Source-to-pay experts, Jaggaer, have issued the complete results of their 2019 study on the adoption and advancement of digital procurement across the globe within the past two years. The aim was to follow up on the 2017 Digital Procurement report where they found high expectations that new digital technologies would drive the “greatest revolution to impact procurement in decades.” So this study looks at what has actually happened in those two years, for example: have the necessary budgets been assigned and what progress have organisations made with the integration of the data needed to drive digital transformation and to provide the basis for data analysis?
Of the 321 respondents, those from Europe dominated accounting for a whopping 65%, followed by 17% from North America, the rest from MENA (12%), APAC (4%) and South America (2%). The responses were further segmented into production, non-production and public sector. The report is structured into key survey findings, what they might mean for the future of procurement in terms of the technologies that will shape it, and the next steps towards digital procurement transformation.
The results suggest overall that progress has been very slow. It found that the majority of companies (but not high at 54%) have only digitised standard procurement processes, and just 2% (the same as in 2017) say they have fully integrated smart technologies into their workflows. Many state the reasons as lack of budget and poor data integration, but the majority are still citing the challenges of technology knowledge and awareness of digitalisation.
It is interesting in terms of regional variation (although look at the split in respondent numbers) – a significant proportion (20%) of North American respondents said their knowledge of procurement digitalisation was “non-existent,” compared with 5% in Europe. Yet at the other end of the spectrum, North America was slightly ahead of other regions, with 10% stating that their knowledge was “excellent.” Europeans were most strongly represented among those stating that their knowledge was “up to date” (47%), while only 30% of North Americans said the same. But how we define ‘up to date’ is not clear, neither is the statement that many organisations are hesitant about ‘investigating new digital technologies:’
“In terms of artificial intelligence — robotic process automation, blockchain, digital assistants — 52% do not plan to invest.” This is quite a sweeping statement, how exactly do we define AI? AI has many aspects to it, and ‘up to date’ can mean different things to different people in different locations – it all depends on who you ask. So, in recognition of this, the report invites a series of AI experts to weigh in on the results and talk about AI and innovation in the context of digital transformation and what that really means: the impact of intelligence and agility on business. It says of the lack of interest and adoption that:
“In organizations across all sectors, procurement is central to profitability, not least because of the vital role the department plays in supply chain management. It serves as a strategic function that directly addresses a firm’s bottom line and drives a crucial decision-making process on factors ranging from process redesign and supply sources to material prices and contract terms. Given this value, you would think that the function is ripe for transformation through innovation, and you would be right, but the reality, as we have seen, is some distance from the theory. While some companies are using machines for a wide variety of procurement tasks, ranging from the simple to the complex, several continue to run traditional departments fraught with inefficiency. We see this as a fallacy of interpretation and execution, not of concept or promise.”
And it goes on to outline the challenges hindering the scale of innovation in digital procurement, the drivers, and measuring results. What it doesn’t do is advocate innovation for innovation’s sake: it clearly advises businesses to take time to find and trial technology to see if it is successful, only then consider implementation.
“Finding and trialing new technology does not need to be a question of replacing existing systems. Companies do not need to wait for a significant transformation and strategy but should go ahead and trial a tool or platform.” But it warns against deploying extra funds simply to “try something out” or working with a vendor for just a month or two. “Consider running a test with in-built mechanisms for learning, so both performance and under-performance become win-win scenarios. You either succeed or you learn. The leading organizations have procurement functions that are given the flexibility to experiment with new technology. They come up with ideas, observe a working model in action, fail fast, and move on to the next step if it doesn’t work. If it’s successful, it gets more budgets and the technology is implemented to deliver business benefits.”
It’s a thorough report, not just giving the current state of play, but answering questions about ‘where to go next.’
You can download the whole report for free here – Digital Transformation in Procurement: How Close Are We?
And Jaggaer has recently hosted a webinar discussing these results – that is available to listen to here.