Digital supply networks strengthen procurement strategy

Disruptive technologies push boundaries for procurement strategy

Over the past two decades, the main mission of procurement has broadened from cost leadership and assurance of supply to strategic insights for decision making. Disruptive technologies—mobile computing and the cloud, constant connectivity, and sensors that enable devices and machines to form the internet of things—are now paving the way for new applications and capabilities across the supply chain that will enable procurement to offer even more strategic value.

Digital supply networks, disruptive technologies, and procurement analytics solutions are opening new possibilities in each of the key areas of procurement:

Source to contract (S2C)

• Predict demand with artificial intelligence
• Categorise and manage spend in real time
• Know landed cost for any commodity for all alternate countries of origin
• Predict sources of future innovation
• Act on timely alerts from all negotiated agreements (indexed pricing, penalties, renewals, etc.) through smart contracts

Procure to pay (P2P)

• Automatically sense material demand and consumption and requisition replenishment deliveries from suppliers
• Exchange goods through validated and trusted decentralised ledgers
• Eliminate repetitive processing through robotic process automation
• Trigger payments utilising real-time signals of material delivery
• Execute automated secure payment

Supplier Relationship Management (SRM)

• Monitor potential for risks in real-time through the aggregation and visualisation of third-party data feeds
• Conduct supplier visits from their own office utilising augmented reality
• Perform supplier audits through crowd sourcing
• Monitor sustainability across entire ecosystems through automatic reporting and visualisation

Digital procurement is an exponential shift that allows organisations to better deliver on their main mission with fundamentally different processes at a reduced cost. New operating models, organisational constructs, talent, and metrics will be necessary to embrace and nurture the new capabilities and meet heightened expectations.

With improvements in data, analytics, computing power, and visualisation, digital procurement also has better evidence-based options for decision making, which can improve both the value and accuracy of strategic decisions and the speed of execution. The seat at the executive table for procurement strategy has never been more deserved than it is now.

Figure 1: Characteristics of digital procurement

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Bringing it all together: Digital supply networks

The digitisation of the supply chain, procurement included, creates a “digital loop,” a continuous flow of data, information, goods, and services between the physical and digital worlds.

Three examples of how the digital loop relates to procurement:

• For multiple, unstructured, and disparate sources of spend information, a cognitive computing and artificial intelligence solution can read, interpret, and recognise the information you require and build a single record of your supplier spend—it will also keep it up to date.
• You may have thousands of contracts in hard-copy or PDF form but you can’t act on the valuable T&Cs, indexed pricing, penalties, etc. that you have negotiated. An intelligent content extraction solution enabled by machine learning can convert static documents into data points for your review and action.
• Changes in demand, delivery, and consumption of raw materials can be captured through sensors that digitise the status and transaction of materials.

Digital supply networks and digital procurement are a reality now. We encourage you to download our full report on digital procurement and contact us to find out more about how Deloitte can help your organisation apply disruptive technologies and improve procurement strategy. Read more about industry 4.0 and The rise of the digital supply network.