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Disruptive technologies push boundaries for procurement strategy

Over the past two decades, the main mission of procurement has broadened from cost leadership and assurance of supply to strategic insights for decision making. Disruptive technologies—mobile computing and the cloud, constant connectivity, and sensors that enable devices and machines to form the internet of things—are now paving the way for new applications and capabilities across the supply chain that will enable procurement to offer even more strategic value.

Digital supply networks, disruptive technologies, and procurement analytics solutions are opening new possibilities in each of the key areas of procurement:

Source to contract (S2C)

• Predict demand with artificial intelligence
• Categorize and manage spend in real time
• Know landed cost for any commodity for all alternate countries of origin
• Predict sources of future innovation
• Act on timely alerts from all negotiated agreements (indexed pricing, penalties, renewals, etc.) through smart contracts

Procure to pay (P2P)

• Automatically sense material demand and consumption and requisition replenishment deliveries from suppliers
• Exchange goods through validated and trusted decentralized ledgers
• Eliminate repetitive processing through robotic process automation
• Trigger payments utilizing real-time signals of material delivery
• Execute automated secure payment

Supplier Relationship Management (SRM)

• Monitor potential for risks in real-time through the aggregation and visualization of third-party data feeds
• Conduct supplier visits from their own office utilizing augmented reality
• Perform supplier audits through crowd sourcing
• Monitor sustainability across entire ecosystems through automatic reporting and visualization

Digital procurement is an exponential shift that allows organizations to better deliver on their main mission with fundamentally different processes at a reduced cost. New operating models, organizational constructs, talent, and metrics will be necessary to embrace and nurture the new capabilities and meet heightened expectations.

With improvements in data, analytics, computing power, and visualization, digital procurement also has better evidence-based options for decision making, which can improve both the value and accuracy of strategic decisions and the speed of execution. The seat at the executive table for procurement strategy has never been more deserved than it is now.

Figure 1: Characteristics of digital procurement

Building blocks for digital networks and procurement

Exponential evolution of digital supply chain technologies are fundamentally altering the Procurement function. While there are Core technologies that are the mainstay of any Procurement function, disruptive technologies for digital supply chain management can be classified as Maturing or Emerging. Procurement leaders should invest in digital capabilities that are Maturing and gaining momentum among highly-capable procurement organizations, including:

• Cognitive computing and artificial intelligence
• Predictive and advanced analytics
• Intelligent content extraction
• Collaboration networks
• 3D printing
• Crowdsourcing
• Robotics
• Visualization

Four Emerging solutions could also impact procurement dramatically in the future: sensors and wearables, blockchain, cyber tracking, and virtual reality and spatial analytics.

As a stand-alone deployment, each of these solutions can bring additional value to procurement. However, organizations that combine multiple technologies and solutions typically see the value of their deployments grow exponentially.

Figure 2: Deployment of digital technologies in procurement

Bringing it all together: Digital supply networks

The digitization of the supply chain, procurement included, creates a “digital loop,” a continuous flow of data, information, goods, and services between the physical and digital worlds.

Three examples of how the digital loop relates to procurement:

• For multiple, unstructured, and disparate sources of spend information, a cognitive computing and artificial intelligence solution can read, interpret, and recognize the information you require and build a single record of your supplier spend—it will also keep it up to date.
• You may have thousands of contracts in hard-copy or PDF form but you can’t act on the valuable T&Cs, indexed pricing, penalties, etc. that you have negotiated. An intelligent content extraction solution enabled by machine learning can convert static documents into data points for your review and action.
• Changes in demand, delivery, and consumption of raw materials can be captured through sensors that digitize the status and transaction of materials.

Digital supply networks and digital procurement are a reality now. We encourage you to download our full report on digital procurement and contact us to find out more about how Deloitte can help your organization apply disruptive technologies and improve procurement strategy. Read more about industry 4.0 and The rise of the digital supply network.

Figure 3: Digital Procurement capabilities work together to magnify results