Low Hanging Fruit & The Snowball Effect in Digital Procurement Transformations
Talk to any procurement leader in an international company and you’ll hear some common issues being raised. The lure of technology (especially big data and AI) and dangled carrots of opportunity to digitally transform the whole procurement function are all great but hard facts are getting in the way.
Corporate immune systems (“we’ve always done it like this”) can lead to insufficient executive buy-in; lack of skills, time and financial resources to tackle the complexity of multi-phased transformation projects mean it’s hard to predict outcomes or completion dates; growing evidence that many transformation projects fail causes nervousness with CFOs. The list goes on.
According to Deloitte’s 2018 CPO survey, only 30% of procurement leaders in the U.S. believe that their procurement function is highly effective and highly regarded internally. Whilst 44% believe their digital strategy helps deliver on its procurement objectives and improve enterprise value, 14% have no approved digital strategy in place. In the EMEA region, 79% are not confident that the procurement professionals in their organisation have sufficient capabilities to maximise their use of digital technologies.
So what’s an ambitious, visionary procurement leader supposed to do to move forward with projects that they “know” will deliver value to their organisations in terms of time and money saved and other ancillary benefits? The pressure to deliver savings in an uncertain macroeconomic climate means they should welcome options to consider.
One such option is to pick the low hanging fruit. We’ll define that for now as a significant project that is relatively quick and easy to implement with clear demonstrable gains.
The indirect IT category is a perfect fit. It’s complex, growing, nearly all long tail and has become ill-suited to regular RFPs and “classic tenders”. The explosion of variety in IT device choice continues unabated whilst in parallel product prices are constantly dropping meaning almost all IT hardware and accessories have become commoditised and so, with the right partner, it’s a clear area to deliver significant time and money savings. In my experience, having analysed IT spend data from hundreds of international companies, savings of over 12% per annum can regularly achieve with an IT purchasing solution offering real-time pricing and stock availability, centralised purchasing, local invoicing and delivery etc. However, it’s not only about cost reduction. I have seen plenty of evidence showing the time spent on purchasing can be significantly reduced, freeing up people for more strategic and creative tasks. I’m sure there are other categories where niche partners can deliver similarly impressive results.
I’d advise embattled procurement leaders to pick a reliable partner to work with, one with a proven track-record of delivering value quickly and on an on-going basis, rather than a groundbreaking "new solution”. Once the results are in, show those to the execs. Respect and recognition will have been earned and logically that should lead to more support for additional projects.
Don’t start with the mega digitise-everything-with-AI-big-data-bells-and-whistles kind of project. The time for that will come. Low hanging fruit can become snowballs that gather momentum and lead to more and more projects being approved. It’s a prudent yet smart strategic approach.