According to a recent Gartner study, 50% of procurement contract management will be AI-driven by 2027. While this headline will grab the attention of procurement leaders, it's essential to pause before diving into technology investments. A deeper analysis is needed to ensure the technology aligns with the organization’s maturity, processes, and people.
Procurement leadership needs to consider factors like organizational maturity, people, and processes to determine the roadmap for procurement technology.
When considering implementing procurement technology, a vital understanding is essential: Technology can enhance and support human resources in procurement, not replace them. While technology can automate several routine tasks and provide valuable insights, the human element remains crucial for several reasons:
Strategic Decision-making:
Complex Negotiations: Human expertise is essential for complex negotiations and relationship building with suppliers.
Judgment and Intuition: Strategic decisions often require human judgment and intuition, which technology cannot fully replicate.
Supplier Relationships:
Personal Interaction: Building and maintaining strong supplier relationships rely on personal interactions and trust, which are difficult to automate.
Conflict Resolution: Humans are better equipped to handle conflicts and negotiate resolutions in ways that maintain positive relationships.
Adaptability and Creativity:
Problem-solving: Humans excel at creative problem-solving and adapting to unexpected challenges, such as supply chain disruptions.
Innovation: Procurement professionals can innovate and develop new strategies that leverage technology to achieve better outcomes.
Data Interpretation and Insights:
Contextual Understanding: While technology can analyze data, humans provide the contextual understanding needed to interpret insights and make informed decisions.
Strategic Use of Data: Procurement professionals can strategically use data to align procurement activities with broader business objectives.
As a procurement leader, understanding that technology must complement, and not replace, your resources is a foundational belief. However, there is more to consider than simply understanding how technology may fit into your organization. Procurement leaders must understand and assess their organizational maturity. Less mature, reactive organizations may struggle to leverage the full benefits of technology, often viewing it as a quick fix for underlying issues. In contrast, more mature, strategically driven organizations understand that technology complements and supports procurement resources, freeing them up for higher-value tasks. When assessing your organization’s maturity, we recommend using a procurement maturity continuum, as presented below.
Stages of Procurement Maturity
Source: WNS Procurement Organizational Transformation 2023
We recommend that your organization be at a maturity level 3 or higher when considering procurement technology. At this level of maturity, the organization is more forward-thinking, strategic, and ready to integrate technology effectively.
Let’s assume that your organization is level 3 or beyond on the maturity continuum, and you believe that technology should complement, not replace, your team. Now, you’re ready to explore the digital procurement technology landscape. You may be asking yourself, “Where do I begin?” In our view, most digital procurement technologies fall into three main categories:
Finding suppliers
Improving category strategies and execution
Deploying data analytics
Finding Suppliers
Supplier Discovery: Due to its complexity and constant evolution, finding and maintaining supplier data has long been a massive challenge for procurement professionals. Traditionally, procurement teams have relied on manual input from suppliers across multiple platforms. Now, a unified view of supplier data exists where procurement professionals can query a database to find the right supplier(s) for the opportunity. We are seeing increased interest and adoption of supplier discovery tools.
Supplier Sustainability and Diversity: According to the 2023 Gartner Sustainable Procurement Pulse Survey, sustainable procurement has grown in importance for 83% of procurement leaders. As organizations increase their commitment to sustainability goals and regulatory requirements grow, companies are increasingly adopting sustainability applications to meet these expectations.
Supplier Risk: According to a 2022 McKinsey survey of senior supply chain executives, only 17% of companies had complete visibility into their supply chains, extending to Tier 3 and beyond. In sectors with intricate supply chains, such as auto and aerospace, supply chain executives were less than confident that they had a solid view of their supply chains at various tiers and levels. Effective supply chain risk management goes beyond knowing who or which suppliers are in their supply chains. Executives and leadership want (and need) to know more about suppliers’ operations, compliance with industry-specific standards, and how suppliers safeguard their information and maintain continuity of operations in an emergency.
Improving Category Strategies and Execution
Digital Category Management Solutions: These solutions enable teams to swiftly navigate changes, eliminate uncertainty, and make timely, data-driven decisions. Most platforms offer AI-powered digital category intelligence, proactive category alerts, and category-specific recommendations.
Tail Spend Management Solutions: Organizations that take a strategic approach to tail spend can cut costs, reduce cycle times, and source more competitively. To address the volume of transactions within the tail, several solutions have been developed to enable companies to tackle this tail spend volume and effectively manage and source this spend.
Autonomous Sourcing Solutions: Autonomous sourcing automates simple and repetitive high-volume, time-intensive tasks, allowing procurement teams to focus on sourcing more complex, high-value strategic initiatives. This shift accelerates the speed and efficiency of the procurement team and reduces the effort spent on low-value tasks.
Deploying Data Analytics
Predictive Data Analytics: Predictive analytics is among the most commonly utilized forms of data analytics, enabling businesses to uncover trends, identify correlations, and determine causation. Procurement can use predictive analytics to forecast elements such as supplier risk, price variances, demand forecasts, and inventory optimizations.
Prescriptive Analytics: Prescriptive analytics leverages artificial intelligence and big data to forecast outcomes and provide actionable recommendations. For procurement professionals, prescriptive analytics can help with sourcing optimization scenarios, payment terms analysis, and category opportunity assessments.
Diagnostic Analytics: Diagnostic data analytics helps answer why certain events occurred. Procurement uses this type of analysis for cost driver and spend analysis, uncovering the root causes of financial trends and performance issues.
Descriptive Analytics: Descriptive analytics is the cornerstone of reporting—it’s impossible to have BI tools and dashboards without it. It addresses the fundamental questions of “how many, when, where, and what.” This includes canned and ad hoc reporting.
There are many data and analytics solutions in the market today. Many are embedded in Procure-to-Pay (P2P) systems, while others are standalone digital procurement platforms.
Procurement digital technologies are powerful tools that can enhance the capabilities of procurement professionals by automating low-value tasks, providing data-driven insights, and improving overall category management. For all of technology’s power, however, the human element remains indispensable for strategic decision-making, relationship management, and ethical considerations. We firmly believe that technology should not be deployed to solve problems but rather to support procurement and align with the future vision that the leadership has for the team. In our view, the future of procurement lies in a blend of technology and human expertise, with each enhancing the other's strengths to deliver optimal outcomes.