CSCMP's Supply Chain Quarterly
Procurement
November 13, 2019
Forward Thinking

Commentary: From a patchwork of solutions to unbroken digital thread

Comment
A cloud-based procurement network can knit together previously disparate data to reveal patterns and trends that can unlock supply chain efficiency.

There was a time when businesses seeking to streamline their procurement operations, particularly the labor-intensive aspects of sourcing, purchasing, and contracting/payments, would purchase software applications narrowly focused on one of those areas. While these software systems improved efficiencies, rarely could they juggle more than one application or activity. Furthermore, the solutions often functioned independently of the business' other core operations (such as manufacturing, logistics, or sales) and were disconnected from the corresponding or complementary data they generate.

As a result, companies were often haphazardly piecing together a patchwork of different solutions to cover the source-to-settle process. Knitting together these systems of varying size, strength, and capacitythrough software integrations often hampered the smooth flow of operations.

But now there's another alternative: Cloud-based digital networks allow buyers and suppliers to see into each other's connected operations, better unlock the value hidden in their data, and uncover mutually benefical insights. As procurement leaders increasingly embrace cloud-based digital networks, they're finding the source-to-settle process no longer hemmed in by siloed data or organizational boundaries.  Instead they are able to tie together all the data gathered throughout the source-to-settle process, and they are reaping efficiencies. The data present a comprehensive view of an organization's supply chain efficiency and procurement opportunity. In a sense, the cloud-based networks provide an unbroken digital thread that replaces the old cumbersome patchwork of point solutions. This thread's reach includes finance, legal, and other mission-critical systems. The unbroken digital thread creates value that's not merely additive but exponential, as this report from the consulting company Deloitte lays out.

When contract renegotiations take into account previously unexamined sourcing data, or when sourcing decisions factor in previously untapped reputational data, or when payment methods include previously unavailable discount alternatives, savings add up quickly—the whole of procurement becomes greater than the sum of its traditional parts. Businesses can redirect these savings into shoring up the supply chain, investing in research and development, or exploring new markets.

Businesses can now uncover patterns out of previously disparate procurement data. Aided by machine learning and other forms of artificial intelligence made possible by cloud-based networks, these newfound patterns of data can lead to actionable insights that extend competitive advantage. Imagine when smart contracts are immediately aware of performance and execution data from actual receipts and can autonomously invoke agreed-to pricing conditions and clauses. Businesses that leverage these emerging technologies successfully free up their employees to focus on higher-value outcomes.

These intelligent enterprises harness the vast repositories of uncorrelated data that organizations routinely accumulate—and, in the process, their procurement function transforms itself from back-office cost center to strategic growth engine! By stitching together insights out of data dispersed across an organization and its trading partners, procurement leaders dramatically sharpen the tools of their craft, trading in what amounted to a humble sewing kit for an industrial-scale textile powerhouse.

Patrick McCarthy is senior vice president and general manager of SAP Ariba.

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