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 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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CONTENTS

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...... 28 Chatbots, NLP & guided buying...... 29 Blockchain 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

3 INTRODUCTION 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.

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KEY TAKEAWAYS of procurement professionals rate their 50% digital knowledge as up-to-date or excellent of organizations have automated 40% procure-to-pay (P2P) processes Organizations most commonly cite lack of budget and lack of the requisite IT skills as reasons for any lack of progress

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

64% of companies Priorities for Investment have no plans yet to 1 Predictive Analytics invest in blockchain

2 Internet of Things (IoT) 62% of companies have no plans for 3 Robotic Process Automation (RPA) digital assistants

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

is a priority for investment for the automation RPA of procure-to-pay processes 30% 54% don’t integrate data from started the process upstream/downstream processes The level of integration in 2% organizations has not progressed claim to have over the past two years do54% so manually fully automated

still rely on fax16% and paper have16% automated the integration of data from end to end

5 What you will learn from this report

The 2019 survey shows that the majority of companies (54%) that across the full spectrum (from spend to pay) automated have digitized standard procurement processes, but it also processes “push” information that is stored in a central location reveals a low level of integration of procurement processes. and is subsequently available where it is needed elsewhere Many organizations state that they lack the necessary budgets across the procurement spectrum, i.e. in subsequent process to do so, while others cite poor data integration as an obstacle. steps, and for subsequent analysis. The majority still need to overcome the same challenges that we identified in our 2017 report, i.e. relating to technology, When it comes to personal awareness and knowledge of awareness of digitalization and budget. digital technologies, the 2019 report once again revealed a split between those who say they know enough to understand The percentage of organizations that have fully integrated their potential and those who say they lack such understanding. procurement using smart technologies remains stuck at 2%, Nevertheless, there has been a jump in the number who say where it was in 2017. “Fully integrated procurement” means their knowledge is “excellent.”

What does digital transformation mean for procurement?

FROM DIGITIZATION TO DIGITAL TRANSFORMATION

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

The short answer: it depends who you ask! Digitization is the simple conversion of analog to digital. This can be as simple as converting paper-based information to Digital transformation has been a hot topic in procurement digital data that can be stored on a computer or other storage for some years now. It is a top priority for CPOs that want their device. Digitalization can be defined as “making digitized organizations to achieve greater process efficiency, to achieve information work for you”. For example, centralized data about more with less. suppliers, such as contract information and performance records help procurement professionals to stay informed about what Yet there is still a lot of confusion and, as our survey shows, types of problems they might encounter. However, while this a relatively low degree of familiarity with what exactly “digital” information is useful and saves time, it has not yet fundamentally means and implies. Fifty percent of those surveyed stated that altered the way procurement professionals go about their their knowledge of digitalization was either non-existent or in day-to-day business. need of improvement. Digital transformation comes about when digitization and One reason for the confusion is that three terms are digitalization come together with advanced technologies used interchangeably: digitization, digitalization and to enable the creation of new business models. To take digital transformation. an example with which we are all familiar: analog films

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were digitized, processes were created for searching and Let’s take contract management as an example, not only downloading them and, combined with the new technology because traditional approaches to contract management have of smart TV, movie streaming services have emerged that been difficult, time-consuming and error-prone, but also because have, in part at any rate, displaced traditional broadcast TV. contract management has generally been stuck at the end of the source-to-contract cycle. This is often the cause of inefficiency. The Hackett Group defines digital transformation as “the “When supplier selection gets to the contracting phase, creation of business value by improving customer experiences, procurement often finds that there are additional considerations operational efficiency and agility by fundamentally changing that hamper or even derail the sourcing process. Suppliers the way organizations innovate, operate, deliver products and operating in foreign jurisdictions, for example, may not meet services, engage with stakeholders and execute work, using regulatory requirements tracked by legal, disqualifying them digital technologies as the enabler of holistic transformation.” even after winning the bid. Requested documentation could cause the supplier to change the specifications for its product, But why should procurement professionals from the CPO invalidating the earlier quote.” (SpendMatters) downward embrace digital transformation? Where is the “what’s in it for me?” A common but understandable misconception is that With advanced software solutions such as artificial intelligence digital transformation in procurement implies the replacement of and robotic process automation (RPA), CLM considerations humans by robots or artificial intelligence-based systems. “How can be moved to the start of the process. Past contracts can can you improve customer experiences if you remove human be mined for data such as price, supplier performance and beings from the equation?” might be a typical response. distribution of supplier by subcategory or geography, thereby While it is true that some human roles will be replaced by reducing the likelihood that suppliers will subsequently be technology-based solutions, human beings will be no less disqualified. In addition, a digitally transformed CLM solution vital to the future of procurement than actors and directors will eliminate a lot of manual effort and make it easier to are vital in the era of streamed TV. However, the focus of manage complex approval processes, notifying the appropriate human activity will change, and change fundamentally. parties and involving them only as much as needed to complete the contract. Artificial intelligence will further enable Digital transformation has been discussed for some years now, various algorithms to perform sophisticated contract analysis, so given the low level of deployment revealed by our survey, it automatically identifying obligations and trends that can should come as no surprise if you run up against the skeptical be integrated into broader risk management efforts. view that digital has not delivered what it promised. But when people talk about the “digital transformation of procurement,” Finally, a digitally transformed CLM system should integrate with what they usually mean is digitization or digitalization. For other systems and software, all the way from Microsoft Word to example, in the procure-to-pay (P2P) process: SAP, and it should be capable of rapid global deployment while offering the flexibility to support localized variations in workflows, • Scanning invoices is a typical example of digitization rules construction and templates. • The use of an eProcurement tool is an example of digitalization At its core, therefore, digitally transformed procurement is a radically new approach to the way the function operates and These are important steps, but they essentially involve the how it connects with all of its partners. It is not the usual automation of current processes rather than a fundamental continuous improvement approach that was at the heart change in the procurement function’s modus vivendi. Digital of many previous digitalization initiatives. It is, in fact, an transformation requires more and starts with an understanding opportunity to step back and focus on a broader picture that technology is an enabler and not an end in itself. Digital that covers more than the use of tools. 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.

7 Leading and lagging indicators

Even though most organizations integrate data, they still do This concept applies to every process and it is why the topic so on a limited scale. This jeopardizes their ability to make of integration is so important. Organizations have digitized well-informed decisions and may lead to a failure to recognize information and digitalized processes, so they have much cause-effect relationships. An important aspect related to data more data available than before. In addition, there is more and indicators is linked to a well-known topic in performance and more external information available. For example: measurement: leading vs. lagging indicators. Leading indicators tend to communicate changes in the environment. They are • Public information available on the internet, e.g. OECD and generally predictive in nature. A change in such an indicator other national statistics bureaus for demographics, industry, highlights a future change in lagging indicators, which measure labor statistics by country; LME (and others) for raw material a result or outcome. Leading indicators measure an input of a prices; professional associations, etc. process, lagging indicators its output. • Information from third party providers specialized in certain types of data, e.g. Dun & Bradstreet, LexisNexis, riskmethods, For example, in procurement performance management, ecovadis, RapidRatings, etc. measured savings is a typical lagging indicator. The percentage of spend that is actively managed is a leading indicator. The Therefore, integration is much more than just an internal rationale behind this is easy to understand: the more spend issue and refers to integrating any source of information that you manage, the more results you get. An organization that is relevant to a process and that can influence its outcome. 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).

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

Process efficiency is regarded as the main benefit of digitalization, the adage that in today’s business world “data is gold.” Without ahead of cost optimization. According to our survey respondents, the right insights, it is difficult for organizations to move beyond the technologies that have the highest potential in this regard are the usual tactics and strategies. At the bottom of the scale are supplier management, eProcurement, and eSourcing. All three blockchain, where 64% of respondents say they do not (yet) are at the core of procurement activities and set the ground for have plans to invest, virtual and smart assistants and/or natural the most critical activities like category management and supplier language processing (61%), AI (52%), and prescriptive analytics development: from defining strategies (analytics, eSourcing), to (50%). These results correspond with the areas where companies definition (SRM) and execution (eProcurement and eSourcing). estimate they will achieve the highest value gains. This shows It follows, therefore, that boosting these areas will also that companies are taking a cautious approach and are not enhance performance. ready to take risks and invest resources in unproven technology.

The greatest obstacle to digitalization is the lack of data According to the Hackett Group, performance (e.g. cost, integration. There are many tools that perform a particular quality and cycle time) is the area where digital transformation function or process very well (best of breed) but they are not of procurement is currently having the greatest impact. In its integrated to take the next step. Data is “siloed” and this can 2019 Key Issues Study, 40% of respondents stated that digital lead to conflicts (which silo contains the “right” data?) even if the transformation was already having a high or very high impact data is compatible. A unified data source, i.e. on a single platform, on performance, compared with 32% saying that it was already is necessary to ensure data integration and data quality. having a similar impact on roles, skills profiles and needs, 32% stating that it was having high or very high impact on the With regard to more advanced technologies, such as blockchain, achievement of enterprise objectives, and 31% stating that robotic process automation, and digital assistants/chatbots in it was having a similar impact on their organization’s service particular, the results show that companies are still rather reluctant delivery model. However, a majority reported that they expect to implement them. There is little change from 2017. Only a small digital transformation to have a significant impact over the next number of respondents seemed to have a clear idea of how 2-3 years in all of these areas, rising to 78% who believe it will these tools could be used for digital procurement to create have a high or very high impact on the service delivery model. 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

Still a 50-50 split on digital awareness

Technology that enables the digital transformation of the Compared with our last survey in 2017, the main change has procurement function has been with us for some time and been in the number who say they are not merely up to date, continues to evolve and extend its reach through organizations but whose knowledge is “excellent” – up from 3% to 10%. The of all sizes, enabling them to maximize the value they obtain for percentage who said they were simply up to date showed the money they spend while streamlining procurement processes a corresponding fall. This suggests that there is a significant from source to pay. The ability to master new technology and minority of technology “first movers” and “fast followers” but put it to effective use can therefore be a critical success factor many are lagging behind. in any industry sector. Our study reveals that the procurement profession is evenly split – almost 50-50 – between those Although the results suggest a lack of progress since 2017, who claim to be up to date on digital technology trends and JAGGAER is confident that the procurement function is at those who think their knowledge falls short of what is required. an inflection point. As the Hackett Group pointed out in

9 its benchmarking report at the end of 2018, “world-class The advent of cloud-based technologies, in particular those organizations can continue to reduce costs by embracing hosting machine-learning apps that can crunch through vast digital technology, while the peer group can leverage the amounts of information to make effective predictive decisions, same technology to catch up faster at less cost.” Late adopters makes it easier than ever for late adopters to catch up faster than will be pulled along in the draft created by incumbent leaders was the case in earlier periods of rapid technological change. and will, in some cases, overtake them, so long as they can secure the executive support, budgets and skillsets that will be required.

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

2017 2019

9% Non-existent 9% Non-existent 40% In need of improvement 41% In need of improvement 48% Up-to-date 40% Up-to-date 3% Excellent 10% Excellent

As in 2017, we identified a strong correlation between the size factors (larger companies need to manage larger, more dispersed of the organization (represented by its revenue) and the level teams and have larger IT budgets) and “pull” factors (vendors of maturity/awareness. This is easily explained by both “push” tend to focus on clients that have the larger budgets).

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

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

Public Sector Non-Production Sector Production Sector

60%

50%

40%

30%

20%

10%

0% Non-existent In need of improvement Up-to-date Excellent

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

MENA APAC Europe North America South America

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Non-existent In need of improvement Up-to-date Excellent

When we turn to personal knowledge of digitalization by those in the production sector, though in both cases around 10% sector (public sector, production and non-production) we see stated that their knowledge was “excellent”. some interesting contrasts. A surprisingly large percentage of respondents in the production sector (approximately 18%) In terms of regional variation, we were somewhat surprised that confessed that their knowledge was “non-existent.” Relatively a significant proportion (20%) of North American respondents few gave this response in the public and non-production stated that their knowledge was “non-existent,” compared sectors. Half of respondents in the public sector stated that their with 5% in Europe. Yet at the other end of the spectrum, North knowledge was “in need of improvement”; on the other hand, America was slightly ahead of other regions, with 10% stating 40% considered themselves “up to date.” Overall, respondents that their knowledge was “excellent.” Europeans were most in the non-production sector rated their knowledge better than strongly represented among those stating that their knowledge

11 was “up to date” (47%), while only 30% of North Americans extent by external factors. For example, perceptions may be gave this response. Respondents from the Middle East and influenced by media coverage of technological advance in North Africa occupied the middle ground, with 47% stating each of these global regions. Moreover, it should be noted that their knowledge was “in need of improvement” and 40% that regions outside of North America and Europe were not “up to date.” We should, however, not read too much into some as well represented in the survey of these answers, which undoubtedly are influenced to some

Integration is the next step

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.”

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

2017 2019

22% Fax/paper 21% Fax/paper 37% Standard processes 54% Standard processes 39% Most processes digitalized (SRM, eSourcing,...) 23% Most processes digitalized (SRM, eSourcing,...) 2% Fully digitalized + smart technologies 2% Fully digitalized + smart technologies

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)

Fax/paper

Standard processes established and automation started

Standard processes automated and mostly integrated + analytics for KPI analysis

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

13 P2P the most widely automated procurement process

In our 2019 survey we introduced a new question: what are your Approximately a third of respondents named quality priorities for investments in SRM, eSourcing and eProcurement management/supplier development and analytics as priorities for technologies? A substantial number (40%) of respondents stated the next year. Interestingly, given the current state of uncertainty that they had already automated procure-to-pay (P2P) processes. in international trade, supplier risk management is a relatively These are also priorities for many companies in the coming year. low priority, with well over a third of respondents stating that their organization had no plans to automate processes; only The areas where process automation is already advanced 15% have already automated risk management. or planned for the next one to three years (circled) are supplier management, procure-to-pay, spend management and invoice- to-pay.

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

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

s ay ay

Analytic Invoice-to-P Procure-to-P Source-to-Contract Risk Management Spend Management Supplier Management Quality Management / Already automated Supplier Development 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)

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

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% l / ) Al s s n s chai ool

Block tomation (RPA Internet of Things Predictive Analytic SRM, eSourcing and Prescriptive Analytic anguage Processing eProcurement T

Virtual and Smart Assistants botic Process Au Natural L Ro

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

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

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Big Data Algorithms/ Digital Predictive RPA Blockchain SRM-eSourcing Analysis Smart Work- Assitants Analytics eProcurement Flows Tools

15 This year’s Hackett CPO Agenda revealed that although many main focus over the next one to three years will be in predictive companies are making progress with the adoption of digital analytics and the internet of things (IoT, circled); in other areas the technologies, in particular eProcurement, this adoption is majority of organizations report that they have no plans. typically limited in scope. It seems that many organizations are still not quite sure where to start, or where to go next This “wait and see” attitude is more understandable in with many new technologies. the case of blockchain and digital assistants, which are still relatively new technologies and the benefits for This finding is confirmed by our own. Half have implemented procurement are not widely understood. SRM, eSourcing and eProcurement; in all other areas of procurement technology, organizations that have made The survey results made it very clear that it is necessary to any investment are in a minority and the numbers are scarcely have the right person in place to drive the adoption of new different from 2017. The biggest change is in robotic process technologies forward. In many organizations, procurement automation (RPA), which, according to the Hackett Group, specialists have limited knowledge of new technologies, “refers to the automation of routine, repeatable tasks through so cross-disciplinary project teams need to be established existing user interfaces, permitting the execution of simple representing procurement, IT and HR and with executive rules-based logic in situations where there is no room for sponsorship. A further major challenge is the lack of interpretation.” It appears that many organizations have acted data integration, which further emphasizes the need on the intention to invest as stated in 2017. RPA is especially to get IT experts involved. relevant to tasks that require data extraction, enrichment and validation, and interaction with multiple screens and/ Companies that have already invested in digitalization or plan or applications. These include catalog management, invoice to do so over the coming years tend to have few employees processing and supplier information management, for example. still engaged in tactical procurement. Nearly a half (48%) have fewer than five employees in tactical procurement. 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

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) 48% <5 or no employees Number of employees in tactical procurement in companies where digitalization topics are already in 29% use or investment planned in the 5-20 employees next 1-3 years 23% >20 employees

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Predictive analytics popular but skepticism persists

In this question we asked survey respondents to match Blockchain is the new technology that procurement organizations digital technologies to specific processes.Predictive analytics are least likely to invest in; if at all, it is likely to be in the invoice- technology is the most popular, in particular for risk management, to-pay processes. analytics and spend management processes. RPA is the second priority for investment, especially for the automation of invoice- These technologies are covered in more depth in Part 2. to-pay and procure-to-pay processes. Artificial intelligence is next on the list of priorities for investment and is rated to be More than half of respondents stated that they did not regard useful in all processes in procurement. Prescriptive analytics these technologies as applicable to procurement processes. technology is also regarded as having application in spend This corresponds to the 50% who stated that they lack management. Digital assistants are not yet seen as priorities. knowledge about digital procurement technologies.

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

100 90 80 70 60 50 40 30 20 10 0

s ay ay

Analytic Invoice-to-P Procure-to-P Source-to-Contract Risk Management Spend Management Supplier Management Quality Management / Supplier Development

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

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

19% AI 12% Virtual and Smart Assistants / Natural Language Processing 28% Predictive Analytics 17% Prescriptive Analytics 20% Robotic Process Automation (RPA) 4% Blockchain

If we look purely at the technologies that are being used to Companies that plan to use emerging technologies to support support procurement processes, analytics (both predictive and procurement processes also tend to have few employees still prescriptive) emerge as the most important. This was also the engaged in tactical procurement. Well over a third (38%) have most important growth area (after cloud) identified in the Hackett fewer than five employees in tactical procurement. Group 2019 report, with 60% of respondents expecting broad- based adoption over the next two years, and 15% expecting limited adoption.

Question 5: Number of employees in tactical procurement in companies which plan to use emerging technologies to support procurement processes (2019) 38% <5 or no employees Number of employees in tactical procurement in companies which plan to use emerging 37% technologies to support 5-20 employees procurement processes 25% >20 employees

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Process efficiencies regarded as the most important benefit

Until relatively recently cost savings were seen as the main governance, regulatory compliance, reporting and security – benefit of digital transformation in procurement, and while this suggesting that the focus is still geared towards the tactical is still regarded as important, it has been overtaken by process rather than the strategic. Procure-to-pay and invoice-to-pay are efficiencies in the eyes of the procurement professionals that regarded as the specific processes where technology will have we surveyed. A significant number also mentioned operational most impact. In terms of cost optimization, the biggest impact is improvement, whereas relatively few mentioned process expected in spend management.

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

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% y / s s n s ay AI t Pa hai

Analytics tomation Blockc Invoice-to- Procure-to-P Internet of Thing Source-to-Contract Risk Management Spend Management Predictive Analytic Quality Management / Prescriptive Analytic Supplier Management anguage Processing eProcurement, RFQ etc Supplier Developmen obotic Process Au Virtual and Smart Assistants Natrual L A / R RP

Cost optimization Process improvement Operations improvement Process governance Regulatory compliance improvement Improved transparency (reporting/KPIs) Improved security Not applicable

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

23% Cost optimization 7% Regulatory compliance improvement 29% Process improvement 10% Improved transparency (reporting / KPIs) 18% Operations improvement 4% Improved security 9% Process governance

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) 41% <5 or no employees

Number of employees in tactical procurement in companies 38% which see a big impact of 5-20 employees AI on procurement 21% >20 employees

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Insufficient budget is by far the largest obstacle

There is clearly some frustration among procurement leaders Another prominent challenge is a lack of IT know-how among that they can see the way forward in digital transformation, but staff. This was also the finding of the Deloitte Global CPO there are a number of obstacles in their path. Survey 2018, which stated that “51% of procurement leaders do not believe that they have the capability in their teams to deliver In many cases procurement departments simply do not have the their procurement strategy.” Lack of data integration figured as budget to cover investments in digital technologies. This reflects a major obstacle to the effective application of digital technology, the finding of the Hackett CPO Agenda, which reported that too. Our own finding also corresponded to those of Deloitte, with “procurement expects its budget to grow at a much slower 46% citing data integration, and 45% data quality. pace this year than in 2018 (1.3%, versus 2.7% last year).”

46% 45% 30% 29%

Lack of data integration Quality of data Limited senior stakeholder Skills capability endorsement and of analytics prioritization resources

27% 24% 24% 20% 18% 7%

Limited Availability Poor Availability Technology Other understanding of analytics systems of data knowledge resource adoptions of data technology Data People Systems

Source: Deloitte Global CPO Survey 2018

Relatively few stated that lack of executive vision and support bring cost optimization and process efficiencies it is or lack of strategic vision were major challenges. Given that (as therefore curious that the budgets are not (yet) being seen in Q6) it is widely understood that these technologies can made available to modernize procurement processes.

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

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

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

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

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

2017 2019

17% No integration 30% No integration 22% Manual integration (pull) 54% Manual integration (pull) 61% Automated integration (push) 16% Automated integration (push)

To understand the silo effect, we asked our respondents about 1. Actual supplier performance into sourcing decisions their level of integration for the following critical processes: (TCO/TVO) 2. Actual supplier performance into category management • Category management 3. Logistics / landed costs into sourcing decisions (TCO/TVO) • Supplier management 4. Electronic transmission of PO/confirmations in • Sourcing decisions (TCO / TVO) supplier collaboration • Supplier evaluations 5. Material and process costs into sourcing decisions • Supplier collaboration (TCO/TVO)

In each case we asked if they factored in data, and if so, was Processes and data that most organizations do not this a manual process to “pull” the information that is needed integrate include: (e.g. to get data from a system and integrate it into another one 1. Digital competence of suppliers in supplier management or into Excel), or was it an automated process that “pushes” the 2. Internal costs into sourcing decisions (TCO/TVO) information where and when needed (i.e. data is generated as 3. Supplier footprint vs. own footprint in process output and stored in a system where it is available in supplier management subsequent process steps, if needed, and in the system used 4. Supplier information management in to run that process). supplier collaboration

5. Suppliers’ potential for innovation in supplier management 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:

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The organizations that do integrate data mostly rely on manual The current level of digital integration is low and there has integration in the following areas: been no progress over the past two years – in fact, our survey results suggest that things have moved backwards, 1. Financial and supply chain risk integration into sourcing with 30% now saying they have no integration, compared decisions (TCO/TVO) with 22% in 2017. Note however that in 2019 there are more 2. Logistics / landed costs into sourcing decisions (TCO/TVO) factors to assess in each category than was the case in 2017, 3. Raw material prices and changes into sourcing decisions so it is possible that in some cases the factors added are (TCO/TVO) less integrated, which may explain why the general level 4. Financial and supply chain risk integration into category of integration is apparently lower. management

According to the Deloitte survey, 46% of procurement leaders Furthermore, the study results also indicate that there is a low believe that the low level of data integration is a major barrier level of integration between processes. This will be covered to the effective application of technology procurement. in more detail later in our study, but, in brief, these results can be explained by the fact that, in the past, technology was The level of integration is highest in category management implemented in procurement on a process by process basis. and supplier evaluations; only around 25% of organizations For example, companies would implement an SRM solution have no integration at all in these areas. However, most without looking at the other upstream and/ or downstream progress had been made towards automating integration in processes that fed into it or used data from it. Currently, the area of supplier collaboration, at 23% of organizations. But 30% of organizations do not integrate data between insofar as data is being factored, the overwhelming majority of major processes. In the instances where teams do organizations are currently doing so using manual processes, successfully integrate data, they mostly do it manually. with little change in this respect since 2017. This is clearly a Only 16% of the companies surveyed have end-to-end major obstacle to further digital transformation. and integrated processes.

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

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 2017 2019 2017 2019 2017 2019 2017 2019 2017 2019

Category Supplier Sourcing Decision Supplier Supplier Management Management (TCO/TVO) Evaluations Collaboration

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

Curiously, far fewer respondents stated that they had integration”. This may simply reflect a changed perception of automated data integration in the supplier evaluations area what constitutes automation. In other respects, the picture is than in 2017, though at the same time, there seems to have little changed. been some movement from “no integration” to “manual

23 Which data points are being integrated?

We then asked which data points have been factored into their supplier contract management, market trends and future strategies in each of the above areas. In category management, requirements, but for the most part the data is processed the data point most frequently factored in and processed manually. Least progress has been made in terms of supply chain automatically is consolidated spend, followed by supplier risks, future innovation and governance & compliance guidelines. performance (circled in green). Data is also factored in for

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

100%

90%

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70%

60%

50%

40%

30%

20%

10%

0% Consolidated Supplier Supply Chain Supplier Future Future Market Trends Governance & Spend Performance Risks Contract Requirement Innovation (Raw Materials Compliance Management (Quantities, (Technology, Prices, etc.) Guidelines etc.) Development, etc.)

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

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.

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

100%

90%

80%

70%

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50%

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10%

0% Potential For Availability / Digital Global Switching Your Own Position Innovation Capacities Competence Footprint Costs With The Supplier

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

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With regard to sourcing decisions, i.e. the supplier selection price. Material and process costs and supplier performance are and award process, internal costs remain untouched by data the data points that have most commonly factored in but only a integration in nearly half of the responding organizations, and small minority are processing this automatically. a significant number have factored in no data points other than

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

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% None (Only Logistics Material and Changes Internal Costs Category Supplier Financial and CSR / Other Internal Price) Costs Process Costs in Raw (e.g. Audits, Strategy Performance Supply Chain Sustainability Costs Materials Integration, Risks Prices etc.)

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

Despite CSR and sustainability being objectives for most important topic in the near future – is also relatively weak. organizations, many have not yet integrated the relevant data in Most progress has been made in the automatic processing the area of supplier evaluations (circled in orange). Integration of of quality performance, price performance and supplier data on supplier innovation – which is also likely to become an on-time delivery data.

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

100%

90%

80%

70%

60%

50%

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30%

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0% Quality Price Supplier CSR / Contract Response Service Supplier Performance Performance Performance Sustainability Compliance Time Level Innovation (Number of (On Time Delivery) )

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

25 Although supplier collaboration is the area identified by the documents, forecasting and goods receipt is particularly weak. survey where most organizations have now fully automated Nevertheless, there is a relatively high level of data on purchase data integration, as noted above, a significant number of orders, supplier database and requisitions & quotations being respondents stated that data has not yet been factored in factored in automatically. at all. Data integration on quality management, customs

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

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% Goods Invoices Supplier Forecasting Inventory Requisitions, Quotations Customs Quality Receipt Database Management Quotations Document / Management / Long Term Improvement Supplier Measures Declaration

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

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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.

27 PART 2: THE FUTURE OF PROCUREMENT

A missed opportunity?

Our report revealed a continuing lack of awareness of the solutions, requiring much less input by human labor. This means new technologies that will transform procurement, so let’s that warehouses of the future will look nothing like they do today; take a whistle-stop tour of these technologies and what in place of hundreds of human beings, they will be operated by they can offer. a lean personnel controlling robots that can work 24/7 and don’t even require lighting to see what they are doing. In the two years that have passed since our last survey report, artificial intelligence (AI) has progressed in leaps and bounds This does not mean (as we discuss in the article that follows) in many areas of industry and business. For example, Amazon that robots will replace human beings; rather, the focus will be Robotics is using a combination of artificial intelligence and on human beings as knowledge workers, aided by robots and advanced robotics to provide highly innovative logistics machine learning.

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.

Artificial Intelligence

What do these trends mean for procurement? According A recent experiment undertaken by associates and inhouse to Spend Matters, AI in Procurement is about: lawyers from global firms such as Goldman Sachs, Cisco and Alston & Bird, as well as general counsel and sole practitioners, • Using systems and approaches that are able to proved the effectiveness of deploying AI to review risks in legal learn behavior through education documents (in this case, five non-disclosure agreements (NDAs)). • Managing structured and unstructured data In the test, the AI software matched the top-performing lawyer • Supporting forms of expression that are more for accuracy – both achieved 94%. Collectively, the lawyers natural for human interactions managed an average of 85%, with the worst performer • Continuing to evolve as computers experience recording 67%. new information, new scenarios and new responses • Unlocking new insights and enabling optimal outcomes If procurement does not investigate such possibilities and deploy AI in the near future it will be missing out on a huge opportunity. Artificial intelligence and related technologies open up many Conversely, those organizations that do embrace the new world possibilities for implementation in the field of procurement, for will gain significant competitive advantages over their peers. example to analyze contracts, quality complaints, order income Here are some more areas that CPOs should consider. bookings, and purchase orders. The results are predictive analyses, which help companies avoid bottlenecks in the supply chain.

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Chatbots, NLP & guided buying

Natural language processing (NLP) represents a big step beyond Let us take just one example: guided buying. In guided buying, the graphical user interfaces we currently use to interact with the chatbot or procurement assistant will suggest solutions digital devices. Improvements in NLP open the door to new, based on preferred suppliers, preferred items, contracts in more natural, and more intuitive interfaces that simulate place, purchase history etc. This relieves the (human) conversation with humans (chatbots, popularized by Siri, procurement officer of most routine effort in the majority of Cortana & co.) cases but if, for whatever reason, the procurement assistant is unable to find a solution, there would be a smooth handover There are many uses for chatbots and digital assistants in to the procurement officer. procurement – too many to list here. However, the central issue is that procurement specialists are increasingly dealing The conversation could also involve suppliers directly, who could with vast quantities of data, which means that a lot of their check availability and discuss conditions. Every conversation time is spent looking for information rather than using it. would be an opportunity to: Chatbots will enable procurement specialists to converse • Learn about a person’s preferences, which will speed up with their AI-powered procurement software, which will do future conversations the heavy lifting involved in finding the relevant information • Enforce guidelines and procedures, which will prevent and making intelligent suggestions as to what actions need fraud and risk to be taken in specific situations. • Secure authorization for further conversations (“is it ok to remind you when…”) Through machine learning the chatbot will be able learn about your preferences and your organization’s policies Again, this is just one example. The same approach can be and procedures. applied across most of the procurement value chain.

Blockchain in procurement

Blockchain is one of the hottest technologies under discussion in In its October 2018 report, Gartner positioned blockchain at the 2019, though our report shows a low level of awareness among start of its “hype cycle,” meaning the technology will see rapid procurement professionals and an absence of plans to invest in progress over the next five to 10 years. blockchain. Blockchain-based innovations hold enormous promise, with a Blockchain technologies involve distributed databases that hold wide array of applications possible for procurement and supply tamper-proof records of digital transactions. Blockchain and its chain, though Gartner sees an extended time horizon for it to associated applications could usher in a new era of supply chain reach what it calls the “plateau of productivity”. In other areas, and source-to-pay process efficiency. such as smart contracts, things should move faster.

29 Predictive and prescriptive analytics

You will also see a lot of discussion on these topics. To cut prescriptive analytics: optimization (linear programming) and through the jargon, descriptive analytics interrogates big data heuristics (using set rules to reach ideal decisions). Gartner to describe what happened in the past. Predictive analytics then reports that only 10% of companies are currently taking use algorithms to intelligently tell you what is likely to happen advantage of prescriptive analytics, and our own survey in the future, and prescriptive analytics use a further level of revealed that a similar percentage of respondents plan intelligence in order to tell you what you should do, i.e. the to invest in prescriptive analytics. However, Gartner also best course of action. believes that this percentage will increase more than three-fold over the next four years. In procurement, predictive analytics can be used to look at all the possible situations within demand planning, costs, profits, A typical scenario where prescriptive analytics would benefit inventory optimization, logistics and transportation (and much the procurement function would be to address disruptions to more, too much to mention in full here). It enables organizations the supply chain. For example, what is the best course of action to better anticipate anomalies through their supply chain network if your usual suppliers are unable to meet your demand due to and respond appropriately, given past conditions. Businesses a natural disaster? Another example is inventory optimization. can determine shipments, consolidate underutilized capacity, With prescriptive analytics, store-level supply chain plans can and assess potential future situations, ranking them by probability. recommend which items to reorder and when, not just now but Organizations are unlikely to have all of the information needed in a range of “what if?” scenarios. This might involve a number to enable reliable predictive analytics, so external data streams of inputs including analyses of fluctuating (e.g. seasonal) customer (e.g. for transport route optimization) are required. demand, weather forecasts, which end-products will sell fastest or slowest in a given scenario (such as during a major sports Predictive analytics provides the necessary foundation for tournament), etc. For example, a brewery or soft drinks factory prescriptive analytics. This level of analytics offers the best will be able to optimize inventory based on weather forecasts, possible action plans to reach a desired outcome while keeping changing consumer preferences etc. the overall objectives in sight. There are two approaches to

Robotic process automation (RPA)

RPA has the potential to save procurement function literally Vendor selection is easily one of the most time-consuming years and years of manual effort. Despite the fancy name, the responsibilities in supply chain management. RPA can be technology is quite simple in principle. RPA is software rather deployed to carry out tasks such as the assessment of supplier than machinery. It imitates the activity of a human carrying out creditworthiness, look through credentials and even finalize your a repetitive task within a process and then replicates those selection based on predefined criteria. It can also be deployed actions for future repetitions. Or to put it even more simply, to handle the bulk of your supply chain communication strategy. RPA records a user’s clicks and drag-and-drops or keyboard Used in conjunction with AI, RPA solutions can gather market strokes and then repeats those actions as directed, but does intelligence, collect and organize data from vendors, sales so intelligently (for example by entering the correct supplier and internal teams, create formal reports and communicate name). Software robots can complete tasks such as opening to all involved. emails and completing forms. Given the potential savings this would bring, with the reduction RPA may be used in conjunction with machine learning, of manual effort and the elimination of human error, it is perhaps but in contrast to AI, it is essentially a technology that, once surprising that 52% of respondents to our survey have no plans to implemented, stays the same, at least until the task or workflow invest in RPA. We expect that to change over the next five years. changes. Or to put it another way, RPA is essentially process- driven, whereas AI is data-driven.

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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.

31 Internet of things (IoT)

The Internet of things (IoT) is the extension of Internet and logistics: sensors in delivery trucks can provide real-time connectivity into physical devices and everyday objects; it has information about the movement of goods but can also be already become familiar in many consumer applications such a used for applications such as condition monitoring; working smart refrigerators and smart cars. And on a much bigger scale, with maintenance officers, procurement can then predict we are witnessing amazing things with the advent of highly breakdowns and intervene before they actually happen. energy-efficient smart cities. IDC forecasts that spend on IoT will surpass the $1 trillion mark in 2020. Perhaps most importantly, the IoT will empower companies to gain visibility into their spend analysis by keeping a close eye But what can it do for procurement? One major example is on consumption patterns. The data that is generated is traceability. IoT will increase the traceability of products and monitored continuously and analyzed for behavioral sets to materials across the entire supply chain. In many situations, the optimize supply networks, allowing companies to gain a much ability to understand where products or materials are at any stage better understanding of the needs and usage patterns of their throughout the supply chain will be critical to business success. consumers. This in turn empowers them to negotiate with And in industries such as pharmaceuticals and food processing, suppliers in a more informed manner as they can estimate the ability to track the materials and ingredients that make up in advance what material and what quality and quantity is a finished product is likely to become compulsory to meet required. All these factors combined will contribute to cost regulatory requirements. savings and bring value for the procurement function.

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

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

In order to develop a vision of what a digital procurement As the foregoing discussion of new digital technologies organization is, and in order to realize that vision, it is indicates, digitalization is not just about automating decade-old important to look at digital procurement from an operating processes. It is about doing things in a new way that delivers model point of view. value and growth to the rest of the organization more efficiently and effectively.

Cognitive procurement

Increasingly, the umbrella term for the technologies we Cognitive technologies will give procurement the means to: have described above is “cognitive procurement”. Cognitive • Increase its own agility and responsiveness to both procurement is a method of using disruptive technologies to aid internal and external changes in the management of the procurement function. It is the process • Enable the rest of the organization to be more agile of using self-learning technology to process data in order to aid in the process of acquiring or buying goods and services. With the help of cognitive technology, procurement will deliver even more value to the rest of the organization and to the end- Procurement, being a very data-rich industry, is a prime candidate customer by transforming how companies deliver their products to reap the benefits of cognitive technologies. For one, there and services in an era of hyper-personalization and convenience. 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.

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Two key applications of cognitive procurement

Digital transformation will not happen overnight but rather Cognitive technologies can also streamline contracting functions. one step at a time. Organizations will decide at what pace What if you could automatically identify relevant terms and they should proceed, based on a number of considerations. conditions against a legal library and taxonomy; or, administer But two functions that are already ripe for cognitive contracts without third-party intervention. By employing cognitive procurement are sourcing and contracts. systems, you can essentially shorten contract negotiation cycles and reduce costs by teaching systems to target ideal price Cognitive technologies can help with sourcing by continuously points based on expected volume and contractual discounts. re-evaluating suppliers in order to achieve the greatest efficiency and value with the least amount of waste. Think about the Cognitive technologies like blockchain are eliminating the implications of this in retail, for example. What if your system need for third-party services (i.e., banks, transfer services, card could use big data points to optimize decision making throughout processors) to process transactions, giving both companies and the supply chain? What would this mean to your business or your suppliers quicker settlement. For companies that provide services customers? Intelligent sourcing could help you identify suppliers and employ smart contract technology, they are able to register whose product capabilities best align with customer preferences; new clients automatically once a payment is sent. When data is analyze spend; and eliminate under-performing suppliers without able to move freely and transparently, it streamlines and speeds time-consuming research and manual data aggregation. up the transactions.

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

Initially, the role of AI will be focused on operations. And there is some form of artificial intelligence behind many of the services you use online. Those offers that keep popping up Finally, let us consider what the role of the procurement all over the place? AI. Those chatbots that provide answers faster professional will be as the function goes through digital than a call center? AI. transformation. We often hear the phrase “disruptive technologies” – how will they disrupt the professional It is that simple. But there is not (yet) quite the same commercial futures of procurement specialists? Will humans be imperative to transform many B2B services, such as procurement, replaced by the “digital workforce?” as there is in B2C. As shown by our survey results, until now, digital transformation in procurement has been largely focused Every time you book an airline ticket and hotel room online on increasing efficiency by automating manual processes and or use an app to complete a banking transaction, you are helping organizations identify opportunities they may have benefiting from digital transformation. As to the disruptive previously missed, for example by bundling purchases. 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.

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.

33 The next stage will be to make processes not merely faster, but any automation where AI can be used. This suggests a smarter, through the application of predictive and prescriptive serious lack of awareness of the ways in which AI could analytics and artificial intelligence, which will provide insights benefit procurement. and knowledge to procurement experts and will, in some cases, relieve those experts of the need to make certain decisions. Our survey showed that the areas where procurement When this happens (and it is already happening within such professionals expect most benefit from digital transformation organizations) we will see a far more radical development in are process efficiencies, cost optimization and improved the procurement function. operations. This, we believe, reflects the current level of progress and awareness in the function. So, will disruptive From a broader business perspective, digital transformation digital technologies such as digital assistants soon replace means adopting technology with a customer focus. Whereas human decision-making? until now the technologies have enabled process efficiencies either internally or between buyers and sellers, Hackett considers It is a simple question, but research carried out by JAGGAER world-class organizations those that have adopted technologies suggests that the answer is highly nuanced. You first have to that allow for greater engagement with internal and external ask, “What kind of decisions?” Procurement decisions typically customers, including cloud-based tools and portals that fall into one of four “buckets”. The first of these concerns category allow for a more interactive experience for customers. strategy (such as how do I segment the purchasing of bought-in goods?), the second relates to awarding strategy (such as which The problem for many organizations, however, is the lack supplier shall I award this contract to?), the third focuses on of a formal strategy. Our research, and that of other organizations tactical decisions (such as what are the best transport options such as Hackett, has shown that many procurement teams lack to ensure just-in-time delivery), and the fourth involves a comprehensive plan and/or the talent required to move things operational decisions (such as changing deadlines within forward effectively. The Hackett Group’s research showed that a specific software tool). only 32% of procurement organizations currently have a formal digital strategy and only 25% have the needed resources and Typically, a company might make 500 category decisions per competencies in place today. Moreover, procurement budgets year, 3,000 awarding decisions, 10,000 tactical decisions, and are shrinking. 100,000 operational decisions, with the impact in direct inverse proportion to the number of decisions. 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

Decision matrix for the procurement function

Type of decision Category strategy Awarding strategy Tactical Operational

Typical number Indirect: 100 500 10,000 100,000 of decisions Direct: 3,000

Impact Very high High Low Negligible

Difficulty Very high High Low Negligible

Risk Very high High Low Negligible

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How difficult would it be for a digital assistant to reach the a wrong decision can be more easily corrected, so there is right decision in each case, and what would be the level of less risk. The historical data required is available in thousands risk should the digital assistant make the wrong the decision? or tens of thousands of use cases, such as not-on-time-delivery, Strategic decisions will always be difficult for human beings which is good for machine learning. to relinquish because of the quantity and quality of analyses that have to be considered: it would be very challenging Thus, the conclusion must be that machine intelligence and indeed to construct a software application that could carry digital assistants will be introduced at the operational and out market analyses, given that the market for each category tactical end of the spectrum. The return on investment would is different and constantly changing. Because of the low also be high, due to the volume of decisions made here. number of strategic decisions, the historical data is relatively JAGGAER has already succeeded in developing artificial scarce and therefore not especially helpful in reaching the intelligence-based tools that eliminate analog decision- right decision. Moreover, the high-impact nature of these making. For example, an application trialed with a leading decisions implies a high level of risk if you get it wrong. German manufacturer is making decisions on whether suppliers will deliver components on time. It has shown The opposite is true at the more tactical end of the spectrum: an average 95% accuracy, far higher than can normally there are fewer factors to consider, making it easier to write be achieved by humans alone. an algorithm, and less data needs to be analyzed. Moreover,

The human factor

The challenge for procurement experts is not that they will be Human judgment will always have a role to play, but many routine replaced by artificial intelligence, but rather that procurement tasks are already being automated, and many more sophisticated departments lack the skills and talent that will be needed to decision-making tasks will be automated or semi-automated take advantage of artificial intelligence. They will need people in the medium-term future. New skillsets in areas such as data with the right skills in place to take full advantage of what digital science and analytics will take on greater importance, to some transformation can offer; they must work closely with IT and HR extent displacing traditional skills such as negotiation. And the departments to move forward. performance of procurement leaders and their teams will be assessed on a broader range of metrics. 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.

An example: predictive order management

An example of the effective application of artificial intelligence in It uses 50 separate data dimensions to predict outcomes, procurement is in predicting the probability of on-time delivery enabling companies to move from reactive to proactive mode. of goods and materials in direct procurement, which JAGGAER recently prototyped with a leading German manufacturing Because it relies on large volumes of data to make accurate company. The JAGGAER OTD Predictor will provide immediate predictions, its application is specifically for direct spend information about the likelihood of delays to deliveries from categories with a high volume of transactions. The OTD suppliers, enabling supply chain managers to mitigate risks Predictor’s machine learning algorithms mean that these of disruptions to production flows and reduce the costs that predictions should get even more accurate over time. For this these can cause. to work, all of the data must be stored in a single platform for machine learning to take place. This is the biggest challenge The OTD Predictor has been “trained” by feeding millions of within many companies. line items through the algorithm to learn from previous events.

35 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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NEXT STEPS TOWARD DIGITAL TRANSFORMATION

Our survey suggests that the 90% or so of organizations that Second, procurement must make a stronger case to the have not yet achieved digital transformation must tackle organization’s leadership to demonstrate the value it can two key problems. deliver. This is discussed in many reports, but with budgets not growing at an adequate pace, or in some cases even First, they must remove the data-related obstacles by integrating shrinking, procurement cannot deliver the value that digital data across the spectrum from source-to-pay. As noted above, transformation promises. the digital transformation of procurement involves many processes working in tandem rather than sequentially, and Third, procurement must recruit talent with the skills that analytics exploiting data from one area of the value chain will be needed to take the next leap forward: professionals to improve performance and efficiency in another. who understand data, IT and analytics. Apply these skills to complement traditional procurement expertise. 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.

The JAGGAER approach to digital procurement strategy

At JAGGAER, we believe more in evolution than in revolution. 3. Optimize: Leverage new emerging technologies. Organizations have to be pragmatic and build on their existing They contribute to further digitalizing processes digital components. and to increasing the amount of data available (e.g. Internet of things, blockchain, robotic process 1. Get Started: Build a strong digital base. Use Procurement automation). Get additional data from new sources technology to streamline and improve core processes. where you need them, e.g. about supply chain or Our survey shows that most teams are there already: financial risks. Define standard actions based on SRM, eSourcing, and eProcurement are in place. They changed KPIs and turn them into triggers for a should also extend this digitalization to supply chain process change. Visualize and communicate your management (supplier portal, webEDI, etc.). Also create category strategies and improvement measures and a business case based on your vision and the potential involve your suppliers in your innovation processes. improvements – and get your stakeholders on board! 4. The “Day of Digitalization”: Ramp up your analytical 2. Establish the Basics: Eliminate manual processes as capabilities! Develop new cognitive analyses to much as possible or maximize the utilization of the enable efficient data monitoring. This will allow you to processes that you have already digitized. Be sure gain new and better insights by using smart technology to increase your analytics capabilities! Connect the (e.g. machine learning, AI, chatbots, assistants). An dots between processes, your teams, and the suppliers example would be using a digital assistant for proactive to ensure that data flows smoothly. Our survey shows user support based on algorithms. Also, begin that this is where most organizations want to invest in implementing predictive analytics. the near future.

37 The value of a single platform

It is very difficult to make progress in digitalization and digital Since we conducted our 2017 survey, JAGGAER has introduced transformation unless all processes and data are on a common its own end-to-end platform, JAGGAER ONE: All processes, all platform. This provides the foundation for visibility over all data, data. One platform. This is a technological development that which is consistent for execution of all processes, and for end- will enable many organizations to make positive strides to-end process continuity, compliance and auditability. It also towards digital procurement over the coming years. 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.).

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

Of all the powerful assertions made about AI and its role in function is ripe for transformation through innovation, and digital transformation, some have held water while others are you would be right, but the reality, as we have seen, is some subjective. One that is unarguably true, however, is the impact of distance from the theory. While some companies are using intelligence and agility in a business context. AI-powered digital machines for a wide variety of procurement tasks, ranging from transformation can exponentially increase the value of functions the simple to the complex, several continue to run traditional previously seen as cost centers. departments fraught with inefficiency. We see this as a fallacy of interpretation and execution, not of concept or promise. In organizations across all sectors, procurement is central to Before detailing the potential and future of digital procurement, profitability, not least because of the vital role the department it is pertinent to outline the challenges hindering the scale of plays in supply chain management. It serves as a strategic innovation in digital procurement, each of which we believe can function that directly addresses a firm’s bottom line and be addressed through perspective, patience, and pragmatism. 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

Understanding the context

In our experience of building solutions that solve complex Furthermore, AI is still seen as an exploratory technology, problems for some of the largest businesses in the world, we even at the most accessible point of entry – data analytics. have found that several organizations see the need for digital To truly undertake this exploration, firms must have access transformation and are happy to trial products and services to a structured and harmonized repository of data that is in a range of areas to serve this need. The issue, however, is easy to interrogate, but that isn’t the case with a majority the absence of a strategy. Some companies may use lessons of companies looking to begin their digital transformation learned from industries other than their own and the change in journey. Although their systems generate data from millions context can affect the expected results. Also, even within the of transactions, this information is often disorganized, and same company, departments like marketing or logistics may the sources fragmented. In some cases, companies recognize be ahead or just readier for transformation than others, such as this issue and decide to invest their resources in creating data procurement, where initial results may not be indicative of those lakes through an extensive process of consolidation, cleansing, expected. and standardization, before implementing AI for analysis and

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“Over the next few years, growing adoption will fuel the number of successful use cases of digital procurement and make transformation mandatory.”

insights. This process means that it can take months before information from multiple underlying systems to understand AI is deployed and the absence of results in the waiting period questions and supply answers. It is essential to note that the means that people give up due to a lack of motivation, often way information is organized is crucial to the success of an AI misinterpreted as the absence of a business case. initiative. This perhaps explains why the manufacturing industry is leading the pack when it comes to intelligent chatbots while Consider the case of chatbots. In many industries, chatbots are other sectors are lagging. Irrespective of these challenges, digital used to supply static responses and not handle every query that transformation in procurement is imperative for businesses to arises in the stakeholder interaction. Why aren’t more companies survive, thrive, compete and lead. using NLP-enabled bots that can answer user queries intuitively? Tools like chatbots rely on a defined and streamlined feed of

Drivers of digital transformation in procurement

Below we have outlined what we believe are the central digital procurement across the organization, it is crucial tenets of digital transformation that will drive the proliferation for companies to enable cross-functional collaboration of digital procurement: driven by digital technologies. Enabling a continuous, contextual, and interdisciplinary information flow will • Enterprises are moving from operational efficiency help enterprises think smarter and faster. To be truly to value creation: In its initial stages of evolution, intelligent, firms need to connect people, processes, technology was seen as an enabler of operational and technologies, generate real-time intelligence, efficiency. In procurement, the effectiveness of and empower decision makers with actionable technology was measured just like the success of business insights. procurement departments – in increments of time or money saved. However, the power of innovation • Agility in procurement: Agile procurement will identify goes far beyond these metrics and procurement and tackle future challenges instead of just responding teams today are moving fast from an approach of to the current environment. There already is an AI cutting losses to a mindset of creating value. element in contract lifecycle management, three-way matching in invoices and even eProcurement. Soon, • Becoming a connected enterprise and embedding AI is not going to be a business consideration outside AI into the organization: To unlock the true value of

39 the system but embedded in most transaction systems is being placed to ensure a compliant transaction is used for procurement, sourcing, invoicing and other created. Preferred suppliers should be highlighted, regularly accessed applications in enterprises. Such and the contracted price mentioned, so the user can ubiquity is the only way to democratize the value of make informed decisions such as accepting a delay AI and ensure an agile procurement function primed for non-critical purchases in case of a price advantage. to drive strategic value. Procurement’s move towards a value creation mindset will change its current perception of being just a • Innovate and collaborate across the ecosystem: In gatekeeper that delivers intangible value. the race to transform, procurement has unfortunately

been left behind. As firms start to recognize the wealth From a facilitator of savings and budget optimization, of information and insight generated by procurement, with the use of AI, procurement departments can use this can no longer be the case. Procurement must play all the data they gather and process it in a way that a pivotal role in informing business strategy across the makes for more effective decision making. Earlier, ecosystem and firms will deploy digital technologies to or even currently in some cases, internal business enable this intervention. intelligence and process intelligence teams would Over the next few years, growing adoption will fuel the number provide insights in conjunction with a third-party provider. of successful use cases of digital procurement and make AI can change that by turning procurement departments transformation mandatory. Like with any business initiative, the into nerve centers in the operations chain. For example, clarity of intention and specificity of outcomes will determine category managers today spend more time speaking eventual success. AI at the core of procurement will serve a with suppliers and not just managing budgets. The host of valuable functions and these are the three areas, in time spent gathering those valuable insights could be our view, where it could have the most impact: multiplied by technology that completes effort-intensive manual tasks. Make no mistake. This situation is not a 1. The Buying Experience: User experience in procurement is often overlooked. Procurement, as a function, hasn’t case of a machine doing a person’s job. It’s a scenario seen the benefits of UX. Leveraging AI to make for where technology is performing functions that a person a simplified experience could have an impact on should never have to perform in the first place. predictions, buying, governance, and compliance. 3. Market Context and Intelligence: Companies will start Companies should target the UX of their platforms by to leverage AI to get a better look from the outside in. deploying AI-enabled systems that are conversational in People in procurement are usually given sliding budgets nature and that will, in turn, have a direct and more visible and expected to deliver savings with limited information impact on procurement KPIs. The end user isn’t choosing about current market trends. Procurement needs to the system and should at least be offered a stellar user understand these market trends to develop a holistic experience that in turn impacts the adoption of AI overall. view of its performance and develop a strategy to achieve the savings target. It is also essential to have a nuanced Procurement generally does not have much of a say in the point of view on pricing from a broader market standpoint, selection of AI technology as an end user. An intuitive UX including supplier-specific information. will enable people with more information, allow people to do their jobs better, and allow them to do something Insights are crucial, but they need to be accurately interpreted new beyond their everyday role. While tasks involving and deployed, and that can only be achieved by a sound replicable and repetitive skills aren’t going to be secure, comprehension of the broader industry. The technology is the impetus on creating value will exponentially increase already at a state where it can make a substantial contribution as the importance of procurement teams. long as companies take the time to assess its accuracy. Through sustained efforts, organizations can expect to see seismic 2. Confidence in Data: Organizations have large amounts of data, but it remains unstructured, unclassified, business gains such as improved time to value and time to disorganized and in disparate systems. Due to insight, alongside better outcomes. 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

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Measuring results

Even if we were to consider standard measurement metrics In the case of spend under management, people place orders for procurement – cost reduction, spend under management, outside a system because they don’t like the system. User- and compliance – digital procurement can provide significant friendly applications, in this case, will have a direct impact advantages. For instance, if a procurement team is set the on spend under management as onboarding new users becomes objective of reducing costs by 10%, identifying where and a more straightforward exercise. how would be the first prerogative with data analysis providing the answers. Manually sifting through data could take months, From a compliance standpoint, intelligent systems can make whereas AI-based solutions could achieve results in a fraction contextual compliance information and contracted prices of the time. available to users, allowing them to make smart decisions.

Priming for success

It is imperative for firms, especially digital procurement first- third-party tools that are pre-built with domain expertise is a much timers, to establish a specific and nuanced understanding of more sustainable and practical idea. The market has evolved their business context. Once that knowledge is in place, a proof to a level where there is little merit in trying to build proprietary of concept (PoC) is useful to understand the mechanics of a versions of best-in-class tools that offer deep customization. framework. However, since PoCs can’t provide the complete picture with all the variations that exist in the real business To ensure that this shift is seamless, recognize that the scenario, people should consider creating pilots with insights problem does not lie in understanding, but with expectations. more relevant to the business and move on to rolling out the new An organization that wants to be best-in-class must have a plan solution to the rest of the organization. to achieve smaller interim targets and have a larger strategy for the journey till the end. A vision is not a strategy. Companies may Finding and trialing new technology does not need to be a intend to reinvent their operations but have no idea of where to question of replacing existing systems. Companies do not need start, and it is here that a framework can be of immense value. to wait for a significant transformation and strategy but should Unlocking value then becomes a function of outlining not just go ahead and trial a tool or platform. If it’s successful, then there where the procurement department can be, but also where it is a clear case for implementation. Another trend to steer clear is today along with a deep awareness of the challenges and of is innovation for the sake of curiosity. You should not deploy opportunities for its transformation. extra funds just to “try something out” because the budget is available, nor should you work with a vendor for just a month Most importantly, procurement departments should set a or two. Consider running a test with in-built mechanisms for timeframe and begin their journey. While the initial results learning, so both performance and under-performance become may not be incredible, they represent a start. Making that win-win scenarios. You either succeed or you learn. The leading start is crucial. 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

41 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

REGION Companies 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.

65% Europe 4% APAC 17% North America 2% South America 12% MENA

REVENUE The 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.

52% S: <250m EUR 20% M: 250m 1b EUR 28% L: >1b EUR

SECTOR 45% 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.

48% Production Sector 32% Non-production 20% Public Sector

43 JAGGAER LOCATIONS

WORLD HEADQUARTERS EUROPE, MIDDLE EAST & AFRICA

Research Triangle Park, NC Abu Dhabi, UAE 3020 Carrington Mill Blvd, Suite 100 Building 6, Office Number 601 A Morrisville, NC 27560 Park Rotana Office Complex Main: +1 (919) 659-2100 Khalifa Park Sales: +1 (919) 659-2600 PO Box – 769366, Abu Dhabi, UAE Fax: +1 (919) 659-2199 Phone: +971 2 245 4107

Amsterdam, the Netherlands AMERICAS Nieuwezijds Voorburgwal 162 1012 SJ, Amsterdam Chicago, IL Phone: +31 (0) 20 820 3825 200 W Monroe St · Suite 620 Chicago IL 60606 Dubai, UAE, TEJARI Phone: +1 (312) 373-3100 Level 5, Suite 510, Building #2, Dubai Media City P.O. Box: 500001, Dubai UAE Mexico City, Mexico Phone: +971 4 360 1300 Torre Esmeralda II Periférico Boulevard Manuel Ávila Camacho 36 Helsinki, Finland (Nordic Region) Miguel Hidalgo, Lomas de Chapultepec c/o Waselius & Wist Oy 11000 Mexico City CDMX Eteläesplanadi 24 A Phone: +52 55 9171 1262 00130 Helsinki

Newtown Square, PA London, United Kingdom 18 Campus Boulevard, Suite 210 103 St. John Street Newtown Square, PA 19073 London, UK Phone: +1 (610) 325-3700 EC1M 4AS Phone: +44 (0)20 7796 4170 Pittsburgh, PA 2200 Liberty Avenue, Suite 201 Madrid, Spain Pittsburgh, PA 15222 Avenida Manoteras, 42 – Calle 3 Phone: +1 (412) 471-8200 Edificio Esindus 1° planta, 28050 Madrid Phone: +34 091 78702-00 Vestal, NY 120 Plaza Drive, Suite F Milan, Italy Vestal, NY 13850 Via Rombon 11 Phone: +1 (607) 231-6000 20134 Milan Phone: +39 02 210 512 1

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ASIA PACIFIC

Rawalpindi, Pakistan Munich, Germany Office No. 7, 3rd Floor Ottobrunner Strasse 41, 82008 Meridian Software Technology Park Unterhaching Rawalpindi Phone: +49 (0)89 121 93 35-0 Phone: +92 51 4573238-41

Paris, France Singapore Le Quintet – Batiment E, 81/83 25 International Business Centre Avenue Edouard Vaillant #04-103H German Centre 92100 Boulogne Billancourt Singapore 609916 Phone: +33 1 460956 78 Phone: +65 656 280 60

Rome, Italy Shanghai, China Via Sallustiana, 26 piano 5° interno 11 Room C06, No.13, Lane 345 00187 Rome Danshui Road, Huangpu District Phone: +39 06 997 250 00 Shanghai Phone: +86 (0)21 6145 8500 Vienna, Austria Wienerbergstraße 11 Sydney, Australia Vienna Twin Towers Suite 807, 109 Pitt Street Tower B, 29th Floor Sydney, NSW 2000 1100 Vienna Phone: +61 (0)2 8072 0644 Phone: +43 1 80 490 80

45 THE SURVEY QUESTIONNAIRE

SECTION 1: Status Quo & Potential

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.

Automation planned Automation planned Automation Currently no Already automated in >1 year in >3 years planned in >5 years automation planned

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

Investment planned in Investment planned in Investment planned Currently no investment Already invested >1 year >3 years in >5 years 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.

Virtual and Predictive Prescriptive Robotic Process AI Smart Assistants/Natural Blockchain Not Applicable Analytics Analytics Automation (RPA) Language Processes

Source-to-Contract Supplier Management Procure-to-Pay Risk Management Quality Management / Supplier Development Spend Management Analytics Invoice-to-Pay Other:

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

Regulatory Improved Cost Process Operations Process Improved Not Compliance Transparency Optimization Improvement Improvement Governance Security Applicable Improvement (Reporting/KPIs)

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

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.

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?

Data is factored in and is Data is factored in and is Not factored in processed manually 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 Data is factored in and is processed manually processed automatically Potential for innovation

Availability / Capacities

Digital competence

Global footprint

Switching costs

Your own position with the supplier

49 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?

Data is factored in and is Data is factored in and is Not factored in processed manually 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?

Data is factored in and is Data is factored in and is Not factored in processed manually 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

SECTION 3: Company Information

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

51 Acknowledgements

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

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About JAGGAER

Global 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.

53 In Cooperation With

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