Orchestration: Segmenting the Market for Procurement Goals
Three Procurement Goals of Future Procurement Teams
Procurement goals have evolved even further throughout 2021, and procurement teams have big goals for the future. Although still working through aspects of digital transformation and implementing platforms and tools, procurement is primed to bring greater strategic value to all organizations by achieving three goals.
The first is to be a true strategic partner to the business. Procurement wants to be the trusted advisor for buying, negotiating, and sourcing. If procurement is involved earlier in the process, it can drive greater business impact and be a part of prioritizing activities against target attainments.
The second is to contribute more directly to both top-line revenues and to strategic initiatives, such as new product launches.
The third big goal is procurement on demand. Procurement teams of the future will be able to offer their services on the spot, rather than the current model that conflicts with the speed of business and as a result is often bypassed. Deloitte’s 2021 CPO survey found that those procurement teams that set agility as a goal were four to five times more likely to have predictive analytics capabilities, utilizing predictive sourcing and staying ahead of the market.
These procurement goals all have one overlying procurement solution in common: orchestration. To understand orchestration, we must first understand how procurement got left behind.
Procurement Was Left Behind in Process Management Evolution
In the mid-2000s, the sales and marketing function underwent a profound evolution in process management. It was all about the cloud. A series of connected cloud apps and solutions, including well-known products like Salesforce, combined with increasingly ubiquitous computing.
Sales, marketing, and client management teams had access to mobile devices like laptops, smartphones, and tablets. They could be connected at the office while traveling and at home. With all the data centralized and available online, cloud-based apps, and a workforce that could be mobile, sales and marketing were revolutionized.
Procurement wasn’t a part of that first wave of cloud-based apps and connection workforces. Because of a reliance on legacy systems and offline records, procurement didn’t make the jump. However, that is now beginning to change. There are now well over a thousand new startups focused on procurement, finance, operations, and supply chain.
That’s a good sign for procurement professionals, but the downside of such a wealth of choice is the potential for confusion and overlap. Some apps focus on only one area of procurement, some on a single industry, while others cover procurement with much broader strokes. They’re all priced differently, and they each deliver value in a fundamentally different way.
How do you pick the right solution for your organization to reach procurement goals? To help make that decision, we’ve broken the products down into distinct procurement categories.
Emerging Procurement Solution Categories: Data
We invest in data to make our decisions more intelligent. A data system at its most basic is one that primarily consumes and produces data. Having access to this data can accomplish the goal of helping procurement to be a more strategic partner to the business. Data solutions tend to be priced as large, multi-year contracts. They can have intensive integration cycles that link the processes directly to the system of record.
Emerging Procurement Solution Categories: Process
We invest in process to make our decisions more automated. Process is a meta category. It encompasses functions such as procure to pay, source to contract, marketplace purchasing, and punch-outs. In short, a process-based system is one where you got to do your work. Many solutions in this category are designed to manage process across multiple stakeholders, and some also offer a degree of automation. Pricing is typically usage-based.
Emerging Procurement Solution Categories: Enablement
We invest in enablement to make our decision cycles more productive. Under this category, you will typically find procurement solutions focusing on spend analytics or benchmarking to make the spend process more productive.
To facilitate this, many enablement solutions pull in data from other solutions, and they may be designed for integration within other systems in a customer’s ecosystem. Like process-based solutions, enablement-focused procurement solutions are typically priced based on usage.
Orchestration: The Ultimate Procurement Solution (Sub) Category
Ideally, the enablement category should include a critical function called orchestration to help the function reach its procurement goals. This is the active coordination of all vital activities across the supply chain. Orchestration is a challenge. It requires real-time data and the ability to measure progress against targets in real-time. To reduce reaction time, exceptions must be identified automatically. Leaderboards are especially effective in driving these functions.
Adding to the challenge, most procurement solutions are designed for internal stakeholders. To gain access to the full range of data required for orchestration, a system must be multi-sided. Companies and their suppliers must have the ability to communicate directly, facilitating true collaboration, including reaching a common understanding of the requirements of a process.
The rewards of being able to orchestrate procurement are huge, including real-time data reporting, realistic forecasting, and the ability to track progress against those forecasts. All of these elements of orchestration lead to the three big procurement goals that teams are aiming for in the future: services on demand, contribution to top-line revenue and strategic initiatives, and being a true strategic partner to the business.
Unfortunately, most current procurement solutions lack orchestration capability, and that’s preventing the procurement teams using them from attaining their goals.
To learn more about the challenges and opportunities facing procurement teams, along with tips and best practices, be sure to check out this webinar.