CSCMP's Supply Chain Quarterly
September 22, 2019
Forward Thinking

Procurement organizations rush to prepare for a digital future

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An annual survey from The Hackett Group found that two-thirds of procurement organizations have a digital strategy in place, up from one-third in 2017.

Procurement organizations have made significant progress not only in creating a digital transformation strategy but also in getting the resources and competencies they need to implement that strategy, according to a new report from the consulting company The Hackett Group Inc.

For procurement organizations, digital transformation involves applying technologies—such as robotic process automation, artificial intelligence (AI), cloud-based applications, advanced analytics, data visualization, and mobile computing—to change how processes, such as procure-to-pay or request for quote, are conducted. The Hackett report, titled "The CPO Agenda: Expanding Procurement's Influence Through Change and Innovation," says that 95 percent of the more than 160 procurement executives that it surveyed believe that digital transformation will fundamentally change the way procurement services will be delivered within two to three years.

"Last year, procurement leaders told us that digital transformation was a priority. But most simply didn't have the strategy and resources in place to move forward," said Chris Sawchuk, principal and global procurement advisory practice leader for Hackett. "This year, that gap has closed significantly. Momentum is growing. More organizations are planning for digital transformation and more are in a position to do something about it."

According to the survey results, the percentage of organizations with a formal strategy for digital transformation has more than doubled from last year, moving from 32 percent to 66 percent. The number of organizations indicating they have the resources in place to handle the transformation also rose sharply, to 46 percent. Procurement leaders expect to rely on digital transformation to help them achieve an array of critical objectives in 2018, including cost-cutting, improving agility, and improving their ability to serve as a trusted advisor to the enterprise, according to the report.

The study also found that procurement executives plan to expand their use of data management and analysis tools over the next two to three years. Broad adoption of master data management is expected to grow by a rate that is 3.8 times more than the current adoption level, while adoption of advanced analytics is expected to grow at a rate that is 3.2 times the current adoption level. Data visualization adoption is expected to more than double. Companies will also be augmenting those technologies with AI. Thirty percent of survey respondents said they are conducting pilots in AI areas such as cognitive computing and virtual assistant technology.

The study also found that emerging digital technologies focused on process efficiency such as robotic process automation (RPA) and blockchain are expected to see higher adoption levels in the near future. Use of robotic process automation by procurement is expected to grow by 4.5 times more than the current adoption rate in the next two to three years, with nearly 40 percent of surveyed executives saying they are already engaged in pilots. A third of procurement respondents also said that they are engaged in blockchain pilots.

"Robotic process automation and blockchain are digital technologies that have the potential to help procurement yield new levels of data accuracy and intelligence. RPA can help procurement teams dramatically improve process quality and focus more on strategic analysis and other activities that add value," said Constantine Limberakis, senior research director, for Hackett's Procurement Executive Advisory Program. "Blockchain can have a truly transformative effect, as it promises to revolutionize checks and balances between buyers and suppliers."

There is one main roadblock that could trip up many organization's digital transformation efforts: the budget. One the whole, procurement budgets are expected to fall by 0.3 percent in 2018, according to The Hackett Group's research.

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