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Procurement transformation a main focus at CPO Rising Summit

At the CPO Rising Summit, procurement experts discussed how procurement and supply chain will involve technologies like blockchain and AI, but some are skeptical this will happen soon.

BOSTON -- Corporate procurement and supply chain operations must undergo a modern digital transformation, or the...

companies will be left behind.

This procurement transformation will be driven by real-time processes and next-generation technologies that allow procurement professionals to see what's ahead and react immediately to any changes in the conditions, according to Tom Linton, chief procurement officer and supply chain officer for Flex, a company that designs and builds intelligent devices for a variety of industries.

Linton spoke at the CPO Rising Summit, a conference for procurement and supply chain professionals sponsored by the research firm Ardent Partners.

"We have to operate in real time and have systems and business processes that operate in real time, because the velocity of the business is going to continue to get faster," Linton said. "Everything, whether you're looking at technology or medicine or information systems, is moving faster. If we can't communicate or conduct business in real time, we actually consider ourselves failing or falling behind."

Every generation of every product today is smarter than the one that came before, Linton explained, and the average generational change is just nine months. Procurement needs to keep up with this increase in intelligence and start to take advantage of the new opportunities.

"How do we operate in an age of intelligence?" Linton asked. "How do we operate in a world which is not about the internet of things, because the things themselves are getting more intelligence? How do you develop a system of intelligence in procurement that helps us identify where we are in this progression?"

Visualization helps show where you're going

One way to do this is through visualization, where information is presented in more digestible ways for procurement.

"What if everything you need to know about your business is available to you in the same time that you can open Uber on your smartphone?" Linton asked.

Flex built a procurement environment, called Flex Pulse, which uses a 100-foot wall of interactive monitors that display up to 58 applications that tell what's going on with purchases and transactions in real time, according to Linton.

"The idea with Flex Pulse is to take that data and actually make it actionable," Linton said. "It's not doing anything truly different; it's just taking information and restructuring it to make it more digestible for the users."

The need for the procurement transformation to get up to speed was echoed at a subsequent expert panel.

Need to build trust in transactions

Mike Palackdharry, president and CEO of Aquiire, a Cincinnati-based B2B purchasing and supply chain process technology company, said real-time and next-generation technologies will drive the transformation.

"Things like blockchain, machine learning, AI and natural language processing are all about increasing the speed, the transparency and the trust within the supply chain. And all of that is about real time and how we create communications between buyers and sellers in real time, where we can trust the transaction and the accuracy of the data," Palackdharry said.

The ultimate goal will be to provide systems that guide buyers to where you want them to go.

"It's about how you use all of this real-time information that you're gathering to guide your users to the items that you want them to buy," said Paul Blake, technology product marketing leader for GEP, a provider of procurement technology in Clark, N.J. "It's not just about cost savings; it's about all the value you can bring into the supply chain and how we guide the users to those items."

Procurement software will need to be fully functional to allow users to do everything they need to do, but underlying complexity must fall under a simple user experience, according to Blake.

"Increasingly, because of our changing expectations and innovations in technology, it has to be able to be used in the same way as all the other technologies around us," Blake said. "The user experience, ease of use, seamless and formless interface with the technology is a major driving force in what's going to deliver value in the future. It's simplicity and complexity represented in the single whole -- difficult to achieve, but that's where I see it going today."

The future is now -- maybe

However, Blake cautioned the procurement transformation may not happen in the immediate future.

It's extremely difficult to change. If you have a supertanker of a mammoth corporation, you need 100 miles to slow down and change direction.
Paul Blaketechnology product marketing leader at GEP

"In the 1990s, there were major corporations that said, 'We think we need software that helps us to buy stuff more effectively.' And today, there are still corporations saying the same thing," Blake said. "There's enormous inertia in the corporate world toward adopting new technologies, not because there isn't the will to do something or the technology isn't there, but because it's extremely difficult to change. If you have a supertanker of a mammoth corporation, you need 100 miles to slow down and change direction."

The procurement transformation is interesting and has potential, but real time may not be quite ready for the real world of procurement today, according to conference attendee Lynn Meltzer, director of sourcing for Staples, the office supply retailer based in Framingham, Mass.

Staples transitioned from a largely paper- and spreadsheet-based procurement system to Coupa, a cloud-based procurement SaaS platform, in the past year, Meltzer said.

"If you are just now getting a procure-to-pay system and you're working to pull in your processes and your data and get there, then the timeline is highly compressed from where you are today to what they're saying about the next 10 years," she said. "It doesn't mean that it can't happen; you've just got to show the value and senior management fully buys in."

It will be important to define the next step on the procurement transformation journey, said Jaime Steele, Staples' senior director of procurement operations, and that probably won't involve advanced AI or blockchain yet.

"The next step, not only for us but in the procurement industry, is that you've got to punch this out to every system and company next," Steele said. "So, the realistic next step might be a simple chatbot, and nobody has done that well yet, so you need to solve the more basic things first."

Meltzer agreed that certain basic things need to be taken care of before procurement organizations can use technology like blockchains.

"When you think about blockchain, you can't move yourself to that until you figure how you can get that into a place where a robot can grab it or AI can figure out how to make some kind of decision on it," she said. "I think those are some of the things that need to get sorted through, and it's going to take a little bit of time. I would probably put it in five to 10 years, but I don't see full automation getting in there anytime soon."

Next Steps

The SAP Ariba Network now includes machine learning, AI, bots and blockchain.

Coupa challenges SAP in procurement software market.

Evaluate your requirements before choosing an e-procurement system.

Dig Deeper on ERP procurement and purchasing

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What next-gen technologies will drive the procurement transformation?
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RPA should be utilized for all of the high volume, repetitive events/actions/transactions in at least the back office to start. P2P, O2R... 

Applying AI, ML and Cognitive to get smarter and learn more about what you didn't know you didn't know about your operations and processes is key to advancing them.  

Blockchain by definition means trust - there is no editing, no fooling - it's a shared ledger that's unalterable. Incorporating blockchain into contracts should be a no-brainer as a place to start.
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It doesn't matter if you're a small business or a global enterprise, in this day and age, digital transformation is not a buzzword - it's a necessary way of life. Most efforts, some 70% (by McKinsey, Forbes and others' reporting...) fail. Of that, 35% is due to people not ready for change. Disruptive Culture is critical to survival. Those that put off these available, and already proven (there are significant business use cases out there!) are subject to being left in the dust.
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