Digital Transformation in Procurement: How Close Are We? · Digital Procurement 2019 Digital Transformation in Procurement: How Close Are We? A Study Based on the Complete Results

Digital Procurement 2019

Digital Transformation in Procurement: How Close Are We?A Study Based on the Complete Results of the Global JAGGAER Digital Procurement Survey

In Cooperation With

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Digital supply networks are evolving, connecting all parts of the supply chain,

and insight-driven organizations are applying advanced analytical capabilities to enhance

performance. Digital transformation is inevitable and high performing organizations

are leading the way on adoption.

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Table of Contents ..................................................................................................................................................................................3

Introduction ...........................................................................................................................................................................................4 Key takeaways ..........................................................................................................................................................................................................5 What you will learn from this report ................................................................................................................................................................. 6

What does digital transformation mean for procurement? ......................................................................................................................6 Leading and lagging indicators..........................................................................................................................................................................8

Part 1: Survey Findings .........................................................................................................................................................................9 Process efficiency is currently seen as the key benefit ............................................................................................................................9 Still a 50-50 split ......................................................................................................................................................................................................9 Integration is the next step .................................................................................................................................................................................12 P2P the most widely automated procurement process ..........................................................................................................................14 Uncertainty about where to go next ...............................................................................................................................................................15 Predictive analytics popular but skepticism persists ................................................................................................................................. 17 Process efficiencies regarded as the most important benefit ...............................................................................................................19 Insufficient budget is by far the largest obstacle ........................................................................................................................................21 Integration of data, systems and processes: some progress, but still largely manual ............................................................... 22 Which data points are being integrated? .....................................................................................................................................................24

Part 2: The Future of Procurement ................................................................................................................................................. 28 A missed opportunity? ........................................................................................................................................................................................ 28

Artificial Intelligence ............................................................................................................................................................................................ 28Chatbots, NLP & guided buying ..................................................................................................................................................................... 29Blockchain in procurement ............................................................................................................................................................................... 29 Predictive and prescriptive analytics ............................................................................................................................................................ 30 Robotic process automation (RPA) ................................................................................................................................................................. 30 Internet of Things (IoT) .........................................................................................................................................................................................32 Adding it all up: what does digital procurement have to offer? ...........................................................................................................32 Cognitive procurement .......................................................................................................................................................................................32 Two key applications of cognitive procurement........................................................................................................................................33 The “digital workforce”: Will AI replace procurement experts? ...........................................................................................................33 The human factor ..................................................................................................................................................................................................35 An example: predictive order management ...............................................................................................................................................35

Next Steps Towards Digital Transformation ...................................................................................................................................37 The JAGGAER approach to digital procurement strategy .....................................................................................................................37 The value of a single platform ..........................................................................................................................................................................38

AI Experts Weigh In: The Outlook For Digital Procurement ― What’s Next? ........................................................................... 38 Understanding the context ................................................................................................................................................................................38 Drivers of digital transformation in procurement ..................................................................................................................................... 39 Measuring the results ...........................................................................................................................................................................................41 Priming for success ................................................................................................................................................................................................41

Survey Demographics ....................................................................................................................................................................... 43

JAGGAER Locations .......................................................................................................................................................................... 44

The Survey Questionnaire ................................................................................................................................................................ 46

Acknowledgements ........................................................................................................................................................................... 52

CONTENTS

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In our Digital Procurement 2017 report we wrote about the high expectations that new digital technologies would drive the “greatest revolution to impact procurement in decades.” Where are we two years on? Have the necessary budgets been assigned? What progress have organizations made with the integration of data that is necessary to drive digital transformation, and to provide the basis for data analysis?

These are the kind of questions to which we sought answers in the 2019 survey. A total of 321 procurement professionals, representing a cross-section of public sector, production and non-production sectors from around the world, took part. The results suggest that overall, progress has been very slow. Many organizations are hesitant about investigating new digital technologies such as artificial intelligence, robotic process automation and blockchain. For example, 52% do not plan to invest in artificial intelligence. However, a significant minority of companies are indeed embracing these new technologies and seeing results. At the moment they tend to be large enterprises, concentrated in certain vertical industries. Where they lead, others will follow.

INTRODUCTION

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KEY TAKEAWAYS

Larger organizations are more advanced both in terms of awareness and level of technology and personnel

Organizations most commonly cite lack of budget and lack of the requisite IT skills as reasons for any lack of progress

Interest in predictive analytics is focused on risk management and spend management processes

is a priority for investment for the automation of procure-to-pay processes RPA

of organizations have automated procure-to-pay (P2P) processes 40%of procurement professionals rate their digital knowledge as up-to-date or excellent50%

64% of companies have no plans yet to invest in blockchain

62% of companies have no plans for digital assistants

Priorities for InvestmentPredictive Analytics

Internet of Things (IoT)

Robotic Process Automation (RPA)

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30%don’t integrate data fromupstream/downstream processes

54%do so manually

16%have automated the integrationof data from end to end

The level of integration in organizations has not progressed over the past two years

54%started the process

2%claim to have

fully automated

16%still rely on fax and paper

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The 2019 survey shows that the majority of companies (54%) have digitized standard procurement processes, but it also reveals a low level of integration of procurement processes. Many organizations state that they lack the necessary budgets to do so, while others cite poor data integration as an obstacle. The majority still need to overcome the same challenges that we identified in our 2017 report, i.e. relating to technology, awareness of digitalization and budget. The percentage of organizations that have fully integrated procurement using smart technologies remains stuck at 2%, where it was in 2017. “Fully integrated procurement” means

that across the full spectrum (from spend to pay) automated processes “push” information that is stored in a central location and is subsequently available where it is needed elsewhere across the procurement spectrum, i.e. in subsequent process steps, and for subsequent analysis. When it comes to personal awareness and knowledge of digital technologies, the 2019 report once again revealed a split between those who say they know enough to understand their potential and those who say they lack such understanding. Nevertheless, there has been a jump in the number who say their knowledge is “excellent.”

The short answer: it depends who you ask!

Digital transformation has been a hot topic in procurement for some years now. It is a top priority for CPOs that want their organizations to achieve greater process efficiency, to achieve more with less. Yet there is still a lot of confusion and, as our survey shows, a relatively low degree of familiarity with what exactly “digital” means and implies. Fifty percent of those surveyed stated that their knowledge of digitalization was either non-existent or in need of improvement.

One reason for the confusion is that three terms are used interchangeably: digitization, digitalization and digital transformation.

Digitization is the simple conversion of analog to digital. This can be as simple as converting paper-based information to digital data that can be stored on a computer or other storage device. Digitalization can be defined as “making digitized information work for you”. For example, centralized data about suppliers, such as contract information and performance records help procurement professionals to stay informed about what types of problems they might encounter. However, while this information is useful and saves time, it has not yet fundamentally altered the way procurement professionals go about their day-to-day business. Digital transformation comes about when digitization and digitalization come together with advanced technologies to enable the creation of new business models. To take an example with which we are all familiar: analog films

What you will learn from this report

What does digital transformation mean for procurement?

FROM DIGITIZATION TO DIGITAL TRANSFORMATION

CONVERSION (DATA) ADAPTION (PROCESS) CREATION (BUSINESS)

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were digitized, processes were created for searching and downloading them and, combined with the new technology of smart TV, movie streaming services have emerged that have, in part at any rate, displaced traditional broadcast TV. The Hackett Group defines digital transformation as “the creation of business value by improving customer experiences, operational efficiency and agility by fundamentally changing the way organizations innovate, operate, deliver products and services, engage with stakeholders and execute work, using digital technologies as the enabler of holistic transformation.” But why should procurement professionals from the CPO downward embrace digital transformation? Where is the “what’s in it for me?” A common but understandable misconception is that digital transformation in procurement implies the replacement of humans by robots or artificial intelligence-based systems. “How can you improve customer experiences if you remove human beings from the equation?” might be a typical response. While it is true that some human roles will be replaced by technology-based solutions, human beings will be no less vital to the future of procurement than actors and directors are vital in the era of streamed TV. However, the focus of human activity will change, and change fundamentally. Digital transformation has been discussed for some years now, so given the low level of deployment revealed by our survey, it should come as no surprise if you run up against the skeptical view that digital has not delivered what it promised. But when people talk about the “digital transformation of procurement,” what they usually mean is digitization or digitalization. For example, in the procure-to-pay (P2P) process:

• Scanning invoices is a typical example of digitization • The use of an eProcurement tool is an example

of digitalization These are important steps, but they essentially involve the automation of current processes rather than a fundamental change in the procurement function’s modus vivendi. Digital transformation requires more and starts with an understanding that technology is an enabler and not an end in itself. Digital transformation involves examining, analyzing and re-engineering core procurement processes. One of the ways in which leaders are re-engineering processes is to make them run less sequentially and more in parallel. This can only happen when information is not only digitized and digitalized but integrated across processes.

Let’s take contract management as an example, not only because traditional approaches to contract management have been difficult, time-consuming and error-prone, but also because contract management has generally been stuck at the end of the source-to-contract cycle. This is often the cause of inefficiency. “When supplier selection gets to the contracting phase, procurement often finds that there are additional considerations that hamper or even derail the sourcing process. Suppliers operating in foreign jurisdictions, for example, may not meet regulatory requirements tracked by legal, disqualifying them even after winning the bid. Requested documentation could cause the supplier to change the specifications for its product, invalidating the earlier quote.” (SpendMatters) With advanced software solutions such as artificial intelligence and robotic process automation (RPA), CLM considerations can be moved to the start of the process. Past contracts can be mined for data such as price, supplier performance and distribution of supplier by subcategory or geography, thereby reducing the likelihood that suppliers will subsequently be disqualified. In addition, a digitally transformed CLM solution will eliminate a lot of manual effort and make it easier to manage complex approval processes, notifying the appropriate parties and involving them only as much as needed to complete the contract. Artificial intelligence will further enable various algorithms to perform sophisticated contract analysis, automatically identifying obligations and trends that can be integrated into broader risk management efforts. Finally, a digitally transformed CLM system should integrate with other systems and software, all the way from Microsoft Word to SAP, and it should be capable of rapid global deployment while offering the flexibility to support localized variations in workflows, rules construction and templates. At its core, therefore, digitally transformed procurement is a radically new approach to the way the function operates and how it connects with all of its partners. It is not the usual continuous improvement approach that was at the heart of many previous digitalization initiatives. It is, in fact, an opportunity to step back and focus on a broader picture that covers more than the use of tools.

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Even though most organizations integrate data, they still do so on a limited scale. This jeopardizes their ability to make well-informed decisions and may lead to a failure to recognize cause-effect relationships. An important aspect related to data and indicators is linked to a well-known topic in performance measurement: leading vs. lagging indicators. Leading indicators tend to communicate changes in the environment. They are generally predictive in nature. A change in such an indicator highlights a future change in lagging indicators, which measure a result or outcome. Leading indicators measure an input of a process, lagging indicators its output. For example, in procurement performance management, measured savings is a typical lagging indicator. The percentage of spend that is actively managed is a leading indicator. The rationale behind this is easy to understand: the more spend you manage, the more results you get. An organization that measures both could benefit from early warning signs that delivered savings may shrink because less spend is being managed than before (which is normally not the case).

This concept applies to every process and it is why the topic of integration is so important. Organizations have digitized information and digitalized processes, so they have much more data available than before. In addition, there is more and more external information available. For example: • Public information available on the internet, e.g. OECD and

other national statistics bureaus for demographics, industry, labor statistics by country; LME (and others) for raw material prices; professional associations, etc.

• Information from third party providers specialized in certain types of data, e.g. Dun & Bradstreet, LexisNexis, riskmethods, ecovadis, RapidRatings, etc.

Therefore, integration is much more than just an internal issue and refers to integrating any source of information that is relevant to a process and that can influence its outcome.

Leading and lagging indicators

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Technology that enables the digital transformation of the procurement function has been with us for some time and continues to evolve and extend its reach through organizations of all sizes, enabling them to maximize the value they obtain for the money they spend while streamlining procurement processes from source to pay. The ability to master new technology and put it to effective use can therefore be a critical success factor in any industry sector. Our study reveals that the procurement profession is evenly split – almost 50-50 – between those who claim to be up to date on digital technology trends and those who think their knowledge falls short of what is required.

Compared with our last survey in 2017, the main change has been in the number who say they are not merely up to date, but whose knowledge is “excellent” – up from 3% to 10%. The percentage who said they were simply up to date showed a corresponding fall. This suggests that there is a significant minority of technology “first movers” and “fast followers” but many are lagging behind.

Although the results suggest a lack of progress since 2017, JAGGAER is confident that the procurement function is at an inflection point. As the Hackett Group pointed out in

Still a 50-50 split on digital awareness

Process efficiency is regarded as the main benefit of digitalization, ahead of cost optimization. According to our survey respondents, the technologies that have the highest potential in this regard are supplier management, eProcurement, and eSourcing. All three are at the core of procurement activities and set the ground for the most critical activities like category management and supplier development: from defining strategies (analytics, eSourcing), to definition (SRM) and execution (eProcurement and eSourcing). It follows, therefore, that boosting these areas will also enhance performance. The greatest obstacle to digitalization is the lack of data integration. There are many tools that perform a particular function or process very well (best of breed) but they are not integrated to take the next step. Data is “siloed” and this can lead to conflicts (which silo contains the “right” data?) even if the data is compatible. A unified data source, i.e. on a single platform, is necessary to ensure data integration and data quality. With regard to more advanced technologies, such as blockchain, robotic process automation, and digital assistants/chatbots in particular, the results show that companies are still rather reluctant to implement them. There is little change from 2017. Only a small number of respondents seemed to have a clear idea of how these tools could be used for digital procurement to create value for their companies. In general, the readiness to invest is still moderate. Most of the respondents prioritized analytics (predictive KPIs and big data) as an area where they would be willing to invest. This confirms

the adage that in today’s business world “data is gold.” Without the right insights, it is difficult for organizations to move beyond the usual tactics and strategies. At the bottom of the scale are blockchain, where 64% of respondents say they do not (yet) have plans to invest, virtual and smart assistants and/or natural language processing (61%), AI (52%), and prescriptive analytics (50%). These results correspond with the areas where companies estimate they will achieve the highest value gains. This shows that companies are taking a cautious approach and are not ready to take risks and invest resources in unproven technology. According to the Hackett Group, performance (e.g. cost, quality and cycle time) is the area where digital transformation of procurement is currently having the greatest impact. In its 2019 Key Issues Study, 40% of respondents stated that digital transformation was already having a high or very high impact on performance, compared with 32% saying that it was already having a similar impact on roles, skills profiles and needs, 32% stating that it was having high or very high impact on the achievement of enterprise objectives, and 31% stating that it was having a similar impact on their organization’s service delivery model. However, a majority reported that they expect digital transformation to have a significant impact over the next 2-3 years in all of these areas, rising to 78% who believe it will have a high or very high impact on the service delivery model.

PART 1: SURVEY FINDINGSProcess efficiency is currently seen as the key benefit

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As in 2017, we identified a strong correlation between the size of the organization (represented by its revenue) and the level of maturity/awareness. This is easily explained by both “push”

factors (larger companies need to manage larger, more dispersed teams and have larger IT budgets) and “pull” factors (vendors tend to focus on clients that have the larger budgets).

its benchmarking report at the end of 2018, “world-class organizations can continue to reduce costs by embracing digital technology, while the peer group can leverage the same technology to catch up faster at less cost.” Late adopters will be pulled along in the draft created by incumbent leaders and will, in some cases, overtake them, so long as they can secure the executive support, budgets and skillsets that will be required.

The advent of cloud-based technologies, in particular those hosting machine-learning apps that can crunch through vast amounts of information to make effective predictive decisions, makes it easier than ever for late adopters to catch up faster than was the case in earlier periods of rapid technological change.

Q1: Personal knowledge of digitalization of procurement professionals by company size (2019)

Q1: Personal knowledge of digitalization of procurement professionals (2017-2019)

20192017

9% Non-existent40% In need of improvement 48% Up-to-date3% Excellent

9% Non-existent41% In need of improvement 40% Up-to-date10% Excellent

Excellent

Up-to-date

In need of improvement

Non-existent

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Revenue–L Revenue–M Revenue–S

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When we turn to personal knowledge of digitalization by sector (public sector, production and non-production) we see some interesting contrasts. A surprisingly large percentage of respondents in the production sector (approximately 18%) confessed that their knowledge was “non-existent.” Relatively few gave this response in the public and non-production sectors. Half of respondents in the public sector stated that their knowledge was “in need of improvement”; on the other hand, 40% considered themselves “up to date.” Overall, respondents in the non-production sector rated their knowledge better than

those in the production sector, though in both cases around 10% stated that their knowledge was “excellent”.

In terms of regional variation, we were somewhat surprised that a significant proportion (20%) of North American respondents stated that their knowledge 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

Question 1: Personal knowledge of digitalization of procurement professionals by sector (2019)

Question 1: Personal knowledge of digitalization of procurement professionals by region (2019)

0%

10%

30%

40%

50%

60%

20%

Non-existent In need of improvement Up-to-date Excellent

Public Sector Non-Production Sector Production Sector

0%5%

25%30%

35%40%45%50%

10%15%20%

Non-existent In need of improvement Up-to-date Excellent

MENA APAC Europe North America South America

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was “up to date” (47%), while only 30% of North Americans gave this response. Respondents from the Middle East and North Africa occupied the middle ground, with 47% stating that their knowledge was “in need of improvement” and 40% “up to date.” We should, however, not read too much into some of these answers, which undoubtedly are influenced to some

extent by external factors. For example, perceptions may be influenced by media coverage of technological advance in each of these global regions. Moreover, it should be noted that regions outside of North America and Europe were not as well represented in the survey

Our 2019 survey indicates that the majority (54%) of organizations are on the road to digitalization, with standard processes established and automation started. After some discussion we came to the conclusion that the way the questions were phrased in 2017 skewed the results somewhat, particularly in question 2. In 2017, respondents chose the second option if they had so far only established their standard processes. If they had already started digitalization, they chose the third option. In 2019, however, the second option has already incorporated the start of the automation processes – which the majority of companies (54%) has already done. Consequently, the third option in 2019 already requires the finished automatization of the standard processes and their integration to a high extent; hence the drop from 39% in 2017 to 23% in 2019. We think this gives a more accurate picture of the extent to which the processes are automated.

The fourth option remained the same, as did the result: a mere 2% of respondents stated that they have fully digitalized and integrated all processes with the use of new technologies. This figure has not changed since 2017, so there is plenty of scope for improvement over the coming years. There has also been no significant shift in the proportion of organizations that are still essentially reliant on fax machines and paper for procurement – around a fifth.

In its 2018 CPO Survey Deloitte also found that “the level and speed of digitalization across procurement functions is lower than expected and needed” and that only a small minority (4%) of procurement leaders themselves believe that “procurement has a big influcence in delivering their organization’s overall digital strategy.”

Integration is the next step

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Once again, there is a strong correlation between the usage of these tools and the size of the organization.

Question 2: Companies with advanced level of digitalization in procurement by company size (2019)

Question 2: Level of digitalization in procurement (2017-2019)

Standard processes establishedand automation started

Standard processes fully digitized and integrated + smart technologies

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Revenue–L Revenue–M Revenue–S

Fax/paper

Standard processes automated and mostlyintegrated + analytics for KPI analysis

2017 2019

22% Fax/paper37% Standard processes39% Most processes digitalized (SRM, eSourcing,...)2% Fully digitalized + smart technologies

21% Fax/paper54% Standard processes23% Most processes digitalized (SRM, eSourcing,...)2% Fully digitalized + smart technologies

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In our 2019 survey we introduced a new question: what are your priorities for investments in SRM, eSourcing and eProcurement technologies? A substantial number (40%) of respondents stated that they had already automated procure-to-pay (P2P) processes. These are also priorities for many companies in the coming year.

The areas where process automation is already advanced or planned for the next one to three years (circled) are supplier management, procure-to-pay, spend management and invoice-to-pay.

Approximately a third of respondents named quality management/supplier development and analytics as priorities for the next year. Interestingly, given the current state of uncertainty in international trade, supplier risk management is a relatively low priority, with well over a third of respondents stating that their organization had no plans to automate processes; only 15% have already automated risk management.

P2P the most widely automated procurement process

Question 3: Processes planned for automation in SRM, eSourcing, eProcurement (2019)

0%

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20%

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40%

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Source-to

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-to-Pay

Procure-to

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Manag

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Supplier D

evelopment

Already automated

Automation planned in >1 year

Automation planned in >3 year

Automation planned in >5 year

Currently no automation planned

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Uncertainty about where to go next

Question 4: Which of these digitalization topics is your company planning to invest in? (Tick all that apply) (2019)

Question 4: Which of these digitalization topics is your company planning to invest in? (Tick all that apply). (2017)

Not planned>1 year >3 year >5 yearAlready in use

0%

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20%

30%

40%

50%

60%

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80%

90%

100%

Big DataAnalysis

Algorithms/Smart Work-

Flows

DigitalAssitants

PredictiveAnalytics

SRM-eSourcingeProcurement

Tools

RPA Blockchain

Not planned>1 year >3 year >5 yearAlready in use

0%

10%

20%

30%

40%

50%

60%

70%

80%

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All

Prescrip

tive Analy

tics

Virtual

and Smart

Assista

nts /

Natural

Languag

e Processi

ng

Blockch

ain

Internet of T

hings

SRM, eSourci

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eProcurement T

ools

Predictive

Analytic

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Robotic

Process

Automati

on (RPA)

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Question 4: Number of employees in tactical procurement in companies where digitalization measures are already in place or investment planned in the next 1-3 years (2019)

This year’s Hackett CPO Agenda revealed that although many companies are making progress with the adoption of digital technologies, in particular eProcurement, this adoption is typically limited in scope. It seems that many organizations are still not quite sure where to start, or where to go next with many new technologies.

This finding is confirmed by our own. Half have implemented SRM, eSourcing and eProcurement; in all other areas of procurement technology, organizations that have made any investment are in a minority and the numbers are scarcely different from 2017. The biggest change is in robotic process automation (RPA), which, according to the Hackett Group, “refers to the automation of routine, repeatable tasks through existing user interfaces, permitting the execution of simple rules-based logic in situations where there is no room for interpretation.” It appears that many organizations have acted on the intention to invest as stated in 2017. RPA is especially relevant to tasks that require data extraction, enrichment and validation, and interaction with multiple screens and/or applications. These include catalog management, invoice processing and supplier information management, for example.

Despite the fact that artificial intelligence, predictive analytics and prescriptive analytics have been the focus of attention for many in the analyst community, progress has been slow here. The

main focus over the next one to three years will be in predictive analytics and the internet of things (IoT, circled); in other areas the majority of organizations report that they have no plans.

This “wait and see” attitude is more understandable in the case of blockchain and digital assistants, which are still relatively new technologies and the benefits for procurement are not widely understood.

The survey results made it very clear that it is necessary to have the right person in place to drive the adoption of new technologies forward. In many organizations, procurement specialists have limited knowledge of new technologies, so cross-disciplinary project teams need to be established representing procurement, IT and HR and with executive sponsorship. A further major challenge is the lack of data integration, which further emphasizes the need to get IT experts involved.

Companies that have already invested in digitalization or plan to do so over the coming years tend to have few employees still engaged in tactical procurement. Nearly a half (48%) have fewer than five employees in tactical procurement.

Number of employees in tactical procurement in companies where digitalization topics are already in use or investment planned in the next 1-3 years

48%<5 or no employees

29%5-20 employees

23%>20 employees

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In this question we asked survey respondents to match digital technologies to specific processes. Predictive analytics technology is the most popular, in particular for risk management, analytics and spend management processes. RPA is the second priority for investment, especially for the automation of invoice- to-pay and procure-to-pay processes. Artificial intelligence is next on the list of priorities for investment and is rated to be useful in all processes in procurement. Prescriptive analytics technology is also regarded as having application in spend management. Digital assistants are not yet seen as priorities.

Blockchain is the new technology that procurement organizations are least likely to invest in; if at all, it is likely to be in the invoice-to-pay processes.

These technologies are covered in more depth in Part 2.

More than half of respondents stated that they did not regard these technologies as applicable to procurement processes. This corresponds to the 50% who stated that they lack knowledge about digital procurement technologies.

Predictive analytics popular but skepticism persists

Question 5: Which emerging technologies are you planning to use to support the following processes? (2019)

Not Applicable

4% Blockchain

20% Robotic Process Automation (RPA)

17% Prescriptive Analytics

28% Predictive Analytics

12% Virtual and Smart Assistants / Natural Language Processing

19% AI

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If we look purely at the technologies that are being used to support procurement processes, analytics (both predictive and prescriptive) emerge as the most important. This was also the most important growth area (after cloud) identified in the Hackett Group 2019 report, with 60% of respondents expecting broad-based adoption over the next two years, and 15% expecting limited adoption.

Companies that plan to use emerging technologies to support procurement processes also tend to have few employees still engaged in tactical procurement. Well over a third (38%) have fewer than five employees in tactical procurement.

Question 5: Number of employees in tactical procurement in companies which plan to use emerging technologies to support procurement processes (2019)

Question 5: Technologies only: most popular emerging technologies to use to support procurement processes (2019)

38%<5 or no employees

37%5-20 employees

25%>20 employees

Number of employees in tactical procurement in companies which plan to use emerging technologies to support procurement processes

19% AI

12% Virtual and Smart Assistants / Natural Language Processing

28% Predictive Analytics

17% Prescriptive Analytics

20% Robotic Process Automation (RPA)

4% Blockchain

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Until relatively recently cost savings were seen as the main benefit of digital transformation in procurement, and while this is still regarded as important, it has been overtaken by process efficiencies in the eyes of the procurement professionals that we surveyed. A significant number also mentioned operational improvement, whereas relatively few mentioned process

governance, regulatory compliance, reporting and security – suggesting that the focus is still geared towards the tactical rather than the strategic. Procure-to-pay and invoice-to-pay are regarded as the specific processes where technology will have most impact. In terms of cost optimization, the biggest impact is expected in spend management.

Process efficiencies regarded as the most important benefit

Question 6: How could the following processes and technologies impact procurement in your company? (2019)

Cost optimizationOperations improvementRegulatory compliance improvementImproved security

Process improvementProcess governanceImproved transparency (reporting/KPIs)Not applicable

Source-to

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obotic Proce

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FQ etc

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and Smart

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Companies that see a big impact of AI on procurement also tend to have few employees still engaged in tactical procurement, with 41% having fewer than five employees in tactical procurement.

Question 6: Number of employees in tactical procurement in companies which see a big impact of AI on procurement (2019)

Question 6: Processes and technologies that have the biggest impact on procurement (2019)

23% Cost optimization

29% Process improvement

18% Operations improvement

9% Process governance

7% Regulatory compliance improvement

10% Improved transparency (reporting / KPIs)

4% Improved security

41%<5 or no employees

38%5-20 employees

21%>20 employees

Number of employees in tactical procurement in companies which see a big impact of AI on procurement

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There is clearly some frustration among procurement leaders that they can see the way forward in digital transformation, but there are a number of obstacles in their path. In many cases procurement departments simply do not have the budget to cover investments in digital technologies. This reflects the finding of the Hackett CPO Agenda, which reported that “procurement expects its budget to grow at a much slower pace this year than in 2018 (1.3%, versus 2.7% last year).”

Another prominent challenge is a lack of IT know-how among staff. This was also the finding of the Deloitte Global CPO Survey 2018, which stated that “51% of procurement leaders do not believe that they have the capability in their teams to deliver their procurement strategy.” Lack of data integration figured as a major obstacle to the effective application of digital technology, too. Our own finding also corresponded to those of Deloitte, with 46% citing data integration, and 45% data quality.

Insufficient budget is by far the largest obstacle

Relatively few stated that lack of executive vision and support or lack of strategic vision were major challenges. Given that (as seen in Q6) it is widely understood that these technologies can

bring cost optimization and process efficiencies it is therefore curious that the budgets are not (yet) being made available to modernize procurement processes.

Question 7: The challenges in modernizing procurement processes in organizations ranked (2019)

Source: Deloitte Global CPO Survey 2018

Budget

Lack of data integration

Change management

Lack of executive vision/support

Lack of strategic direction

Not sure how to apply new technologies to current work

of datatechnology

Lack of data integration

46%

Skills capabilityof analyticsresources

29%30%

Quality of data

45%

Poorsystems

adoptions

24%

Technology

18%

Availabilityof data

20%

Other

7%

Availabilityof analytics

resource

24%

Limitedunderstanding

knowledge

27%

Limited senior stakeholderendorsement and

prioritization

Data People Systems

The biggest challenge A big challenge A challenge Neutral Less of a challenge Not a big challenge Not a challenge

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Integration of data, systems and processes: some progress, but still largely manual

Question 8 - Question 12: Current level of digital integration (2017-2019)

To understand the silo effect, we asked our respondents about their level of integration for the following critical processes:

• Category management • Supplier management • Sourcing decisions (TCO / TVO) • Supplier evaluations • Supplier collaboration

In each case we asked if they factored in data, and if so, was this a manual process to “pull” the information that is needed (e.g. to get data from a system and integrate it into another one or into Excel), or was it an automated process that “pushes” the information where and when needed (i.e. data is generated as process output and stored in a system where it is available in subsequent process steps, if needed, and in the system used to run that process). The 2019 results showed few signs of progress on 2017. Most integration is done manually and around a quarter of respondents have no integration whatsoever in some of these processes. A more detailed analysis of the results shows that the processes and data which most organizations integrate belong to core areas of procurement with a clear management focus:

1. Actual supplier performance into sourcing decisions (TCO/TVO)

2. Actual supplier performance into category management 3. Logistics / landed costs into sourcing decisions (TCO/TVO) 4. Electronic transmission of PO/confirmations in

supplier collaboration 5. Material and process costs into sourcing decisions

(TCO/TVO) Processes and data that most organizations do not integrate include:

1. Digital competence of suppliers in supplier management 2. Internal costs into sourcing decisions (TCO/TVO) 3. Supplier footprint vs. own footprint in

supplier management 4. Supplier information management in

supplier collaboration 5. Suppliers’ potential for innovation in supplier management

20192017

17% No integration

22% Manual integration (pull)

61% Automated integration (push)

30% No integration

54% Manual integration (pull)

16% Automated integration (push)

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Curiously, far fewer respondents stated that they had automated data integration in the supplier evaluations area than in 2017, though at the same time, there seems to have been some movement from “no integration” to “manual

integration”. This may simply reflect a changed perception of what constitutes automation. In other respects, the picture is little changed.

The organizations that do integrate data mostly rely on manual integration in the following areas:

1. Financial and supply chain risk integration into sourcing decisions (TCO/TVO)

2. Logistics / landed costs into sourcing decisions (TCO/TVO) 3. Raw material prices and changes into sourcing decisions

(TCO/TVO) 4. Financial and supply chain risk integration into category

management Furthermore, the study results also indicate that there is a low level of integration between processes. This will be covered in more detail later in our study, but, in brief, these results can be explained by the fact that, in the past, technology was implemented in procurement on a process by process basis. For example, companies would implement an SRM solution without looking at the other upstream and/ or downstream processes that fed into it or used data from it. Currently, 30% of organizations do not integrate data between major processes. In the instances where teams do successfully integrate data, they mostly do it manually. Only 16% of the companies surveyed have end-to-end and integrated processes.

The current level of digital integration is low and there has been no progress over the past two years – in fact, our survey results suggest that things have moved backwards, with 30% now saying they have no integration, compared with 22% in 2017. Note however that in 2019 there are more factors to assess in each category than was the case in 2017, so it is possible that in some cases the factors added are less integrated, which may explain why the general level of integration is apparently lower.

According to the Deloitte survey, 46% of procurement leaders believe that the low level of data integration is a major barrier to the effective application of technology procurement.

The level of integration is highest in category management and supplier evaluations; only around 25% of organizations have no integration at all in these areas. However, most progress had been made towards automating integration in the area of supplier collaboration, at 23% of organizations. But insofar as data is being factored, the overwhelming majority of organizations are currently doing so using manual processes, with little change in this respect since 2017. This is clearly a major obstacle to further digital transformation.

Question 8 - Question 12: Levels of integration in five key areas of procurement (2017-2019)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CategoryManagement

SupplierManagement

Sourcing Decision(TCO/TVO)

SupplierEvaluations

SupplierCollaboration

2017 2019 2017 2019 2017 2019 2017 2019 2017 2019

NO INTEGRATION MANUAL INTEGRATION (PULL) AUTOMATED INTEGRATION (PUSH)

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We then asked which data points have been factored into their strategies in each of the above areas. In category management, the data point most frequently factored in and processed automatically is consolidated spend, followed by supplier performance (circled in green). Data is also factored in for

supplier contract management, market trends and future requirements, but for the most part the data is processed manually. Least progress has been made in terms of supply chain risks, future innovation and governance & compliance guidelines.

In supplier management, most of the data is either not factored in at all or factored in and processed manually. Digital competence, global footprint and potential for innovation are the points where least progress has been made in terms of data integration.

Which data points are being integrated?

Question 8: Data points that are factored in for category management (2019)

Question 9: Data points that are not yet integrated for supplier management (2019)

Potential ForInnovation

Availability /Capacities

DigitalCompetence

GlobalFootprint

SwitchingCosts

Your Own PositionWith The Supplier

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

NOT FACTORED IN DATA IS FACTORED IN AND IS PROCESSED MANUALLY DATA IS FACTORED IN AND IS PROCESSED AUTOMATICALLY

NOT FACTORED IN DATA IS FACTORED IN AND IS PROCESSED MANUALLY DATA IS FACTORED IN AND IS PROCESSED AUTOMATICALLY

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ConsolidatedSpend

SupplierPerformance

Supply ChainRisks

FutureInnovation

(Technology,Development,

etc.)

Market Trends(Raw Materials

Prices, etc.)

Governance &ComplianceGuidelines

SupplierContract

Management

FutureRequirement(Quantities,

etc.)

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With regard to sourcing decisions, i.e. the supplier selection and award process, internal costs remain untouched by data integration in nearly half of the responding organizations, and a significant number have factored in no data points other than

price. Material and process costs and supplier performance are the data points that have most commonly factored in but only a small minority are processing this automatically.

Despite CSR and sustainability being objectives for most organizations, many have not yet integrated the relevant data in the area of supplier evaluations (circled in orange). Integration of data on supplier innovation – which is also likely to become an

important topic in the near future – is also relatively weak. Most progress has been made in the automatic processing of quality performance, price performance and supplier on-time delivery data.

Question 10: Data points that are not yet integrated for sourcing decisions (TCO/TVO) (2019)

Question 11: Data points that are not yet integrated for supplier evaluations (2019)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

None (OnlyPrice)

LogisticsCosts

Material andProcess Costs

Changesin Raw

MaterialsPrices

Internal Costs(e.g. Audits,Integration,

etc.)

CategoryStrategy

SupplierPerformance

Financial andSupply Chain

Risks

CSR /Sustainability

Other InternalCosts

NOT FACTORED IN DATA IS FACTORED IN AND IS PROCESSED MANUALLY DATA IS FACTORED IN AND IS PROCESSED AUTOMATICALLY

NOT FACTORED IN DATA IS FACTORED IN AND IS PROCESSED MANUALLY DATA IS FACTORED IN AND IS PROCESSED AUTOMATICALLY

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PricePerformance

CSR /Sustainability

ContractCompliance

ResponseTime

ServiceLevel

SupplierInnovation

QualityPerformance(Number of

)

SupplierPerformance

(On Time Delivery)

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Although supplier collaboration is the area identified by the survey where most organizations have now fully automated data integration, as noted above, a significant number of respondents stated that data has not yet been factored in at all. Data integration on quality management, customs

documents, forecasting and goods receipt is particularly weak. Nevertheless, there is a relatively high level of data on purchase orders, supplier database and requisitions & quotations being factored in automatically.

NOT FACTORED IN DATA IS FACTORED IN AND IS PROCESSED MANUALLY DATA IS FACTORED IN AND IS PROCESSED AUTOMATICALLY

Question 12: Data points that are not yet integrated for supplier collaboration (2019)

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

GoodsReceipt

Invoices SupplierDatabase

InventoryManagement

Requisitions,Quotations

Quotations CustomsDocument /Long TermSupplier

Declaration

QualityManagement /Improvement

Measures

Forecasting

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Procurement must become fully dedicated to advancing its capabilities in analytics, customer-centricity and agility,

while also investing in the right talent to help lead those changes. However, there is still a mismatch between what

procurement considers to be most critical for success and what it is able

to address.

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What do these trends mean for procurement? According to Spend Matters, AI in Procurement is about:

• Using systems and approaches that are able to learn behavior through education

• Managing structured and unstructured data • Supporting forms of expression that are more

natural for human interactions • Continuing to evolve as computers experience

new information, new scenarios and new responses • Unlocking new insights and enabling optimal outcomes

Artificial intelligence and related technologies open up many possibilities for implementation in the field of procurement, for example to analyze contracts, quality complaints, order income bookings, and purchase orders. The results are predictive analyses, which help companies avoid bottlenecks in the supply chain.

A recent experiment undertaken by associates and inhouse lawyers from global firms such as Goldman Sachs, Cisco and Alston & Bird, as well as general counsel and sole practitioners, proved the effectiveness of deploying AI to review risks in legal documents (in this case, five non-disclosure agreements (NDAs)). In the test, the AI software matched the top-performing lawyer for accuracy – both achieved 94%. Collectively, the lawyers managed an average of 85%, with the worst performer recording 67%.

If procurement does not investigate such possibilities and deploy AI in the near future it will be missing out on a huge opportunity. Conversely, those organizations that do embrace the new world will gain significant competitive advantages over their peers. Here are some more areas that CPOs should consider.

Artificial Intelligence

PART 2: THE FUTURE OF PROCUREMENT

Our report revealed a continuing lack of awareness of the new technologies that will transform procurement, so let’s take a whistle-stop tour of these technologies and what they can offer.

In the two years that have passed since our last survey report, artificial intelligence (AI) has progressed in leaps and bounds in many areas of industry and business. For example, Amazon Robotics is using a combination of artificial intelligence and advanced robotics to provide highly innovative logistics

solutions, requiring much less input by human labor. This means that warehouses of the future will look nothing like they do today; in place of hundreds of human beings, they will be operated by a lean personnel controlling robots that can work 24/7 and don’t even require lighting to see what they are doing.

This does not mean (as we discuss in the article that follows) that robots will replace human beings; rather, the focus will be on human beings as knowledge workers, aided by robots and machine learning.

A missed opportunity?

The World Economic Forum’s Future of Jobs Report 2018 predicts that while the technologies of the fourth industrial revolution will increasingly take over tasks from humans, these job losses can be offset by the creation of new roles.

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Blockchain is one of the hottest technologies under discussion in 2019, though our report shows a low level of awareness among procurement professionals and an absence of plans to invest in blockchain.

Blockchain technologies involve distributed databases that hold tamper-proof records of digital transactions. Blockchain and its associated applications could usher in a new era of supply chain and source-to-pay process efficiency.

In its October 2018 report, Gartner positioned blockchain at the start of its “hype cycle,” meaning the technology will see rapid progress over the next five to 10 years.

Blockchain-based innovations hold enormous promise, with a wide array of applications possible for procurement and supply chain, though Gartner sees an extended time horizon for it to reach what it calls the “plateau of productivity”. In other areas, such as smart contracts, things should move faster.

Natural language processing (NLP) represents a big step beyond the graphical user interfaces we currently use to interact with digital devices. Improvements in NLP open the door to new, more natural, and more intuitive interfaces that simulate conversation with humans (chatbots, popularized by Siri, Cortana & co.)

There are many uses for chatbots and digital assistants in procurement – too many to list here. However, the central issue is that procurement specialists are increasingly dealing with vast quantities of data, which means that a lot of their time is spent looking for information rather than using it. Chatbots will enable procurement specialists to converse with their AI-powered procurement software, which will do the heavy lifting involved in finding the relevant information and making intelligent suggestions as to what actions need to be taken in specific situations.

Through machine learning the chatbot will be able learn about your preferences and your organization’s policies and procedures.

Let us take just one example: guided buying. In guided buying, the chatbot or procurement assistant will suggest solutions based on preferred suppliers, preferred items, contracts in place, purchase history etc. This relieves the (human) procurement officer of most routine effort in the majority of cases but if, for whatever reason, the procurement assistant is unable to find a solution, there would be a smooth handover to the procurement officer.

The conversation could also involve suppliers directly, who could check availability and discuss conditions. Every conversation would be an opportunity to:

• Learn about a person’s preferences, which will speed up future conversations

• Enforce guidelines and procedures, which will prevent fraud and risk

• Secure authorization for further conversations (“is it ok to remind you when…”)

Again, this is just one example. The same approach can be applied across most of the procurement value chain.

Blockchain in procurement

Chatbots, NLP & guided buying

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You will also see a lot of discussion on these topics. To cut through the jargon, descriptive analytics interrogates big data to describe what happened in the past. Predictive analytics then use algorithms to intelligently tell you what is likely to happen in the future, and prescriptive analytics use a further level of intelligence in order to tell you what you should do, i.e. the best course of action.

In procurement, predictive analytics can be used to look at all the possible situations within demand planning, costs, profits, inventory optimization, logistics and transportation (and much more, too much to mention in full here). It enables organizations to better anticipate anomalies through their supply chain network and respond appropriately, given past conditions. Businesses can determine shipments, consolidate underutilized capacity, and assess potential future situations, ranking them by probability. Organizations are unlikely to have all of the information needed to enable reliable predictive analytics, so external data streams (e.g. for transport route optimization) are required.

Predictive analytics provides the necessary foundation for prescriptive analytics. This level of analytics offers the best possible action plans to reach a desired outcome while keeping the overall objectives in sight. There are two approaches to

prescriptive analytics: optimization (linear programming) and heuristics (using set rules to reach ideal decisions). Gartner reports that only 10% of companies are currently taking advantage of prescriptive analytics, and our own survey revealed that a similar percentage of respondents plan to invest in prescriptive analytics. However, Gartner also believes that this percentage will increase more than three-fold over the next four years.

A typical scenario where prescriptive analytics would benefit the procurement function would be to address disruptions to the supply chain. For example, what is the best course of action if your usual suppliers are unable to meet your demand due to a natural disaster? Another example is inventory optimization. With prescriptive analytics, store-level supply chain plans can recommend which items to reorder and when, not just now but in a range of “what if?” scenarios. This might involve a number of inputs including analyses of fluctuating (e.g. seasonal) customer demand, weather forecasts, which end-products will sell fastest or slowest in a given scenario (such as during a major sports tournament), etc. For example, a brewery or soft drinks factory will be able to optimize inventory based on weather forecasts, changing consumer preferences etc.

RPA has the potential to save procurement function literally years and years of manual effort. Despite the fancy name, the technology is quite simple in principle. RPA is software rather than machinery. It imitates the activity of a human carrying out a repetitive task within a process and then replicates those actions for future repetitions. Or to put it even more simply, RPA records a user’s clicks and drag-and-drops or keyboard strokes and then repeats those actions as directed, but does so intelligently (for example by entering the correct supplier name). Software robots can complete tasks such as opening emails and completing forms.

RPA may be used in conjunction with machine learning, but in contrast to AI, it is essentially a technology that, once implemented, stays the same, at least until the task or workflow changes. Or to put it another way, RPA is essentially process-driven, whereas AI is data-driven.

Vendor selection is easily one of the most time-consuming responsibilities in supply chain management. RPA can be deployed to carry out tasks such as the assessment of supplier creditworthiness, look through credentials and even finalize your selection based on predefined criteria. It can also be deployed to handle the bulk of your supply chain communication strategy. Used in conjunction with AI, RPA solutions can gather market intelligence, collect and organize data from vendors, sales and internal teams, create formal reports and communicate to all involved.

Given the potential savings this would bring, with the reduction of manual effort and the elimination of human error, it is perhaps surprising that 52% of respondents to our survey have no plans to invest in RPA. We expect that to change over the next five years.

Predictive and prescriptive analytics

Robotic process automation (RPA)

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There is no longer any question whether or not digital transformations are necessary

for procurement. CPOs representing larger companies with over $1 billion in annual spend under control may be incentivized to more aggressively pursue technology changes that they view as important for

competition in the long term.

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The Internet of things (IoT) is the extension of Internet connectivity into physical devices and everyday objects; it has already become familiar in many consumer applications such a smart refrigerators and smart cars. And on a much bigger scale, we are witnessing amazing things with the advent of highly energy-efficient smart cities. IDC forecasts that spend on IoT will surpass the $1 trillion mark in 2020.

But what can it do for procurement? One major example is traceability. IoT will increase the traceability of products and materials across the entire supply chain. In many situations, the ability to understand where products or materials are at any stage throughout the supply chain will be critical to business success. And in industries such as pharmaceuticals and food processing, the ability to track the materials and ingredients that make up a finished product is likely to become compulsory to meet regulatory requirements.

The internet of things is largely based on data collected by sensors and sent to a central location, where it can be analyzed for various purposes. An example is the optimization of transport

and logistics: sensors in delivery trucks can provide real-time information about the movement of goods but can also be used for applications such as condition monitoring; working with maintenance officers, procurement can then predict breakdowns and intervene before they actually happen.

Perhaps most importantly, the IoT will empower companies to gain visibility into their spend analysis by keeping a close eye on consumption patterns. The data that is generated is monitored continuously and analyzed for behavioral sets to optimize supply networks, allowing companies to gain a much better understanding of the needs and usage patterns of their consumers. This in turn empowers them to negotiate with suppliers in a more informed manner as they can estimate in advance what material and what quality and quantity is required. All these factors combined will contribute to cost savings and bring value for the procurement function.

In order to develop a vision of what a digital procurement organization is, and in order to realize that vision, it is important to look at digital procurement from an operating model point of view.

As the foregoing discussion of new digital technologies indicates, digitalization is not just about automating decade-old processes. It is about doing things in a new way that delivers value and growth to the rest of the organization more efficiently and effectively.

Increasingly, the umbrella term for the technologies we have described above is “cognitive procurement”. Cognitive procurement is a method of using disruptive technologies to aid in the management of the procurement function. It is the process of using self-learning technology to process data in order to aid in the process of acquiring or buying goods and services.

Procurement, being a very data-rich industry, is a prime candidate to reap the benefits of cognitive technologies. For one, there are many data points around raw materials, goods and services, transportation and delivery, and suppliers. It’s also based in transactions—thus, any system that seeks to help procurement professionals find better information faster can only speed up decision making and ultimately drive better ROI.

Cognitive technologies will give procurement the means to:

• Increase its own agility and responsiveness to both internal and external changes

• Enable the rest of the organization to be more agile

With the help of cognitive technology, procurement will deliver even more value to the rest of the organization and to the end-customer by transforming how companies deliver their products and services in an era of hyper-personalization and convenience.

Internet of things (IoT)

Adding it all up: what does digital procurement have to offer?

Cognitive procurement

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Digital transformation will not happen overnight but rather one step at a time. Organizations will decide at what pace they should proceed, based on a number of considerations. But two functions that are already ripe for cognitive procurement are sourcing and contracts.

Cognitive technologies can help with sourcing by continuously re-evaluating suppliers in order to achieve the greatest efficiency and value with the least amount of waste. Think about the implications of this in retail, for example. What if your system could use big data points to optimize decision making throughout the supply chain? What would this mean to your business or your customers? Intelligent sourcing could help you identify suppliers whose product capabilities best align with customer preferences; analyze spend; and eliminate under-performing suppliers without time-consuming research and manual data aggregation.

Cognitive technologies can also streamline contracting functions. What if you could automatically identify relevant terms and conditions against a legal library and taxonomy; or, administer contracts without third-party intervention. By employing cognitive systems, you can essentially shorten contract negotiation cycles and reduce costs by teaching systems to target ideal price points based on expected volume and contractual discounts.

Cognitive technologies like blockchain are eliminating the need for third-party services (i.e., banks, transfer services, card processors) to process transactions, giving both companies and suppliers quicker settlement. For companies that provide services and employ smart contract technology, they are able to register new clients automatically once a payment is sent. When data is able to move freely and transparently, it streamlines and speeds up the transactions.

Initially, the role of AI will be focused on operations. Finally, let us consider what the role of the procurement professional will be as the function goes through digital transformation. We often hear the phrase “disruptive technologies” – how will they disrupt the professional futures of procurement specialists? Will humans be replaced by the “digital workforce?”

Every time you book an airline ticket and hotel room online or use an app to complete a banking transaction, you are benefiting from digital transformation. As to the disruptive part: this technology has disrupted your normal routine, but in a positive way. You no longer have to visit a travel agent to book a vacation, and you no longer have to visit a bank branch to fill out a funds transfer form.

And there is some form of artificial intelligence behind many of the services you use online. Those offers that keep popping up all over the place? AI. Those chatbots that provide answers faster than a call center? AI.

It is that simple. But there is not (yet) quite the same commercial imperative to transform many B2B services, such as procurement, as there is in B2C. As shown by our survey results, until now, digital transformation in procurement has been largely focused on increasing efficiency by automating manual processes and helping organizations identify opportunities they may have previously missed, for example by bundling purchases.

There is a disconnect between companies’ interest in investing in predictive analytics and AI, and the actual state of their data and integration of data in their processes. Data is

processed manually in the majority of processes, and companies will need to make Master data management and data integration a priority before they can consider using tech like predictive

analytics or artificial intelligence.

Two key applications of cognitive procurement

The “digital workforce”: Will AI replace procurement experts?

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The next stage will be to make processes not merely faster, but smarter, through the application of predictive and prescriptive analytics and artificial intelligence, which will provide insights and knowledge to procurement experts and will, in some cases, relieve those experts of the need to make certain decisions. When this happens (and it is already happening within such organizations) we will see a far more radical development in the procurement function.

From a broader business perspective, digital transformation means adopting technology with a customer focus. Whereas until now the technologies have enabled process efficiencies either internally or between buyers and sellers, Hackett considers world-class organizations those that have adopted technologies that allow for greater engagement with internal and external customers, including cloud-based tools and portals that allow for a more interactive experience for customers. The problem for many organizations, however, is the lack of a formal strategy. Our research, and that of other organizations such as Hackett, has shown that many procurement teams lack a comprehensive plan and/or the talent required to move things forward effectively. The Hackett Group’s research showed that only 32% of procurement organizations currently have a formal digital strategy and only 25% have the needed resources and competencies in place today. Moreover, procurement budgets are shrinking.

In our survey, just 12% of companies said that they have already invested in AI. A further 14% plan to invest after one year. 46% have no plans to invest in AI and 10% do not plan

any automation where AI can be used. This suggests a serious lack of awareness of the ways in which AI could benefit procurement.

Our survey showed that the areas where procurement professionals expect most benefit from digital transformation are process efficiencies, cost optimization and improved operations. This, we believe, reflects the current level of progress and awareness in the function. So, will disruptive digital technologies such as digital assistants soon replace human decision-making?

It is a simple question, but research carried out by JAGGAER suggests that the answer is highly nuanced. You first have to ask, “What kind of decisions?” Procurement decisions typically fall into one of four “buckets”. The first of these concerns category strategy (such as how do I segment the purchasing of bought-in goods?), the second relates to awarding strategy (such as which supplier shall I award this contract to?), the third focuses on tactical decisions (such as what are the best transport options to ensure just-in-time delivery), and the fourth involves operational decisions (such as changing deadlines within a specific software tool).

Typically, a company might make 500 category decisions per year, 3,000 awarding decisions, 10,000 tactical decisions, and 100,000 operational decisions, with the impact in direct inverse proportion to the number of decisions.

Type of decision Category strategy Awarding strategy Tactical Operational

Typical number of decisions 500 Indirect: 100

Direct: 3,000 10,000 100,000

Impact Very high High Low Negligible

Difficulty Very high High Low Negligible

Risk Very high High Low Negligible

Decision matrix for the procurement function

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How difficult would it be for a digital assistant to reach the right decision in each case, and what would be the level of risk should the digital assistant make the wrong the decision? Strategic decisions will always be difficult for human beings to relinquish because of the quantity and quality of analyses that have to be considered: it would be very challenging indeed to construct a software application that could carry out market analyses, given that the market for each category is different and constantly changing. Because of the low number of strategic decisions, the historical data is relatively scarce and therefore not especially helpful in reaching the right decision. Moreover, the high-impact nature of these decisions implies a high level of risk if you get it wrong.

The opposite is true at the more tactical end of the spectrum: there are fewer factors to consider, making it easier to write an algorithm, and less data needs to be analyzed. Moreover,

a wrong decision can be more easily corrected, so there is less risk. The historical data required is available in thousands or tens of thousands of use cases, such as not-on-time-delivery, which is good for machine learning.

Thus, the conclusion must be that machine intelligence and digital assistants will be introduced at the operational and tactical end of the spectrum. The return on investment would also be high, due to the volume of decisions made here. JAGGAER has already succeeded in developing artificial intelligence-based tools that eliminate analog decision- making. For example, an application trialed with a leading German manufacturer is making decisions on whether suppliers will deliver components on time. It has shown an average 95% accuracy, far higher than can normally be achieved by humans alone.

The challenge for procurement experts is not that they will be replaced by artificial intelligence, but rather that procurement departments lack the skills and talent that will be needed to take advantage of artificial intelligence. They will need people with the right skills in place to take full advantage of what digital transformation can offer; they must work closely with IT and HR departments to move forward.

Overall, there will be a reduction in headcount in procurement and a focus on quality, not quantity. The Hackett Group’s 2018 benchmarking study found that top performers, thanks to their digital transformations, have 21% lower labor costs and 29% fewer full-time equivalent staff than more typical organizations.

Human judgment will always have a role to play, but many routine tasks are already being automated, and many more sophisticated decision-making tasks will be automated or semi-automated in the medium-term future. New skillsets in areas such as data science and analytics will take on greater importance, to some extent displacing traditional skills such as negotiation. And the performance of procurement leaders and their teams will be assessed on a broader range of metrics.

An example of the effective application of artificial intelligence in procurement is in predicting the probability of on-time delivery of goods and materials in direct procurement, which JAGGAER recently prototyped with a leading German manufacturing company. The JAGGAER OTD Predictor will provide immediate information about the likelihood of delays to deliveries from suppliers, enabling supply chain managers to mitigate risks of disruptions to production flows and reduce the costs that these can cause.

The OTD Predictor has been “trained” by feeding millions of line items through the algorithm to learn from previous events.

It uses 50 separate data dimensions to predict outcomes, enabling companies to move from reactive to proactive mode.

Because it relies on large volumes of data to make accurate predictions, its application is specifically for direct spend categories with a high volume of transactions. The OTD Predictor’s machine learning algorithms mean that these predictions should get even more accurate over time. For this to work, all of the data must be stored in a single platform for machine learning to take place. This is the biggest challenge within many companies.

The human factor

An example: predictive order management

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Deloitte’s view is that applying digital technologies to the procurement function will enable strategic sourcing to become

more predictive, transactional procurement to become more automated, supplier

management to become more proactive, and procurement operations to become

more intelligent.

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Our survey suggests that the 90% or so of organizations that have not yet achieved digital transformation must tackle two key problems. First, they must remove the data-related obstacles by integrating data across the spectrum from source-to-pay. As noted above, the digital transformation of procurement involves many processes working in tandem rather than sequentially, and analytics exploiting data from one area of the value chain to improve performance and efficiency in another. The way to do this is to move all data onto a unified platform – the approach that JAGGAER has adopted with the launch of JAGGAER ONE.

Second, procurement must make a stronger case to the organization’s leadership to demonstrate the value it can deliver. This is discussed in many reports, but with budgets not growing at an adequate pace, or in some cases even shrinking, procurement cannot deliver the value that digital transformation promises. Third, procurement must recruit talent with the skills that will be needed to take the next leap forward: professionals who understand data, IT and analytics. Apply these skills to complement traditional procurement expertise.

At JAGGAER, we believe more in evolution than in revolution. Organizations have to be pragmatic and build on their existing digital components.

1. Get Started: Build a strong digital base. Use Procurement technology to streamline and improve core processes. Our survey shows that most teams are there already: SRM, eSourcing, and eProcurement are in place. They should also extend this digitalization to supply chain management (supplier portal, webEDI, etc.). Also create a business case based on your vision and the potential improvements – and get your stakeholders on board!

2. Establish the Basics: Eliminate manual processes as much as possible or maximize the utilization of the processes that you have already digitized. Be sure to increase your analytics capabilities! Connect the dots between processes, your teams, and the suppliers to ensure that data flows smoothly. Our survey shows that this is where most organizations want to invest in the near future.

3. Optimize: Leverage new emerging technologies. They contribute to further digitalizing processes and to increasing the amount of data available (e.g. Internet of things, blockchain, robotic process automation). Get additional data from new sources where you need them, e.g. about supply chain or financial risks. Define standard actions based on changed KPIs and turn them into triggers for a process change. Visualize and communicate your category strategies and improvement measures and involve your suppliers in your innovation processes.

4. The “Day of Digitalization”: Ramp up your analytical capabilities! Develop new cognitive analyses to enable efficient data monitoring. This will allow you to gain new and better insights by using smart technology (e.g. machine learning, AI, chatbots, assistants). An example would be using a digital assistant for proactive user support based on algorithms. Also, begin implementing predictive analytics.

The JAGGAER approach to digital procurement strategy

NEXT STEPS TOWARD DIGITAL TRANSFORMATION

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It is very difficult to make progress in digitalization and digital transformation unless all processes and data are on a common platform. This provides the foundation for visibility over all data, which is consistent for execution of all processes, and for end-to-end process continuity, compliance and auditability. It also enables comprehensive supplier lifecycle management, with full visibility over the historical relationship, spend and current performance (purchasing process, contractual compliance, service level performance, quality, invoicing accuracy etc.).

Since we conducted our 2017 survey, JAGGAER has introduced its own end-to-end platform, JAGGAER ONE: All processes, all data. One platform. This is a technological development that will enable many organizations to make positive strides towards digital procurement over the coming years.

AI EXPERTS WEIGH IN: THE OUTLOOK FOR DIGITAL PROCUREMENT – WHAT’S NEXT?

The value of a single platform

Of all the powerful assertions made about AI and its role in digital transformation, some have held water while others are subjective. One that is unarguably true, however, is the impact of intelligence and agility in a business context. AI-powered digital transformation can exponentially increase the value of functions previously seen as cost centers.

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. Before detailing the potential and future of digital procurement, it is pertinent to outline the challenges hindering the scale of innovation in digital procurement, each of which we believe can be addressed through perspective, patience, and pragmatism.

In our experience of building solutions that solve complex problems for some of the largest businesses in the world, we have found that several organizations see the need for digital transformation and are happy to trial products and services in a range of areas to serve this need. The issue, however, is the absence of a strategy. Some companies may use lessons learned from industries other than their own and the change in context can affect the expected results. Also, even within the same company, departments like marketing or logistics may be ahead or just readier for transformation than others, such as procurement, where initial results may not be indicative of those expected.

Furthermore, AI is still seen as an exploratory technology, even at the most accessible point of entry – data analytics. To truly undertake this exploration, firms must have access to a structured and harmonized repository of data that is easy to interrogate, but that isn’t the case with a majority of companies looking to begin their digital transformation journey. Although their systems generate data from millions of transactions, this information is often disorganized, and the sources fragmented. In some cases, companies recognize this issue and decide to invest their resources in creating data lakes through an extensive process of consolidation, cleansing, and standardization, before implementing AI for analysis and

Understanding the context

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Below we have outlined what we believe are the central tenets of digital transformation that will drive the proliferation of digital procurement:

• Enterprises are moving from operational efficiency to value creation: In its initial stages of evolution, technology was seen as an enabler of operational efficiency. In procurement, the effectiveness of technology was measured just like the success of procurement departments – in increments of time or money saved. However, the power of innovation goes far beyond these metrics and procurement teams today are moving fast from an approach of cutting losses to a mindset of creating value.

• Becoming a connected enterprise and embedding AI into the organization: To unlock the true value of

digital procurement across the organization, it is crucial for companies to enable cross-functional collaboration driven by digital technologies. Enabling a continuous, contextual, and interdisciplinary information flow will help enterprises think smarter and faster. To be truly intelligent, firms need to connect people, processes, and technologies, generate real-time intelligence, and empower decision makers with actionable business insights.

• Agility in procurement: Agile procurement will identify and tackle future challenges instead of just responding to the current environment. There already is an AI element in contract lifecycle management, three-way matching in invoices and even eProcurement. Soon, AI is not going to be a business consideration outside

Drivers of digital transformation in procurement

insights. This process means that it can take months before AI is deployed and the absence of results in the waiting period means that people give up due to a lack of motivation, often misinterpreted as the absence of a business case.

Consider the case of chatbots. In many industries, chatbots are used to supply static responses and not handle every query that arises in the stakeholder interaction. Why aren’t more companies using NLP-enabled bots that can answer user queries intuitively? Tools like chatbots rely on a defined and streamlined feed of

information from multiple underlying systems to understand questions and supply answers. It is essential to note that the way information is organized is crucial to the success of an AI initiative. This perhaps explains why the manufacturing industry is leading the pack when it comes to intelligent chatbots while other sectors are lagging. Irrespective of these challenges, digital transformation in procurement is imperative for businesses to survive, thrive, compete and lead.

“Over the next few years, growing adoption will fuel the number of successful use

cases of digital procurement and make transformation mandatory.”

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the system but embedded in most transaction systems used for procurement, sourcing, invoicing and other regularly accessed applications in enterprises. Such ubiquity is the only way to democratize the value of AI and ensure an agile procurement function primed to drive strategic value.

• Innovate and collaborate across the ecosystem: In the race to transform, procurement has unfortunately been left behind. As firms start to recognize the wealth of information and insight generated by procurement, this can no longer be the case. Procurement must play a pivotal role in informing business strategy across the ecosystem and firms will deploy digital technologies to enable this intervention.

Over the next few years, growing adoption will fuel the number of successful use cases of digital procurement and make transformation mandatory. Like with any business initiative, the clarity of intention and specificity of outcomes will determine eventual success. AI at the core of procurement will serve a host of valuable functions and these are the three areas, in our view, where it could have the most impact:

1. The Buying Experience: User experience in procurement is often overlooked. Procurement, as a function, hasn’t seen the benefits of UX. Leveraging AI to make for a simplified experience could have an impact on predictions, buying, governance, and compliance. Companies should target the UX of their platforms by deploying AI-enabled systems that are conversational in nature and that will, in turn, have a direct and more visible impact on procurement KPIs. The end user isn’t choosing the system and should at least be offered a stellar user experience that in turn impacts the adoption of AI overall. Procurement generally does not have much of a say in the selection of AI technology as an end user. An intuitive UX will enable people with more information, allow people to do their jobs better, and allow them to do something new beyond their everyday role. While tasks involving replicable and repetitive skills aren’t going to be secure, the impetus on creating value will exponentially increase the importance of procurement teams.

2. Confidence in Data: Organizations have large amounts of data, but it remains unstructured, unclassified, disorganized and in disparate systems. Due to compliance requirements, buying today is based on policies such as paying the same price for goods and services as existing contracts dictate. First, this information may not be available to the user while buying and the system should be able to provide it while the order

is being placed to ensure a compliant transaction is created. Preferred suppliers should be highlighted, and the contracted price mentioned, so the user can make informed decisions such as accepting a delay for non-critical purchases in case of a price advantage. Procurement’s move towards a value creation mindset will change its current perception of being just a gatekeeper that delivers intangible value. From a facilitator of savings and budget optimization, with the use of AI, procurement departments can use all the data they gather and process it in a way that makes for more effective decision making. Earlier, or even currently in some cases, internal business intelligence and process intelligence teams would provide insights in conjunction with a third-party provider. AI can change that by turning procurement departments into nerve centers in the operations chain. For example, category managers today spend more time speaking with suppliers and not just managing budgets. The time spent gathering those valuable insights could be multiplied by technology that completes effort-intensive manual tasks. Make no mistake. This situation is not a case of a machine doing a person’s job. It’s a scenario where technology is performing functions that a person should never have to perform in the first place.

3. Market Context and Intelligence: Companies will start to leverage AI to get a better look from the outside in. People in procurement are usually given sliding budgets and expected to deliver savings with limited information about current market trends. Procurement needs to understand these market trends to develop a holistic view of its performance and develop a strategy to achieve the savings target. It is also essential to have a nuanced point of view on pricing from a broader market standpoint, including supplier-specific information.

Insights are crucial, but they need to be accurately interpreted and deployed, and that can only be achieved by a sound comprehension of the broader industry. The technology is already at a state where it can make a substantial contribution as long as companies take the time to assess its accuracy. Through sustained efforts, organizations can expect to see seismic business gains such as improved time to value and time to insight, alongside better outcomes.

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It is imperative for firms, especially digital procurement first-timers, to establish a specific and nuanced understanding of their business context. Once that knowledge is in place, a proof of concept (PoC) is useful to understand the mechanics of a framework. However, since PoCs can’t provide the complete picture with all the variations that exist in the real business scenario, people should consider creating pilots with insights more relevant to the business and move on to rolling out the new solution to the rest of the organization.

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. If it’s successful, then there is a clear case for implementation. Another trend to steer clear of is innovation for the sake of curiosity. You should not deploy extra funds just to “try something out” because the budget is available, nor should you work 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 a larger budget and the technology is implemented to deliver business benefits.

Another debate for companies to address is the “make versus buy” decision. Some firms hire their own data scientists and think that will offer a benefit, when in reality the investment will only generate returns in five years or more, assuming all other considerations have been met. It is essential to recognize that a data scientist is not necessarily a domain expert. Integrating

third-party tools that are pre-built with domain expertise is a much more sustainable and practical idea. The market has evolved to a level where there is little merit in trying to build proprietary versions of best-in-class tools that offer deep customization.

To ensure that this shift is seamless, recognize that the problem does not lie in understanding, but with expectations. An organization that wants to be best-in-class must have a plan to achieve smaller interim targets and have a larger strategy for the journey till the end. A vision is not a strategy. Companies may intend to reinvent their operations but have no idea of where to start, and it is here that a framework can be of immense value. Unlocking value then becomes a function of outlining not just where the procurement department can be, but also where it is today along with a deep awareness of the challenges and opportunities for its transformation.

Most importantly, procurement departments should set a timeframe and begin their journey. While the initial results may not be incredible, they represent a start. Making that start is crucial.

Priming for success

Even if we were to consider standard measurement metrics for procurement – cost reduction, spend under management, and compliance – digital procurement can provide significant advantages. For instance, if a procurement team is set the objective of reducing costs by 10%, identifying where and how would be the first prerogative with data analysis providing the answers. Manually sifting through data could take months, whereas AI-based solutions could achieve results in a fraction of the time.

In the case of spend under management, people place orders outside a system because they don’t like the system. User-friendly applications, in this case, will have a direct impact on spend under management as onboarding new users becomes a more straightforward exercise.

From a compliance standpoint, intelligent systems can make contextual compliance information and contracted prices available to users, allowing them to make smart decisions.

Measuring results

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To meet the challenges of the digital era, procurement must target its improvement

initiatives to narrow or close the gap between their importance and its ability to

address them.

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SURVEY DEMOGRAPHICS

52% S: <250m EUR20% M: 250m 1b EUR28% L: >1b EUR

48% Production Sector32% Non-production20% Public Sector

65% Europe17% North America12% MENA

4% APAC2% South America

REGIONCompanies from all over the world took part in our 2019 survey. More than half (65%) came from Europe. Of the remaining respondents, 17% were from North America, 12% from the Middle East and North Africa, 4% from the Asia Pacific region, and 2% from South America.

REVENUEThe majority of our participants (52%) were from smaller companies with annual revenue under 250 million EUR. 20% had between 250 million and 1 billion EUR in revenue, while 28% came from companies with revenue above 1 billion EUR annually.

SECTOR45% of participants came from the production sector, including automotive, industrial manufacturing and aerospace, among other fields. 32% came from non-production industries, such as banking, finance and insurance. 20% of participants work in the public sector.

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WORLD HEADQUARTERS

Research Triangle Park, NC3020 Carrington Mill Blvd, Suite 100Morrisville, NC 27560Main: +1 (919) 659-2100Sales: +1 (919) 659-2600Fax: +1 (919) 659-2199

AMERICAS

Chicago, IL200 W Monroe St · Suite 620Chicago IL 60606Phone: +1 (312) 373-3100

Mexico City, MexicoTorre Esmeralda IIPeriférico Boulevard Manuel Ávila Camacho 36Miguel Hidalgo, Lomas de Chapultepec11000 Mexico City CDMX Phone: +52 55 9171 1262

Newtown Square, PA18 Campus Boulevard, Suite 210Newtown Square, PA 19073Phone: +1 (610) 325-3700

Pittsburgh, PA2200 Liberty Avenue, Suite 201Pittsburgh, PA 15222Phone: +1 (412) 471-8200

Vestal, NY120 Plaza Drive, Suite FVestal, NY 13850Phone: +1 (607) 231-6000

EUROPE, MIDDLE EAST & AFRICA

Abu Dhabi, UAEBuilding 6, Office Number 601 APark Rotana Office Complex Khalifa ParkPO Box – 769366, Abu Dhabi, UAEPhone: +971 2 245 4107

Amsterdam, the NetherlandsNieuwezijds Voorburgwal 1621012 SJ, AmsterdamPhone: +31 (0) 20 820 3825

Dubai, UAE, TEJARILevel 5, Suite 510, Building #2, Dubai Media CityP.O. Box: 500001, Dubai UAEPhone: +971 4 360 1300

Helsinki, Finland (Nordic Region)c/o Waselius & Wist OyEteläesplanadi 24 A00130 Helsinki

London, United Kingdom103 St. John StreetLondon, UKEC1M 4ASPhone: +44 (0)20 7796 4170

Madrid, SpainAvenida Manoteras, 42 – Calle 3Edificio Esindus 1° planta, 28050 MadridPhone: +34 091 78702-00

Milan, ItalyVia Rombon 1120134 MilanPhone: +39 02 210 512 1

JAGGAER LOCATIONS

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Munich, GermanyOttobrunner Strasse 41, 82008Unterhaching Phone: +49 (0)89 121 93 35-0

Paris, FranceLe Quintet – Batiment E, 81/83 Avenue Edouard Vaillant 92100 Boulogne BillancourtPhone: +33 1 460956 78

Rome, ItalyVia Sallustiana, 26 piano 5° interno 1100187 RomePhone: +39 06 997 250 00

Vienna, AustriaWienerbergstraße 11Vienna Twin Towers Tower B, 29th Floor1100 ViennaPhone: +43 1 80 490 80

ASIA PACIFIC

Rawalpindi, PakistanOffice No. 7, 3rd FloorMeridian Software Technology ParkRawalpindiPhone: +92 51 4573238-41

Singapore25 International Business Centre#04-103H German CentreSingapore 609916Phone: +65 656 280 60

Shanghai, ChinaRoom C06, No.13, Lane 345Danshui Road, Huangpu DistrictShanghaiPhone: +86 (0)21 6145 8500

Sydney, AustraliaSuite 807, 109 Pitt StreetSydney, NSW 2000Phone: +61 (0)2 8072 0644

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THE SURVEY QUESTIONNAIRE

1. My personal knowledge of digitalization in Procurement is:

A. Non-existent: Big Data, Cognitive Procurement, Digital Assistant, etc. are just buzzwords to me.

B. In need of improvement: I am familiar with the terms Big Data, Digital Assistant, etc. and what they mean, but not in detail.

C. Up-to-date: I actively follow current trends and regularly inform myself about new technologies on the market.

D. Excellent: I am an expert on this topic and am always up-to-date on the latest developments.

2. I would describe the level of digitalization in Procurement at my company as:

E. Not there yet. The fax machine is our best friend.

F. SRM, eSourcing, etc. have been the standard for a while and we have started to automate our processes.

G. The standard processes in our Procurement department are fully automated and mostly integrated. We also use a BW/Analytics solution to analyze our KPIs.

H. The standard processes in our global Procurement organization are digital and fully integrated. We also use algorithms that generate predictive analyses and recommendations based on our KPIs.

3. Which of these processes has your company already automated, and which of these processes does your company plan to automate in the future? Please select the options that apply.

Already automated Automation planned in >1 year

Automation planned in >3 years

Automation planned in >5 years

Currently no automation planned

Source-to-Contract

Supplier Management

Procure-to-Pay

Risk Management

Quality Management /Supplier Development

Spend Management

Analytics

Invoice-to-Pay

Other

SECTION 1: Status Quo & Potential

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4. Which of these digitalization topics is your company planning to invest in? Please select all that apply.

Already invested Investment planned in >1 year

Investment planned in >3 years

Investment planned in >5 years

Currently no investment planned

AI

Virtual and Smart Assistants / Natural Language Processing

Predictive Analytics

Prescriptive Analytics

Robotic Process Automation (RPA)

Blockchain

Internet of Things

Other:

5. Which emerging technologies are you planning to use to support the following processes? Please select all that apply.

AIVirtual and

Smart Assistants/Natural Language Processes

Predictive Analytics

Prescriptive Analytics

Robotic Process Automation (RPA) Blockchain Not Applicable

Source-to-Contract

Supplier Management

Procure-to-Pay

Risk Management

Quality Management /Supplier Development

Spend Management

Analytics

Invoice-to-Pay

Other:

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6. Please evaluate how the following processes and technologies could impact Procurement in your company. Tick all potential outcomes that apply:

Cost Optimization

Process Improvement

Operations Improvement

Process Governance

Regulatory Compliance

Improvement

Improved Transparency

(Reporting/KPIs)

Improved Security

Not Applicable

Source-to-Contract

Supplier Management

Procure-to-Pay

Risk Management

Quality Management / Supplier Development

Spend Management

Analytics

Invoice-to-Pay

AI

Virtual and Smart Assistants / Natural Language

Processing

Predictive Analytics

Prescriptive Analytics

RPA/Robotic Process Automation

eProcurement, RFQ, etc.

Blockchain

Internet of Things

Other

7. Which of the following would you rate as the top three biggest challenges in modernizing your procurement processes? I. Budget J. IT know-how of staff K. Lack of data integration L. Change management M. Lack of executive vision/support N. Lack of strategic direction O. Not sure how to apply new technologies to current work

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SECTION 2: The Hidden Potential of Digital Procurement

8. What does Digital Procurement mean for category management? Which of the following aspects do you factor into your category management strategies for your most important categories and how do you process the data?

Not factored in Data is factored in and is processed manually

Data is factored in and is processed automatically

Consolidated spend

Supplier performance

Supply chain risks

Supplier contract management

Future requirements (quantities, etc)

Future innovation (technology, developments, etc)

Market trends (raw material prices, etc)

Governance & compliance guidelines

9. What does Digital Procurement mean for supplier management? Which of the following aspects do you factor into your supplier management strategy and how do you process the data?

Not factored in Data is factored in and is processed manually

Data is factored in and is processed automatically

Potential for innovation

Availability / Capacities

Digital competence

Global footprint

Switching costs

Your own position with the supplier

The following questions are related to core areas of Procurement, ranging from category and supplier strategy to supplier selection, supplier evaluation and supplier contract management. For the following questions, please indicate which aspects you take into account within the individual areas of Procurement and how you transfer the data from other systems and/or into follow-up processes.

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10. What does Digital Procurement mean for the supplier selection and award process? Which of the following factors do you consider when selecting a supplier from a TVO (Total Value of Ownership) perspective and how do you process the data?

Not factored in Data is factored in and is processed manually

Data is factored in and is processed automatically

None (only price)

Logistics costs

Material and process costs

Changes in raw material prices

Internal costs (e.g. audits, integration, etc.)

Category strategy

Supplier performance

Financial and supply chain risks

CSR / Sustainability

Other internal costs

11. What does Digital Procurement mean for supplier evaluation and development? What information do you factor into your evaluation of supplier performance and how do you process the data?

Not factored in Data is factored in and is processed manually

Data is factored in and is processed automatically

Quality performance (number of compliants)

Price performance

Supplier performance (on time delivery)

CSR / Sustainability

Contract compliance

Response time

Service level

Supplier innovation

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12. What does Digital Procurement mean for supplier integration? How do you communicate and share data with your suppliers for the following processes?

Not digital Partially digital Completely digital

Purchase orders / order confirmations

Goods receipt

Invoices

Supplier database

Forecasting

Inventory management

Requisitions, quotations

Quotations

Customs documents / long term supplier declaration

Quality Management /improvement measures

Tell us something about your company and your Procurement organization!

• Your sector • Your region • Your company revenue • Your company’s purchasing volume • Number of employees in strategic Procurement • Number of employees in tactical Procurement

SECTION 3: Company Information

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About EdgeVerve Systems Ltd.EdgeVerve Systems, a wholly owned subsidiary of Infosys, develops innovative software products and offers them on premise or as cloud-hosted business platforms. Our products help businesses develop deeper connections with stakeholders, power continuous innovation and accelerate growth in the digital world. We power our clients’ growth in rapidly evolving areas like banking, interactive commerce, distributive trade, customer service and enterprise buying and help them navigate their digital journey with our AI enabled Automation and Business Solutions.

At EdgeVerve, we are making constant strides towards transforming enterprises by providing AI enabled Business Applications, leveraging the Infosys Nia™ Platform with capabilities across the Automation continuum. Today EdgeVerve products are used by global corporations across financial services, insurance, retail and CPG, life sciences, manufacturing and telecom.

Finacle, our industry leading digital banking solution suite is the choice of financial institutions across 100 countries to service more than a billion consumers and 1.3 billion accounts.

To know more, visit www.edgeverve.com

Acknowledgements

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About JAGGAERGlobal Spend Management Solutions

JAGGAER is the world’s largest independent spend management company, with more than 2,000 customers connected to a network of 4 million suppliers in 70 countries, served by offices located throughout the Americas, APAC, Asia and EMEA. JAGGAER offers complete SaaS-based Source to Pay eProcurement solutions with advanced Spend Analytics, Sourcing, Supplier Management, Contract Lifecycle Management, Savings Tracking and intelligent workflow capabilities, all on a single platform, JAGGAER ONE. JAGGAER has pioneered spend solutions for more than two decades and continues to lead the innovation curve by listening to its customers and stakeholders in all industry sectors, public services and academia.

Disclaimer

The Digital Procurement Study 2019 and all therein contained assumptions and recommendations were based on the information from the online survey “Digital

Procurement: How Close Are We?” Although the greatest caution was exercised all information is provided without guarantee. In addition, the study is available

in French, Italian, German and Spanish. In case of any inconsistencies with the English version, English version is to be prioritized.

The information contained in this document is proprietary. © 2019 JAGGAER. All Rights Reserved.

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