Digital Technologies Defining the Future of Procurement — a Supply Chain Perspective

Digital technologies are accelerating the pace of disruptive change in Procurement and Supply Chain in general.

It is technology that is notably disruptive, and therefore allowing businesses across the supply network to collaborate and replace their old, inefficient and expensive ways of conducting business, with better, faster, more efficient and cost-effective approaches that improve process integration and customer experience.

Digital technologies are steadily transforming the way customer value is delivered, across end to end supply chains.

In this article, we highlight specific digital technologies and explain how these technologies are defining the future of Procurement and Supply Chain Management in general.

Digital Technologies are in the main, electronic resources; devices, tools or systems that generate and process data.

Advances in digital technology and the rate at which legacy (old) systems are being replaced or updated with newer models is simply breath-taking.

Without a doubt, the path had never been clearer for Supply Chain organizations to actively embrace this digital revolution.

Through digital technologies, operational coordination and efficiency in procurement and other supply chain functions is being enhanced.

Having adopted digital technologies, Supply Chain functions whose processes are notably improving include: -

Strategic Sourcing — which is becoming more predictable.

Procurement — which has become more automated, and

Supplier Relationships Management — which is more collaborative and proactive.

Digital technologies provide Procurement with benefits such as automation.

Where, the usual repetitive and time-consuming procurement tasks are taken over and sped up by programmed automation systems, allowing employees to dedicate more of their time towards strategizing and decision making activities.

Accenture defines digital procurement as a system which; “automates repeatable tasks to boost efficiency and reduce costs; it equips stakeholders across the business with real-time insights and analytics through artificial intelligence (AI) and easy-to-use online tools; it deploys new and smarter ways to infuse data models to enrich day-to-day operations”.

Supply Chain networks are usually complex and spanning across borders. As expected, Data sets among these supply network partners are massive and creating data transparency is crucial. This is one of the reasons, that adoption of digital technologies is a necessity within Supply Chain.

Digital technologies bring operational order to these complex Supply Chain processes, it provides insights and clarity into these huge, and often unstructured supply network data, enabling detailed analyses, clear targets and optimized execution across the supply network.

Such being the case, digital technologies, make it easier for Procurement and Supply Chain to:

● Strategically Source

Strategic sourcing is one of the key tasks in the Procurement process and supply chain management in general.

With digital technologies, sourcing of suppliers and the securing of best terms, conditions and prices is significantly optimized.

For instance, repetitive tasks in the Procure to Pay (P2P) process are largely eliminated with the deployment of automation.

With automation, purchase orders and stock replenishment requests are automatically triggered or with minimal human intervention. Which minimize regular mistakes and maximize speed and operational efficiency.

● Insightfully Contract

Another key task in the Procurement function is Contracting of suppliers.

Digital procurement enable smart contracts.

Smart contracts are similar to regular contracts, in that they use reliable data, and define procurement and supply (Buyer — Seller) rules that are automatically enforced.

Usually, Smart contracts operate on digital platforms like; Blockchain systems, Ethereum blockchain to be specific.

● Accurately Predict Demand

Demand forecasting is another key task of the Procurement function.

Through digital technologies and systems like Artificial Intelligence, Procurement and Supply Chain in general is able to conduct analytics on future market trends, and accurately predict actual (or potential) future sources of supply.

With such accurate predictions, Source to Contract (S2C) processes are clearer and efficient, leading to more realistic and executable contractual agreements with suppliers.

● Risk Mitigation

Procurement and Supply Chain processes given their usual distant operational geographies, are prone to more risks.

However, the end to end, real time data transmission, and operational transparency that come with digital technologies, strengthens collaboration and integration between supply partners, which enhance process visibility and coordination of Procurement data, leading to preemptive risk mitigation initiatives across the network.

Other relevant digital technologies and solutions that leverage competitive advantage and therefore define the future of Procurement and Supply Chain management include:

● Cognitive Agents

These are self-service technologies, programmed to understand human language and provide accurate responses for clear guidance.

In Procurement and Supply Chain operations, Cognitive agents include; chatbots that can respond to various supplier queries hence, lessen the usual administrative burden and related cost.

● Cognitive Computing

This is part of artificial intelligence technology which broadly uses signal processing algorithm to recognize pattern and predict future trends.

Cognitive computing provide insights by categorizing huge and unstructured information on all Supply-chain related data, including; Contracts, Procurement spend, Suppliers, Third-party logistics providers (3PL), etcetera.

These intelligent ‘machine learning’ systems are also capable of using third party information sources, to forecast future scenarios including; fluctuations in cost and price of supplies, demand and supply movements in the market, anticipated risks and many more.

These forecasts allow supply chains to be proactive and position themselves tactically before hand.

● Cloud Computing

Similar to AI, cloud computing systems rely on data to simulate human thinking in making quick and effective decisions.

Cloud Computing provides the necessary intelligence and models that enable Procurement to have total oversight and control over its processes, which include; sourcing, purchasing and all other P2P tasks.

Examples of models and tools used for cloud computing include; Software as a Service (SaaS) and G Suite or Google Workspace.

These are tools that simplify supply network integration and improve administrative capacity across multiple users.

● Intelligent Content Extraction

Here, automated data extraction algorithm like; Optical Character Recognition (OCR), can assist Procurement and Supply Chain to extract text from printed or written documents, and convert the text into machine readable data for easy processing.

Instead of spending days analysing documents, OCR has the capacity to quickly read unstructured documents like; pricing tables, payment terms and other contract clauses, which in the process help procurement and Supply Chain make quick and informed decisions.

A process that would have otherwise taken weeks to complete.

Intelligent Content Extraction also include, technologies that transform data into visual format for clear analysis, insights and better interpretation.

● Rapid Prototyping

Manufacturing is a key function of Supply Chain. Therefore, digital technologies like Rapid Prototyping are vital, because they significantly revolutionize the way products are prototyped and manufactured.

Rapid Prototyping or what is commonly known as 3D printing, is a fast fabrication or additive manufacturing technology that uses 3D computer aided design (CAD), a digital technology which lays down layers of material to make physical objects.

This is a manufacturing system that can best respond to ‘on-demand’ orders, moving forward.

It is equally important to highlight other digital technologies that businesses have — to a large extent- deployed.

Technologies that already defining the future of Procurement and Supply chain management.

These include:

Sensors and Wearables:

These are digital devices that usually detect, record and monitor physical progress with minimum manual intervention.

Supply Chains deploy Sensors and Wearables to capture, record and monitor the movement of inventory, for the purpose of operations management, materials reorder and stock replenishment processes.

Cyber Tracking:

In Supply Chain management, Cyber Tracking or what other literature refers to as; “Cyber Supply Chain Risk Management (C-SCRM), is a digital technology, generally used in assessing and mitigating risks associated with Interconnected systems and operations.

In manufacturing this technology can be deployed to track real-time activities from; acquisition, design, all the way to conversion / production and delivery processes.

This, allow businesses to monitor supplier performance behaviour, understand trends and mitigate any supply chain related risks across the network.

Blockchain:

This is a decentralized, temper-proof and reliable end-to-end cryptologic data technology.

Supply Chains are using this technology for instantaneous communication, process integration and operations coordination along its key network members.

The fact that Blockchain technology provides real time visibility across the board, makes it particularly vital for the usually complex and cross-border spanning Procurement and Supply Chain processes.

This technology leads to; well coordination and efficient flow of information, materials, parts and products, between point of origin and that of consumption.

Blockchain is a technology cannot be backdated or retroactively altered. Hence, a very secure technology every Supply Chain business needs.

Conclusion:

Disruptive digital technologies are changing the way Procurement and Supply Chain processes are carried out. These technologies are clearly defining a better and more rewarding future Procurement and Supply Chain can’t afford to ignore.

As disruptive as it may be perceived, Digital technologies assist organizations to sift through huge amount of complex and unstructured data, to quickly extract vital information that enable businesses to make informed decisions. Hence, a competitive advantage for every business.

In fact, by being disruptive, digital technologies allow Procurement and Supply networks in general to step back, analyze and collaboratively engage on more effective approaches that can best respond to customer demand, fulfill consumer needs, and maximize return on investment across the board.

It is so fortunate that; as Digital technology advances and more entities embrace it, the cost of doing business digitally goes down exponentially.

This allows businesses that implement digital technologies occupy cost leadership positions.

No wonder smaller entities that adopt and implement modern digital technology solutions, have the capacity to leapfrog their bigger competitors who often find themselves still locked in legacy technology.

It is vital that Procurement and Supply Chain leaders embrace and implement this digital revolution into their daily operations.

Because, Digital technology will continue to define the future of Procurement and Supply Chain management.

It is indeed a source of competitive advantage that will constantly transform the way customer value is delivered — in to the future.