News Snippets, Strategy

Only 20% of procurement professionals believe digital disruption will have a significant imapct: KPMG report

An overwhelming 79% of procurement professionals surveyed in a new report released recently (Aug 31) believe that digital disruption will not significantly disrupt the organisational role of procurement.

This new report, Reboot Procurement, was announced today at the inaugural KPMG Procurement Ignite Summit at the JW Marriott hotel.

Main findings

In the survey report of Chief Procurement Officers (CPOs), findings suggest that most procurement-function roles still focused on traditional transactional processes where process efficiency or productivity and savings are key. Considering the impact of digital disruption,

  • 90% believe that digital disruption offers more opportunities than threats but
  • 59% thought the impact of disruption on procurement will be situational.

However, procurement professionals appear unclear about digital disruption, its impact, and how best to transform their functions. Among respondents, while

  • 59% have budgeted for procurement enhancement or transformation,
  • only 40% felt that they had a comprehensive procurement strategy.

The top three challenges cited by respondents were driving efficiencies and effectiveness, quality and visibility of their data and cost optimisation.

“Many procurement functions struggle with legacy infrastructure and processes preventing them from unlocking the potential of the data at their disposal,” says Mr Satya Ramamurthy, Partner & Head of Management Consulting at KPMG in Singapore, “Procurement functions need to better articulate the value these new technologies bring to their organisations and how digital tools will revolutionalise the way they work.”

Professor Sheila Wang, Academic Director, MBA Management Practicum and Adjunct Professor, Department of Analytics and Operations at the NUS Business School says, “Procurement is not about spending money, it is about finding the next competitive edge. It is an important function where opportunities abound in harnessing businesses’ data to enhance efficiency and help leapfrog business transformation through suppliers and market offerings. How organisations and CPOs utilise Procurement to maximise business impact and competitiveness can very well affect an organisation’s success.”

Embrace Digital

Procurement functions are unique in being among a handful of organisational functions with the richest sources of data about their organisation’s core activities. Rapidly emerging technologies can also help them leverage this data for insights more readily.

The top three types of applications that procurement functions found most useful were data analytics for spend-analysis, contract management and data visualisation / dash- boarding.

While 65% of professionals polled said they had an organisation-wide data strategy,

  • 39% of CPOs expressed vague familiarity with data analytics, and a
  • further 27% admitted to being unfamiliar with the potential of data analytics.

Many also expressed concern that the data is buried in different units and deemed a by- product of business processing.

Top priority investments implemented or planned over the next 2 years identified by procurement professionals surveyed were (i) Data Analytics, (ii) Artificial Intelligence and (iii) Robotic Process Automation.

In the survey, most procurement leaders indicated they intend to implement data & analytics within their function but are unsure of the benefits of IoT technologies such as sensors and blockchain to the function and the organisation.

“Integrating spend-data with procurement data on supplier and vendor capabilities and performance, organisations gain real-time visibility into consumption patterns,” says Mr Ramamurthy.

He adds, “Analysing these patterns along with demand forecasts, product and quality specifications and stock levels, businesses can make better decisions around product and service delivery. They can also respond better to market demands, work more closely with suppliers to innovate as well as manage vendor-related risks.”

Empower Collaboration

Emerging technologies are expected to transform the function as robots and e- procurement platforms replace traditional buying activities and transaction execution.

Also affected will be the management of suppliers, vendors, contracts, transactions and sourcing activities.

The role of procurement, its capabilities and the collaboration model with other business units will need to be re-looked as technology adoption increases.

Professor Wang says, “Procurement leaders are beginning to see value in a team with diverse professional backgrounds given the complex and evolving nature of work the function handles. In fact, non-homogeneous teams actually lead to more diverse and innovative perspectives.”

With the automation of routine procurement tasks, employees can also focus on higher value-added work such as business partnering and alliance, supplier and vendor relationship management.

At the same time, it is important to upgrade and professionalise the skills within the procurement function with the requisite training or professional accreditation.

Says Mr. Ramamurthy, “Procurement professionals should ideally be thinking about their role in an increasingly-connected enterprise. Besides understanding how emerging technologies can be managed more successfully in a commercial sense, this will involve empowering their procurement function with the appropriate digital skill-sets.”

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