Procurement Ecosystem: Challenges & Strategies
In today's rapidly evolving business landscape, procurement functions are under immense pressure to be more efficient, responsive, and strategic. The digital transformation of procurement processes is vital for organisations aiming to stay competitive in the modern landscape.
Building a successful digital ecosystem in procurement is not just about adopting the latest technologies; it involves creating an environment where everyone is talking to everyone, from managing data, to digital tools to organisational objectives.
With this comes many challenges, including creating a procurement digital ecosystem fit for purpose. The ecosystem is built to overcome these obstacles, and provide practical advice on where to begin, when redesigning or reviewing the digital infrastructure.
We spoke to Alex Saric, Chief Marketing Officer at Ivalua, and Matthew Buckingham, Vice President of Business Development & Alliances at Focal Point, about the challenges of building a successful digital ecosystem for procurement.
The Ivalua platform is built for collaboration between businesses and suppliers through a single, open platform. With suppliers connecting to their customers via Ivalua, the seamless onboarding process allows immediate engagement with buyers. Supporting a more open ecosystem that integrates with other solutions, networks, and services.
Focal Point is a procurement digital ecosystem that leverages advanced technology to streamline and optimise the procurement process. Offering a unified platform that integrates various procurement functions, including sourcing, purchasing, supplier management, and contract management. This integration helps in eliminating silos and improving overall efficiency.
The challenges of building a successful procurement digital ecosystem - and overcoming them
Building a successful procurement digital ecosystem is packed with challenges, with having your system overlap and a stream of data speaking with one another.
Having this one spot for your ecosystem also comes with the risk of being targeted by hackers, keen to access the information entrusted to them, as well as making sure the effort stays above board and within regulations.
Solutions built to specific needs while ensuring scalability, effectively onboarding suppliers, and keeping pace with technological advancements add further challenges.
Alex said the biggest challenge is keeping up with the volume and variety of data. With pressure to optimise decisions across procurement’s growing and often conflicting priorities, such as between cost and sustainability, leaders must access a large and expanding set of information. Due to specialised data providers, this invariably requires a broad ecosystem. As new sources of information become available and regulatory reporting requirements expand, this ecosystem will continue to grow. “To support procurement, a digital ecosystem must be able to provide easy access to all information needed to support ever more complex decisions and be agile enough to adapt over time,” he adds. “Ultimately, if a digital ecosystem can’t keep up, it will fail in its ability to help support procurement teams in their immediate priorities and longer-term goals.”
While for Matthew, he believes the challenges are fourfold: integration complexity, data management, change management and security, with issues posing technically complex and resource-intensive, especially with legacy architectures in place. “Many companies have a legacy architecture in place that IT manages exclusively in many cases, which compounds this challenge,” he says. “Data is becoming more of a challenge and an opportunity at the same time for many companies. The challenge is handling large volumes of data from various sources, which requires a robust data management strategy and technology infrastructure. Companies today are very risk averse and security is paramount, which can also be a challenge when building a digital procurement ecosystem based on data sharing across vendors, partners, etc.”
When it came to beating these challenges, both men emphasised the importance of planning and strategic approaches, integration such as phased implementation to manage complexity, and integrating various data sources into a unified platform. As well as the key part data has to play for both. Matthew advocates for a value-based approach, conducting cost-benefit analyses, and focusing on tangible and subjective business value. “Companies should start by identifying the value to the business, be it tangible or subjective value,” he adds. “As with all projects, strategic and tactical planning are important. Developing an implementation that focuses on the best possible outcomes might result in a phased implementation plan. This approach is a great way to manage complexity and allows for adjustments based on feedback and performance. It's also a good way to provide value quickly within a project or an implementation.”
While Alex emphasises building a solid data foundation with a single source of truth. “Data will always originate in various sources, but it should all flow to a single Source-to-Pay (S2P) platform where users can easily access all needed insights,” he says. “This platform should be built upon a unified data model, with a single record for each supplier or item to which all information is mapped to. It eliminates the data quality issues that typically arise with duplicate records, each containing only partial information, having to be matched in a central data “lake” or reporting layer.”
Designing or reviewing the digital ecosystem
Procurement operations may design or review the digital ecosystem to enhance efficiency and data accuracy, while ensuring scalability and robust security measures. For Alex, in making this decision , there are three key steps, “Firstly, clearly define your long-term procurement objectives and use this as a basis to plan backwards and build a digital ecosystem that will support this goal. Second, tailor your ecosystem to your organisation’s specific needs. There is no such thing as a one-size-fits-all digital ecosystem – it must meet your unique requirements and be able to adapt as needs evolve and expand. Finally, find choke points to identify areas for improvement. This is where you can find manual processes slowing teams down, and where access to quality data is impeding effective, timely decision-making.”
While for Matthew, to design a new digital procurement ecosystem, businesses must first identify the needs and goals through a gap analysis to highlight current bottlenecks and strengths. Build a cross-functional team and gather stakeholder feedback to align on measurable outcomes. “It’s also important to remember that you “don’t know what you don’t know,” he adds. “This is why engaging with partners from outside your organisation with a wider view of the marketplace and trends makes good financial sense. It could include consultancies, as well as tech companies that are already in the trenches working with CPOs, CFOs and other decision makers.”
Signing from the same hymn sheet
But these ecosystems only work if everyone signs off the same hymn sheet. To ensure new solutions work and integrate across their ecosystem to maintain seamless operations, improve data accuracy, and enhance collaboration. Proper integration prevents system silos, reduces manual work, and ensures that information flows efficiently between different tools and platforms, thereby increasing overall efficiency and supporting strategic decision-making. Alex says, “Organisations must adopt agnostic platforms that integrate with any technology. This is a key reason why ERP S2P solutions continue to lag as they tend to only integrate well with their own ERP platforms and those of partners. Technology-agnostic platforms are the only way to create a comprehensive digital ecosystem that doesn’t discriminate against other platforms, or create unnecessary roadblocks for procurement teams.” While Matthew says, the simplest way to do this is to choose technology that allows companies to connect all their systems. “APIs are critical today, and any system that doesn't use APIs to connect to other systems is not the best choice,” he adds. “It’s important for new tech providers you decide to work with to sit down with you and understand your existing ecosystem and how the new technology will link with theirs. n Maintaining comprehensive documentation of systems and integration processes is important to aid in troubleshooting and future upgrades. Using pilot programmes should only be as phase one of the whole programme, which should start to deliver results and bring value to the business as quickly as possible. A standalone pilot is normally a recipe for wasted time and money.”
The benefits
Matthew adds that companies can see a number of benefits from the digital ecosystem, including e increasing efficiency and effectiveness by automating procurement processes and workflows and significantly reducing manual tasks and processing times. Another benefit is enhanced collaboration. Working in sync with the right people at the right time using the right tools and bringing in the right data is really critical to running a business. “Identifying the right people early enough in the cycle so that they're not blindsided makes for a better working environment,” he adds. “One of the biggest benefits is data-driven decision-making. Using AI and advanced data analytics to make informed real-time decisions is one of the big advantages. Companies can use internal and external data to mitigate risk, track compliance, monitor suppliers and proactively resolve issues. One final benefit is sustainability. More efficient resource utilisation and waste reduction contribute to a company’s sustainability goals but using an updated ecosystem that centralises information allows you to hit those sustainability goals by collaborating with your suppliers to track those sustainability objectives as you go.”
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