, including challenges in risk assessment and supplier collaboration, as well as deficiencies in technology. High-performing procurement organisations have implemented robust strategies to surmount these hurdles, while others may find themselves grappling with the magnitude of change.
It has become imperative to reevaluate prior strategies that were developed or adjusted in response to the escalating levels of complexity driven by factors such as globalisation, extended supply chains, mergers and acquisitions, and low-cost country sourcing. Consequently, the role of the Chief Procurement Officer (CPO) extends beyond a narrow focus on cost reduction and operational efficiency in procurement. The CPO’s agenda now encompasses a wider array of strategic initiatives. In essence, CPOs must cultivate a culture of continuous evolution rather than merely maintaining the existing status quo.
Digital Transformation in Procurement and the Intelligent Enterprise
Through the digitalisation of procurement, businesses can proactively address current challenges while future-proofing their operations. Chief Procurement Officers (CPOs) can broaden their value proposition to encompass continuous improvement, enhanced agility and resilience, streamlined global supplier networks, and seamless integration of critical data and processes with external sources and third-party systems.
SAP Business Technology Platform (SAP BTP) empowers organisations to create and implement digital technologies that propel them towards becoming Intelligent Enterprises. To fully harness business intelligence, it’s imperative that data within the end-to-end procurement IT landscape and associated business processes are seamlessly integrated. This holistic approach facilitates the efficient capture, management, and governance of data, culminating in integrated business processes that drive superior business outcomes. Intelligent capabilities, including machine learning and automation, can then be leveraged to optimise operations and foster innovation. Moreover, new methods for aggregating, connecting, and accessing information can be maximised, while spend compliance can be seamlessly embedded into every transaction.
Enhanced spend management can be achieved through transformative technologies that actualise best practices at an operational level. SAP BTP is uniquely positioned to meet CPOs’ critical expectation that the technology they adopt should align with at least 95% functional fit (as per SAP Benchmarking). It provides a comprehensive suite of platform technologies that expedite development and deployment, incorporating specialised capabilities. This is achieved through data-driven and analytics-driven outcomes, integration facilitation, and extensible, personalised application solutions:
- Data and analytics solutions deliver robust, adaptable spend analytics, affording total visibility into expenditure across regions and business units. This enables access to reliable, real-time data, facilitating more efficient procurement functions, such as streamlined savings tracking with finance functions and seamless spend reconciliation with suppliers.
- Integration solutions seamlessly link data from applications across the IT landscape, ensuring the integration of all source-to-pay processes. This results in an improved user experience and heightened procurement efficiency, achieved by delivering comprehensive business processes coupled with simplified workflows. For instance, lean, automated and integrated workflows expedite approvals and bolster compliance.
- Extension solutions aid in overcoming operational challenges necessitating new processes, shifts in behaviours and enhancements in workforce skills. However, not all solutions to these challenges are readily available off the shelf. Genuine procurement transformation involves extending existing processes and personalising purchasing experiences. When utilised in this manner, procurement organisations can leverage scenario modelling and real-time data for what-if analyses.
Use Case: Digitising SAP Ariba Sourcing with SAP BTP for Should Cost Models
Given the current economic landscape marked by inflation and geopolitical tensions, effective spend management is of paramount importance. Businesses now require a precise and efficient approach to Should Cost modelling for both direct and indirect spending categories.
Challenges Addressed:
- Replacing manual Should Cost modelling with spreadsheet-based processes.
- Conducting price negotiations without the guidance of accurately derived costs based on cost driver trends.
- Lack of insights to ensure prices align with market price indices.
Value-Driven Outcomes:
- Amplified insights derived from supplier bids through the digital sourcing
- Capability for dynamic forecasting, variance analysis, and interactive analytics.
- Visual representation and analysis of critical factors for Should Cost, along with Root Cause analysis based on historical data.
- Development of what-if simulation models.
- Integration of machine learning and advanced predictive capabilities to enhance model accuracy.
Should Cost modelling facilitates periodic price benchmarking, particularly in cases where supplier agreements allow for such provisions. This proves particularly pertinent for procurement organisations heavily focused on cost-saving endeavours. For procurement entities seeking to embed sustainability into their operations, the same Should Cost modelling principles can be applied to assess the impact on pricing when recalibrating the balance between global and local sourcing, ultimately reducing the carbon footprint of delivered goods.
Advantages of Enhanced Intelligent Spend Management
Strategic investments in advanced digital solutions are pivotal for achieving success. Robust digital capabilities empower procurement organisations by enhancing data visibility and fostering seamless collaboration with suppliers, thereby bolstering agility within extended supply networks:
- Facilitates the overcoming of financial barriers, as CPOs can strategically steer investments towards intelligent technologies like the Internet of Things (IoT) and artificial intelligence/machine learning.
- Empowers organisations to revolutionise procurement processes, turning best practices into tangible realities rather than merely filling solution gaps.
- Facilitates astute purchasing decisions by streamlining the connection, management, and governance of procurement data and activities.
- Facilitates the adaptation of procurement strategies to evolving needs, providing a contemporary and personalised buying experience.
- Reinforces compliance by integrating procurement capabilities into existing applications and business processes through pre-built applications.
If you or your organisation are considering a procurement function transformation, we firmly believe that a robust business case forms the cornerstone of success. We offer a range of services to support companies at every stage of their journey. Reach out to us today.
