The landscape of procurement is undeniably changing. Digitalisation of the supply chain is transforming the industry and organisations should be preparing themselves for this shift.
Robotic Process Automation (RPA) removes the need for employees who are responsible for repetitive transactional, operational and administrative tasks. Not only will this have an impact in back office functions and similar set-ups, but it will also impact all levels of procurement functions.
The conventional view is that modern technology will flip a traditionally bottom-heavy, administrative employment structure on its head, with procurement only requiring those in senior positions with strategic roles. However, this assumption isn’t really the case. Digitalisation has not only introduced RPA, but also technologies such as Artificial Intelligence (AI) and Machine Learning. These solutions are capable of replacing the roles that we deem to be higher end, such as creative thinking and negotiating.
I’ve witnessed an AI robot read inbound emails and support negotiations with a supplier by informing the recipient of the sentiment of the email and advising on the best method of negotiation. I’ve also seen another read a 150 page contract in a matter of seconds and highlight the areas that need attention. This means that you only need to read seven clauses rather than 150 pages – very real world, practical business improvements.
The application of AI allows for complex decision making to be achieved at a much faster rate. While in the past one person could have completed ten tasks per month, now they are capable of 500.
The constant evolution of the internet is also reducing the need for as many procurement professionals. Knowledge is a key frontier for those in the industry, as we are expected to be experts in various markets. Gaining this level of knowledge used to take years, but access to the internet means you now have a wealth of information at your fingertips, speeding up the process. This allows you to work across many varied supply markets, rather than a smaller set. Faster knowledge uptake isn’t a bad thing, as long as the quality of advice being given continues to be held to a high standard.
An ever-changing global market place is actually reducing the need for standalone procurement functions within a business. The likes of Amazon, Ali Baba and eBay have transformed the way commerce is conducted and suppliers can now reach buyers much more easily with a fully automated process.
Buyers can appoint Amazon as a supplier for their goods. For example, a company that purchases computer technology may decide that it wants to use Amazon as its supplier for computer consumables, allowing internal users to effectively purchase these goods directly with no or minimal overhead. In this way, there is actually no procurement involved for the company, besides appointing Amazon as the supplier. This all falls under the umbrella of digitalisation, and something we’re going to see more and more of in the months and years to come.
Of course, the tendency may be to read the above and panic about the potential job losses. Yes, fewer roles may eventually be required, however procurement is still going to need to employ those with the right skills to oversee this ever more complex industrial ecosystem.
Procurement is going to become much more of a commercial function within a business, to the extent that it may not even be called ‘procurement’ anymore. It could instead be known more commonly as ‘commercial support’ or perhaps become subsumed as part of a broader commercial group focussed on suppliers and buyers. This transformed function would require two different types of people to operate effectively.
Firstly, the increased use of technology will require digital experts who are able to analyse and run advanced technical solutions. People that will thrive in these positions will have an entrepreneurial flair to them and be able to envision how new technology can be deployed as well as implement it. They will also need to be commercially savvy. As procurement as a whole reduces its relative scale, stakeholders will need influencing by those who know their numbers. Being able to market procurement and communicate the benefits of technology to these decision makers will be essential.
On the other side of procurement, we will need market-focused innovative experts in their spend category. These will be people who understand their spend area technically, have a vision for what the future holds and know how they will reduce costs.
In order to recruit people with these skill sets, organisations need to be looking towards younger professionals who have gained a few years’ experience within these functional areas as analysts and the like. This means placing less emphasis on hiring those with direct procurement experience. Looking towards big consultancies would also be wise, as such organisations produce technical experts who possess both commercial and sales skills.
This is, of course, a vision of the future. However, businesses should prepare their existing talent for this shift by moving away from conventional training, instead encouraging analytics training and digital awareness. If you are a procurement professional yourself, you should be considering your personal development and what skills you’ll be able to bring to this industry of the future. This includes attending talks and conferences that don’t necessarily revolve around procurement, but instead centre on technology and digitalisation.
Eventually, businesses will be able to almost eliminate the need for procurement through automation. Those that will survive and thrive will be the ones that encourage, promote and invest in digitalisation and the benefits it will certainly bring.