According to Deloitte (2017), digital procurement is a disruptive technology that enables firms to predict Strategic Sourcing (S2C), automate Transactional Procurement (P2P), and allowing Supplier Risk Management to be proactive. Yet, despite the idea of it has been established since 2017, procurement organizations are still late in adopting the usage of digital procurement (Accenture, 2020). A video by PwC (2020) revealed that 43% of Chief Procurement Officers (CPO) are not able to obtain insights from the company data due to its poor quality. As procurement data is often very complex to understand, this is exactly why, digitizing procurement is crucial for companies to enable proper utilization of data and drive insights. Later, the digitization will allow digitalization within the company, making the way of work becoming continuously more efficient. Thus, the question the company should ask is not why digital procurement should be used anymore, but it is a question of when to use it, and the answer should be now.
So, what are the forms of digital procurement? There are many forms of applications related to digital procurement. But one of the most disruptive technologies within the industry is Artificial Intelligence (AI). AI has impacted procurement in so many different levels from spend analysis, contract management, and strategic sourcing. With AI, companies can easily manage their data, for example, AI can easily categorize invoices according to the type of material being transacted or classifying it according to the vendor entities it belongs to. In spend analysis, AI can easily detect when prices offered by supplier is an anomaly compared to the usual offered prices without having to do complex analysis. Essentially, AI can also help detect supply risk by utilizing social media to track the position of supplier risks.
There are many examples of AI software that help making different procurement aspects more efficient. For purchase order management, there is a software called Tradeshift that allows companies to automatically review and approve purchase orders. For spend analysis, many companies use Sievo automatic spend classification and vendor matching through invoice data. Many global companies have already adopted AI software such as Tradeshift and Sievo. It is predicted that the number of companies using AI software to digitalize procurement will increase as the technology development is incrementally growing and there is a strong need within the industry to utilize AI to maintain competitiveness against competitors and working more efficiently. Therefore, now is the time for digital procurement!
References:
Deloitte (2017): https://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-cons-digital-procurement.pdf
PwC video of Digital Procurement: https://youtu.be/MoJVDnq4Fq0
Accenture (2020): https://www.accenture.com/us-en/insights/operations/digital-procurement-process
Sievo (n.d.) https://sievo.com/resources/ai-in-procurement
