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April 03, 2020
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Procurement gets smart, adds greater value over the next five years

Procurement organizations that fully optimize their technology architecture and embrace smart automation can realize productivity advantages of up to 68%, Hackett Group researchers say.

More of business is going digital, and new research reveals that procurement departments have a compelling motive to follow suit.

A November report from researchers at the Hackett Group explains that "world-class" procurement organizations that fully optimize their technology architecture and embrace smart automation technologies can gain considerable productivity advantages over their peers. Those organizations that deploy smart automation technologies to execute work that is already highly technology-intensive can realize productivity advantages of up to 68%, they said.

"One specific opportunity to create value occurs at the intersection of smart automation and advanced analytics," the researchers wrote. "From our observation, the combination of smart automation, analytics, and digital continuous improvement represents the next frontier of value creation in procurement's digital transformation journey."

The researchers offer seven key ways the procurement function is changing and will deliver value to their organizations over the next five years: 

  • Aligning and integrating its operations closely with the broader supply chain.
  • Eliminating rule-based, routine transactional processes such as accounts payable and purchase order processing.
  • Automating routine, process-based roles, such as supplier onboarding, enabling it to focus only on more strategic activities.
  • Using cognitive capabilities to predict activities, suggest opportunities, and recommend strategy.
  • Using data and advanced analytics to increase compliance, enabling realized savings to fall to the bottom line.
  • Decreasing the rate of headcount growth and bringing knowledge-based roles to the forefront of its talent needs.
  • Employing smart engines to predict disrupting events to the supply chain, allowing the organization to better plan for and limit disruptions.

"These capabilities will enable procurement to dramatically improve process efficiency and effectiveness, as well as the experience of stakeholders," the researchers wrote. "As a result, [procurement] will be able to respond more rapidly to changing business requirements and deliver the timely insights that management, managers, employees, and recruits expect. This way, it will not only reduce its own operating cost, but also fulfill its aim to become a strategic advisor to the business."

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