Procurement teams are joining the front lines of the data revolution. Leading companies are wielding new digital procurement solutions to increase process efficiency, improve compliance, and expand strategic capabilities, such as category management. And that data muscle is transforming the strategic role of procurement.
However, many companies are just beginning their digital overhaul of procurement, and some are struggling to get started. To address this challenge, chief procurement officers (CPOs) are increasing their investments in digital technologies. Digital solutions can create considerable value, yet firms often lack a digital roadmap aligned to their strategic objectives.
The most critical objective for many is obtaining a transparent view of the full supplier universe to better assess supply risk and build resilience.
Prior to Covid-19, 50 percent of organisations felt strong pressure to accelerate their digital transformation, according to a recent Bain survey of CPOs. Disruptions triggered by the pandemic have increased the urgency to invest by exposing digital blind spots within organisations and making supply resilience a key priority. In particular, CPOs said their top application areas for 2021 include better tracking of supplier risk and performance, improved automation, and stronger analytics.
CPOs are redoubling their efforts to understand supplier risk and performance because many have limited access to information on supplier risk, performance, and environmental and diversity attributes. Often companies track a small subset of suppliers because they have limited system or data capabilities.
They also may have few sources of data from which to gather supplier information attributes. Companies with a low degree of automation face challenges with supplier qualification and monitoring.
Another obstacle to transparency is limited integration of systems tool sets and third-party data sources, such as those providing credit risk information or data on the risk of slave labour. Finally, companies may be unable to review or validate documents, such as insurance policies and accreditation.
Digital solution providers are starting to address these challenges with powerful tools that give companies greater visibility into their supplier relationships. Procurement solutions can identify opportunities for performance improvement, pinpoint areas for innovation and collaboration, validate suppliers’ impact on sustainability and diversity goals, and identify risks with sufficient lead time to react and mitigate potential losses.
As companies grow larger and develop more silos, it becomes harder to develop business insights from supply chain data related to ethical issues, sustainability, or diversity
As new digital solutions increasingly provide access to supplier data that was once unavailable, leading companies are beginning to monitor their supply chains in real-time. To do that, they are developing a set of key supplier metrics and working with solution providers to create a new level of transparency that reduces risk and improves sustainability. The better procurement executives know their suppliers, the more effectively they can support their company’s strategic objectives.
Karim Shariff, partner, Bain & Company Middle East and Brian Murphy, expert associate partner, Bain & Company Boston
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