Procurement - Harnessing the Power of Digitization

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Procurement - Harnessing the Power of Digitization

In the next series of the web-exclusive event Procurement Today & Tomorrow organized by Celerity and Quantic Media, we present to you views & expertise of CPOs. They deliberated upon the future of procurement and how can companies align their strategic objectives with Digital Procurement at fore.

How would you define the importance of digital procurement for companies? What are the value drivers?

Mohit Jauhari

Mohit Jauhari, Head – SCM, Shriram Pistons & Rings Ltd: Digitalization is one of the key priorities for CPOs around the world. Savings, quality, innovation, speed, and risk mitigation are 5 pointers which define value in the world of procurement digitalization. Lot of innovation has happened in digitalization and now we are talking about procurement 4.0., which is set to make procurement and supply chains transparent across the value chain. It will enable holistic transformation based on IOT, big data, virtual reality, etc.

However, before adopting digital procurement roadmap, companies need to understand that it’s capital intensive & time-consuming. Cost leadership, risk mitigation and process excellence are some of the main benefits of digitalization. Digital Procurement (DP) has become the buzzword these days - especially post Covid as Companies have now realized the importance of remote management. Digital Procurement will help companies achieve Cost Leadership, Process Excellence & Risk Mitigation - all at the same time. There are many companies who already have a head start as they had initiated digital procurement almost 2 decades ago - and they are the ones who will benefit the most - while the others take time to set-up the basic infra/paraphernalia in place. The key value drivers are:

  • Innovation management
  • Big data & analytics
  • Digital supply chain management
  • Strategically linked leadership
  • Automation & robotics
  • Digital supplier & category management
  • Agile organization
Vishal Singh

Vishal Singh, Director – Procurement & Logistics, Texas Instruments India & Rest of Asia: Digitalization in procurement is inevitable and it will grow more and more as we continue to get more connected more informed, and more disciplined. While the basics of procurement continue to be the same, what digitalization does is to bring more data to help informed decision making and equal participation of stakeholders. More visibility in the process brings credence and accountability to both buyer and seller and reduces chances of fraud.

How do you integrate People, Process & Technology (PPT)?

Ashutosh Dhar

Ashutosh Dhar, Supply Chain Director, Becton Dickinson: If you look at the interplay of these factors, these all work in sync with each other for every organization on a regular basis. When three of them are put together, that is when the complexity starts building and one of the factors that binds these factors together is the rate of change. Technology is one of the fastest changing factors in any organization to keep pace with the shifting business dynamics. Then comes the business processes which take time to evolve as company’s SOPs are stringent and have been built over the years to garner efficiency and strategic objectives. Third one, which is the most difficult one is People and when we have to ask people to change is when you realize it takes the most time to change and adopt to a new situation.

Any successful business integration or any successful transformation has to ensure that the pace of change is identified first and then the adoption of change for the organization is taken as a key factor of success for any of the projects. While we have been implementing technological changes in our organization from time to time, recently what we realized is that these transformations need to be linked with the SOPs of our organization to reap desired benefits and garner change sooner. It started with an idea of tracking & tracing of our shipments across the globe from suppliers to manufacturers to distributors and ultimately the end consumer. But then we realized that only having track & trace is not good enough. We integrated it with our forecasting process, which helped us in enhancing inventory management. Then came the third and last leg of aligning people with the integration of Process & Technology. The sudden onset of Covid made us realize the importance of real-time information when all of us are working from home. I firmly believe that tough times make us tougher and these last five-six months have been great learning experience for all us.

Sreenivas Rao Nandigam, Global Head – Supply Chain, Sun Pharmaceutical Industries: Interestingly all these factors – People, Processes and Technology are crucial for any change we make in the organization. Neglecting any one of them results in suboptimal results. Get the buy-in you need by involving people outside of management in the decision-making processes and work towards continuous improvement. Many change efforts do not sustain themselves because they focus on short-term change instead of longer-term impacts. Look both at the framework and what you need to change, and then ask yourself what your organization’s biggest problem is. Below are some examples:

  • If you are not completing tasks quickly enough: Pay attention to the interaction of process and technology, and attempt to automate more.
  • If you are not efficient enough: Look at the interaction of people and processes and see what you might be failing to scale.
  • If you are not creating new value: See where people and technology interact and find out where you are failing to innovate.

Also, take a critical look at the technology you already have and make sure you are using it to its fullest potential. You might discover that your existing solutions provide utility that you haven’t even tapped into yet. And do not forget your company’s culture. Take a critical look at how you communicate decisions and changes within your organization. If training is necessary, train people to be successful and to communicate. Keep in mind how the three components of PPT interact: The people do the work; technology often helps them innovate. Strong processes can help people increase efficiency; technology can help automate these processes.

How can companies harness the power of technology, more so during current times?

Ashutosh Dhar: Currently, a lot of us are working from home and physical connection amongst employees has reduced drastically. There are multiple tools to empower employees to continue to remain connected to each other and to the information flow within the organization. Three things that companies can do:

  1. Accept and embrace the new normal – A lot of companies are finding it difficult to adapt to the change that the world has gone through in the last 6 months. The faster we adapt and adopt as employees and as an organization, the faster we will be able to deliver on our goals and perform as we were doing in the past.
  2. Embrace technology with adequate training to users – One of the actions that is absolutely essential is to train the users of the technology/tool that is being implemented. A lot of times the tech is there but users are not familiar due to lack of training and are not able to make effective use of the power that they have in front of them.
  3. Reimagine the impossible – All of us have an opportunity to look beyond the standard ways of working and include technologies related to AI and ML in the work that we do on a daily basis. Some of those ideas would have been trashed in the past considering to be bizarre but with the use of latest tools, a lot of those would be possible in the current scenario.

Sreenivas Rao Nandigam: I strongly feel that the power of technology is even more important during the current times. The amount of digitization, which has happened in the last six months, is much more than the whole decade. One of the key success factors in usage of technology is the level of adoption, and Pandemic is almost forcing the adoption of tech giving tail winds. I would strongly suggest to look for relevant technology and digitization rather than taking big bang projects but they should be scalable. The mantra I use is Start Small and Scale Fast. This allows space for failures as the cost of failure is not large.

I feel that India is the hub for technology support and now will be able to get some advantage of the geopolitical situation in manufacturing and will emerge stronger post pandemic. One key factory for local vendors and for exports is the mindset change out of “Jugaad”. In my view, Jugaad had its own place in the 90s and has outlived its utility. We need to move on and create what I call as 100-year fixes. Managing expectation of the customers, not just overseas but the domestic has also seen a big change in the last one decade and the businesses need to be customer centric in their approach. There are of-course the PLI schemes the government has announced, which will automatically incentivize the investments in localization for specific sectors.

Mohit Jauhari: E-Procurement is a major tool for harnessing the power of digital procurement wherein entities / suppliers spread all over the globe can come together at a pre-defined time and help the buyer conclude deals within hours. Since this eliminates the need for any cross country / continent travel, the process saves a lot of time & effort on the part of the buyer & seller. These direct / indirect savings improve the efficiencies for both the buyer as well as the sellers. On top of this, the process is transparent and hence improves the credibility of such transactions. Likewise, supplier portals with real-time exchange of data / information between the buyers & sellers will be an intrinsic feature of the New Normal.

Vishal Singh: Data forms the base of this era of digitalization. Big data, Fast data, Smart data and any kind of analytics leading all the way to predictive analytics, can offer much more certainty in purchasing & supply chain world. Something as simple as PO & invoice automation can deliver immense value to the operations management, reduce payment delay to suppliers and give predictability to business. Looking from a semiconductor standpoint, the operations has a global footprint with silicon produced in one country, assembled & tested in second country, and stored in third country, with distribution across the globe to all customers locations. In such an operating scenario, with right & sufficient data on supply & distribution side, company reduce cost, give realistic delivery times, and add competitive advantage. But investment in digital solution must be balanced and evaluated in line with companies’ vision. Adding digital or technology solution in your procurement domain, without analyzing value generation, operational efficiency and return on investment, can create more challenges than doing good.

How will digitalization shape up procurement in the years to come? How does the procurement 2025 look like?

Mohit Jauhari: To me Procurement 2025 looks MOST EXCITING. Digitalization is going to transform the way business is done. Procurement will make use of cognitive computing & AI. Predictive / Advanced Analytics will help companies take key decisions. Pan-Globe Collaborations will be a reality. Crowd Sourcing & Blockchain will no longer remain buzzwords - and will become a way of life for a procurement professionals. All in all, DP will help companies become proactive & predictive on their end to end supply chains - especially on transactions with back-end suppliers. Automated transactions will help improve the overall efficiency & effectiveness. Owing to systems & processes taking / supporting decisions, the possibility of human errors will also get eliminated. Companies will be able to manage & mitigate risks much more effectively. Procurement Teams will become leaner with data management experts ruling the roost. IT Savvy-ness will become the Quality # 1 for any procurement professional.

Vishal Singh: Technological evolution has been shaping up procurement at a much faster pace than before and it will continue to define new boundaries. Solution will get integrated and connected supply chain will be the driver of competitive advantage. We can see the glimpse of that in today’s times with impact of geo-political shifts making the flow of good more dynamic and complex. But the other factor would be evolution of corporate governance, audits and fraud prevention. The technology would also define new ways of supply chain transparency, data management & reporting.

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