A global survey of 452 procurement officers and operational leaders conducted by SAP Ariba and the University of Applied Sciences Würzburg-Schweinfurt finds there’s a major gap between where most organizations are today when it comes to digital transformation and where they hope to be.
The survey finds that while 83 percent of respondents say they believe digital transformation will have a major impact on business processes, only 5 percent of the respondents described those processes as being highly automated today. Another 18 percent describe their processes as being very automated, while over half (54 percent) say their processes are somewhat automated.
SAP Ariba Chief Digital Officer Marcell Vollmer says the survey results make it clear that there is still a long way to go in terms of transforming businesses in general and procurement especially. In fact, many organizations don’t seem to completely understand the enormity of the potential changes at hand, says Vollmer. Instead of investing in retraining people to add value on top of processes that will be increasingly automated, too many organizations are still focused on being able to simply scan invoices, notes Vollmer. In the months and years ahead, it’s already apparent that many rote manual procurement process will be automated using machine learning and AI technologies, adds Vollmer.
The good news is that 63 percent of respondents say they are moving further down the path toward automation, while 31 percent say their organizations are undecided. Obviously, it’s hard to imagine how companies that don’t automate processes will be able to remain competitive in an age of digital supply chains. The problem is that there is not enough strategic focus, says Vollmer.
“There’s too much emphasis on just making the next step,” says Vollmer.
A big part of the reason for that lack of focus is that procurement processes often roll up to a chief finance officer or chief operations officer that needs to contend with other competing priorities, says Vollmer.
The survey finds that in terms of technologies, organizations plan to adopt robotic process automation (RPA) (20 percent), artificial intelligence/cognitive computing (17 percent), and machine learning algorithms (15 percent) at the top of the list. Those investments will make it easier for organizations to strike a balance between aggregating their purchasing power to drive down costs, while simultaneously expanding the supply chain to include, for example, smaller suppliers that enable organizations to comply with social and government mandates.
Vollmer notes that other technologies that bear watching are blockchain databases and smart contracts. It’s not precisely clear how these technologies will be applied, but Vollmer says it is now only a matter of time before mainstream use cases involving tracking source materials and preventing fraud manifest themselves in the supply chain.
It’s now a matter of when versus if most organizations will be transforming their procurement processes. Of course, it’s also safe to assume that the organizations that fail to make that transformation won’t likely be around to see how it all turns out.