CPOs must adapt, update and align their procurement strategy and initiatives in line with the evolving digital age.
Digital business refers to business that is created by using digital assets and/or capabilities, involves digital products, services and/or customer experiences, and/or is conducted through digital channels and communities.
In today’s digital world, organizations must quickly adapt their supply chain and procurement strategies to meet the challenges that digital innovation poses. "Smarter" products and extended product life cycles are also forcing supply management processes that support aftermarket enhancements and services.
Let us try and understand the impact of digital business on procurement professionals, especially the CPO function,
Strategic Direction: enabling growth while containing costs by aligning digital business, supply chain and supply management strategies.
Human Resources: increased focus on segmentation, strategic sourcing and collaboration, reduction of back-office procurement staff and automating work processes.
Business Process: Enhanced supply management and supply base innovation, including new processes and partners.
CPOs must build a strong functional foundation first, and then add digital business capabilities, which are different in scope from traditional practices.
In light of the above challenges posed by the digital era, here are some recommended steps to address them:
1) Enunciate How Procurement Supports Digital Business and How it is Ready
CPOs and their staff must synchronize their acquisition strategy with the company's digital business strategies. They should foresee that strategic suppliers and alliance/value partners will be active in multiple networks across many product and software platforms.
Successful strategic sourcing and procurement in this reduced cycle time and digital environment will necessitate more frequent collaboration and multi-enterprise visibility. With digital business operating on reduced cycle times, even minor supplier delivery, quality or compliance issues will dramatically amplify supply chain risks.
Next steps for CPOs:
Collaborate with internal departments to integrate the digital supply chain and supply management strategies.
Regularly update your strategy and communicate with functional leaders and your staff.
Collaborate with other C-level, functional and line-of-business executives to drive consensus on how the company will address rapidly maturing capabilities and assets.
Drive top-line growth and bottom-line cost management.
2) Anticipate and Prepare for Impacts on People and Processes
Assess the result of substantially reduced cycle times.
Focus on communicating your digital supply management vision, initiatives and key metrics to internal and external stakeholders.
Every business leader will need digital knowledge and skills to develop digital leadership and technologies. To survive in the digital business era, CPOs must leverage increasing IT application integration that will take advantage of smart devices to automate requisition, PO and supplier payment processes. In turn, this automation will decrease cycle times and reduce the need for back- office personnel and outsourcing.
Next steps for CPOs:
Communicate and enhance your digital vision for supporting reduced cycle time operations, including the structure of your digital-business-capable supply management organization.
Prepare for changes that enable a lean back-office and reduced cycle time in a digital business supply management environment.
Use business reviews, supplier summits and executive meetings with strategic suppliers and alliance/value partners to communicate digital business initiatives.
3) Evaluate the Scalability of Procurement Processes to meet challenges of the future
It is better to prepare for and lead disruptive innovation than to be impacted by it. The coming digital business era is prompting CPOs and supply management leaders to collaborate with CIOs to avoid competitive shortcomings, including reassessing IT corporate shared procurement services and analytics to support new business opportunities. CPOs can use the company's supplier segmentation process to assess the digital business capabilities of strategic suppliers and value/alliance partners.
CPOs must expand the charter of supply management centers of excellence (COEs) - that have championed procurement shared services - to anticipate the enhanced technology, data sources, big data analytics and governance necessary to enable the digital supply management strategy.
Next steps for CPOs:
Collaborate with both product suppliers and technology vendors on innovative ways to make supply management operations and analytics digital-business-capable
Enhance your supplier segmentation process with supplier ability to support digital products and services.