Digital Procurement: Trends Shaping The Future Of Source to Pay

Trends Shaping The Future of
Procurement
Patrick Connaughton, Senior Research Director

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which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the
contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group.
Copyright © 2015 The Hackett Group, World-Class Defined. All rights reserved.

3© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2016 The Hackett Group
The key takeaways from last year’s Procurement 2025 webcast
 The shift in workforce demographics is a reality. The Millennial generation wants more from work than just a
career at a good company. Commitment to sustainability, fun and work-life balance makes a difference in
recruiting and retention.
 Training strategies will need to be modernized to productively integrate Millennials into the workforce.
 The success of this integration will be one of the biggest determining factors for how well procurement is
positioned to take advantage of social, mobile, analytics and cloud technology. Millennials will be the catalyst for
rapid technology adoption and change.
 However, as data and devices proliferate, so does risk. A new breed of supplier lifecycle management
solutions will be required. Enterprise social networking will play an important role in this evolution.
 Ultimately, SRM will transition to Network Relationship Management, encompassing a broader range of
trading partners and third parties where knowledge becomes currency.
 To prepare for the global/digital/networked economy, our research is showing early indicators of
reshoring and insourcing activity. This, coupled with the creation of dedicated innovation and analytics teams
and emerging technology (ex. 3-D printing) will change the face of procurement service delivery (i.e. location,
team structure) as we know it.

However, the rate of change caused by digital disruption is accelerating
much faster than anyone predicted…
Intensifying
competition
Disruptive
innovation
Customer
as King
The Insight
Imperative
The Digital
Imperative
The Five Forces Of Change

The digital imperative/digital transformation has been the biggest catalyst for
change
 “When the wind of change blows, some people build walls, others build windmills.”
 How can companies take what they do and reimagine it in the digital world?

Today’s session – Trends shaping the future of procurement
 In this is webcast, Hackett will share its predictions on the trends to watch which will have the
biggest impact on how procurement does its job in the future. Central to this discussion will be
Hackett’s new framework for digital transformation in procurement. This framework for digital
transformation embodies five key characteristics: a multi-channel stakeholder experience, a
digitally enabled workforce, pervasive smart process automation, highly network-enabled trading
partners, and a future-looking/predictive insight-driven enterprise.

Four pillars support
procurement’s
digital
business strategy
Data and analytics
form the foundation
Let’s talk about what digital transformation really means to procurement… five characteristics
of a future-proof procurement organization
The Digital Business Strategy
2
Omni-channel,
personalized
stakeholder
experience
3
Digitally
enabled
procurement
workforce
4
“Smart”
orchestration of
source-to-pay
services
5
Ecosystem of
networked
solutions
1 Insight-driven analytics

Setting a foundation of
data and insight driven
analytics

Big data has the potential to transform procurement analytics
Source: The Hackett Group
Data
Data
Information Intelligence
Value
Latency
Record Understand Anticipate
Big Data
Transactional data
Operational data
Machine-to-machine data
Cloud services data
Transactional data
Operational data
Partner data
Sensor data
Social data
Partner data
Weeks/days Days/hours Hours/real-time
Real-time
analytics
Analytics
Reporting

Building a foundation of data and insight driven analytics
Q7. Which trends will have the greatest transformational impact on the way procurement performs its job over the next decade?
65%
57%
48%
47%
43%
30%
27%
19%
7%
8%
Predictive Analytics and Forecasting Tools
Global economy
Cloud computing
Millennial workforce
Mobility
Cognitive computing infused into
procurement software tools
Robotic process automation
Enterprise Social Networking
3-D printing
Other
Which trends will have the greatest transformational impact on
the way procurement performs its job over the next decade?
Source: Key Issues Study, The Hackett Group, 2016

Building an omni-
channel, personalized
stakeholder experience

An omni-channel Olympics experience
Digitalization is affecting change everywhere, including the Olympics
Accessibility
Communication
How has digitalization changed the way we
experience the Olympics?
How does it apply to procurement?
• Anyone can watch live from a television, smart phone,
tablet, or computer
• Recording capabilities and platforms such as YouTube
allow people to watch on demand
• Viewers can interact with people all over the world on
social media to tweet, post pictures, and share stories
about their experiences
• Technology applications can enable end users to make
purchases when they are away from the desk (i.e., from a cell
phone or tablet)
• Online portals can provide updates and policy information
accessible to users at any time
• Social media platforms, e.g., chat groups and forums, provide a
venue for employees, internal customers, and suppliers to
interact with each other

Creating an omni-channel, personalized stakeholder experience
 Omni-channel access to procurement
process allowing ability to buy/pay for
goods/services from all locations
(corporate, satellite offices/locations, home,
on-the-go/mobile)
 Real-time information and status on all
procurement requests/transactions
 Intelligent purchasing process that know
who you are, where you sit, and what role
you play in the organization
Capabilities
In-browser
chat support
Self-service
User
experience
analytics
Community
engagement
Personalized
experience
Email and
messaging
Guided talk
tracks
Phone
support
Case
management
Voice
Mobile
Social
Web

Chat bots: the next big channel redefining the stakeholder experience
 Chat Bots will reinvent the way we interact with
the internet. Browsers and desktops will be
replaced by chat screens. We’ll ask our bots
the weather and the time that the football
games start rather than search for it ourselves.
 Buying products on sites like Ebay will be
much more streamlined with the addition of
bots. By removing our reliance on human
responses to messages we’ll speed things up
greatly.
 However, self-service does not equal good
service and a multi-pronged approach is
needed

Even better… No more typing!

Amazon Echo takes the concept even further… totally hands free

Procurement needs a structured approach to improving the stakeholder
experience
 Identify key stakeholder groups and individuals,
their interactions and general attitude
 Develop measurement approaches tailored to
key stakeholder groups
 Analyze stakeholder feedback, plan for action
by leadership to own and deliver
 Provide feedback to key stakeholder groups on
customer satisfaction and action plans to
address identified improvement needs
Identify
Stakeholders
Improving the
Stakeholder
Experience
Measure
Success
Analyze
Results
Take
Action

The first step is to begin mapping out the influence and importance of key
stakeholders
Monitor and
Inform
Occasionally
Importance
Influence
 Who are your stakeholders?
 Which are most approachable?
 Who will be a good champion?
 Who are your greatest consumers?
Key Players
Engage
Actively and
Keep
Satisfied
Minimal Effort
Keep
Informed
Identify
Stakeholders
Improving the
Stakeholder
Experience
Measure
Success
Analyze
Results
Take
Action
Stakeholder Segmentation

A practical procurement example -- guided buying
Providing a user experience that balances simplicity, risk and control
Identify
Stakeholders
Improving the
Stakeholder
Experience
Measure
Success
Analyze
Results
Take
Action
Source Buy
Source
User- defined
source
Tactical sourcing
desk
Non- sourced
Requisition
Automated
inventory/ MRP
Pull from stock
No system required
Buy
Automated (no
touch)
SRM sourcing
cockpit
P-card or travel
card
No PO (invoice
only)
E-catalog
Strategic sourcing

Orchestrating a “smart”
portfolio of digital
procurement services

Orchestrating a “smart” portfolio of digital procurement services
 Table stakes in a digital era: 100% paperless process from source to pay
 Creating a “procurement-as-service” portfolio – building awareness (branding)
 Taking advantage of robotics and eventually, cognitive computing opportunities

Automation: Agile P2P organizations are piloting robotic process automation
(RPA) – especially in shared service centers
 Large outsourcing providers have begun to reap the
benefits of RPA as a way to lower their own operating
costs. GBS and procurement shared service centers
should explore the potential as well.
 When does RPA make sense?
– Stable, relatively static applications
– Need to access multiple systems
– Limited need for human intervention, exceptions handling
– Clear understanding of the current cost of manually
completing the work
– High transaction volumes

A small percentage of P2P organizations are just getting started with RPA;
RPA is ranked one of the top 4 transformational areas in the next decade
77%
16%
7%
0%
RPA Adoption in P2P
None Piloting Partially Rolled Out Fully Adopted
Source: 2016 P2P Key Issues Study Results
2%
5%
18%
23%
27%
39%
43%
45%
57%
59%
75%
Other
Enterprise social networking
Prompt payment regulation
Millennial workforce
Global economy
Mobility
Cloud computing
Robotic process automation
Process ownership and link to procurement
Predictive analytics and forecasting tools
Digitalization of B2B connections and transactions
Trends that will have the greatest transformation
impact on P2P in the next 10 years

P2P orgs that are implementing RPA expect benefits in higher productivity
and lower operating costs
If you have implemented RPA, which benefits do you expect?
9%
22%
43%
48%
52%
65%
Increased regulatory compliance e.g. through traceability of data /
information
Improved data analytics / management information
Higher employee productivity through increased focus on value-added
activity
Increased quality and accuracy
Process cost reduction
Operational efficiency / productivity

Hackett’s point of view on RPA
 Hackett’s point of view is that RPA will have a limited lifespan as artificial intelligence and cognitive
computing matures and eventually displaces the need for the current generation of RPA.
 RPA is most useful when dealing with legacy, inflexible software tools that otherwise cannot be
upgraded and modernized. For enterprise software that is newer, changes frequently and is up to
date on releases, RPA is not the right solution. As legacy software is phased out and replaced, so
will the RPA utilities deployed to extend its life.
 We predict that this generation of RPA may have a small impact on the number of people needed
to perform mundane, repetitive tasks but ultimately, this is a good thing. Resources can be
reassigned to more rewarding activities and job satisfaction will increase. And, this can be an
effective stop gap for every company that is being asked to take on more and more work without
adding FTEs.
 That being said, when “unsupervised” AI matures to the point that it is pervasive in all enterprise
software, there will be more significant implications on talent management. Companies are
advised to begin planning long-term what this will mean to their own workforce – leading the
discussion with how talent will be transformed to take full advantage of automation and not how
automation will take the place of talent.

Creating a digitally
enabled workforce

Creating a digitally enabled workforce
 Helping Millennials, the first generation of digital natives,
draw from a familiar set of technology tools to work
anywhere, anytime
 Self-provisioning of IT assets (i.e. phones, laptops, tablets) to
increase productivity, job satisfaction
 Modernizing training to include broader experiences through
job rotations, industry recognized certifications and new ways
of learning – ex. “massively open online courses (MOOC)

Video conferencing has come of age for internal collaboration but what
about working with suppliers…?

In the future, video conferencing will also play a role in breaking down
language barriers by mashing it up with real-time translation services

Four characteristics of successful talent management in procurement
1. Training is conducted in the field, not in a classroom. It is creative, engaging, challenging
and specific/based on real-life scenarios.
2. Staff is rotated within and between business units and geographies, developing potential
future leaders who have a broad understanding of the entire value chain.
3. Recruiting and hiring draws from outside the typical pool of procurement and sourcing
specialists. Softer skills like relationship management, intellectual curiosity and business
acumen are highly valued.
4. Procurement’s culture is defined by successfully challenging the status quo, influencing
leadership to try something different. It is a “constructive disrupter,” displacing traditional, less
efficient processes with new, creative solutions that are able to scale with the future strategy.

Unlocking Value
Through an Ecosystem
of Networked
Procurement Solutions

An ecosystem of networked solutions can take many forms
 Source-to-pay software – emerging and legacy solutions coming together
 Supplier and trading partner networks
 Knowledge networks for market intelligence
 Crowdsourcing networks for ideation, freelance assignments
 Risk networks to better manage the interconnectivity of events
 Enterprise social networks to collaborate internally
 “Internet of things” networks connecting physical (and sometimes human) assets

The source-to-pay software landscape
Supplier Lifecycle Management
(Supplier Master Data, Performance and Risk)
Track performance, monitor risk, aggregate third-party data on suppliers, maintain master data, view performance
Automated
Spend Analysis
E-Sourcing Contract Lifecycle
Management
E-Procurement E-InvoicingServices
Procurement
• Identify category
opportunities
• Aggregate and
report on enterprise
spend
• Cleanse and
rationalize spend
data
• Define
requirements/aggre
gate demand
• Conduct RFx
• Evaluate suppliers
• Optimize bids
• Conduct e-auctions
• Create and store contracts
• Maintain standard templates
• Manage negotiation workflow
• Alert on milestones
• Maintain
e-catalogs
• Search approved
suppliers
• Punch-out to
supplier catalogs
• Create requisitions
• Input/upload
invoices
• Match invoices
• Manage
discrepancy
resolution
• Approve payments
• Manage requisition
workflow
• Benchmark rates
• Maintain service
agreements
• Track time and
approval workflow

Automated Spend
Analysis
E-SourcingContract Lifecycle
Management
E-Procurement
E-Invoicing
E-Payables
Supplier Networks
Supplier Portals
Procurement
Savings Dashboards
Supplier Lifecycle
Management (Risk
and Performance)
Services Procurement
Robotic Process
Automation
Dynamic Discounting
Software
Supply Chain
Financing Software
LowValueHigh
The ecosystem of available solutions are all at different levels of maturity
Piloting Adoption Phase Fully Adopted Percentage using Software-as-a-
Service
Q2.5 For each software category, please indicate how
extensively your organization is using it, the estimated level of
value that it has driven and the deployment model being used.

Hot off the presses: understanding the pricing models and tips for selecting
a supplier network

Aggregators like Amazon Business help to expand the universe of available
suppliers while still providing procurement visibility to the spend
Source: The Hackett Group
Savings
Suppliers
80% of
spend
20% 100%
0-2%3-4%5-7%
40% influenced by
strategic sourcing
5% not
influenced
10%notinfluenced 10% influenced
by buying desk 5% infl.
by e-catalogs
Totalspendpersupplier
10% not
influenced
15% not
influenced
5% unknown
Example of tail spend at a company with a non-mature procurement
organization with 55% spend influence
15-30% candidates for spot buys
5%

Beyond supporting transactions, networks can also be a source of market
intelligence
Suppliers
Research centers
Industry groups & trade associations
Internal business partners
Government agencies & NGOs
Customers
Universities/schools
Procurement

Crowdsourcing networks in procurement
 A tool for drawing on ideas and expertise from both suppliers and customers as a
source of co-creation or innovation, and a potential forum for researching new
products and markets
 Crowdsourcing enables sourcing teams to gain access to thousands of new
suppliers from all over the world, encouraging them to submit bids for particular
pieces of work
 Less attention has been given to what we might call microtask-based
crowdsourcing, where a problem or task is presented to a crowd that collectively
provides small units of work, which are then aggregated, processed and
assembled into a more comprehensive output
 Procurement will still be tasked to enable and manage new platform-based
work/service intermediaries (“suppliers”) — with the usual objectives in mind
(cost, risk, performance). However, we are talking about suppliers that are
radically different from the suppliers we have been dealing with for 10 to 20 years.

Networked solutions are also required to mitigate interconnected risks

Enterprise social networking defined
 Enterprise social networking is the use of technologies like wikis, social networks, and discussion forums
to enable or streamline business processes while enhancing collaboration.
 Enterprise social networking aims to help employees, customers, and suppliers collaborate, share, and
organize information better.
Skype for business
Professional meetings and collaboration—all
integrated with your Office apps (prev. Lync)
Freemium cloud based team collaboration tool.
designed to increase productivity and team
comms in one searchable place
 Quick messaging, no history
 Quick voice / video calls
 Android/iOS app
 Live voice translation
 Chatter
 Persistent chat rooms
 Robotic automation
 Android/iOS app
Communication and Collaboration
Freemium enterprise social networking service
used for private communication within
organizations. Used by 80% of Fortune 100
organisations
 Facebook message board for the office
 Setup team groups with closed access
What is it How to use it

The benefits of internal collaboration tools
 A tool like Slack can structure communication into threads that focus on a specific topic or project
— places where team members can share information and files associated with that project. This
can be more effective than sending separate and various emails with attachments, which can be
harder to organize and keep track of.
 This idea also translates into procurement-specific collaboration tools. Buyers within the
procurement department can search for vendors on the platform and share information, send
comments and discuss the potential supplier with other team members, all within communication
forums. It’s a mix of a project management, collaboration and communication tool.
 It’s also a tool that can prevent wasted time on emails. These forums keeps procurement
professionals communicating and collaborating in one platform, instead of having to send
information and communicate over separate emails. All the information and discussion is kept in
that forum, making it easy for procurement to keep track of the organization’s sourcing activities.

Last but not least, there’s the “Internet of Things”
 More intelligent asset management
 Enables pay for performance business models
 Predictive maintenance
 Facility/Smart buildings
 Inventory tracking and forecasting

Wrap up: the five factors shaping procurement’s digital transformation
An Omni –
Channel,
Personalized
Stakeholder
Experience
A Digitally
Enabled
Procurement
Workforce
A “Smart”
Orchestration
Of Source-to-
Pay Services
An Ecosystem
of Networked
Solutions
Insight Driven Analytics
The Digital Business Strategy
1
2 3 4 5

Assessment Questions
Digital Stakeholder Engagement
• Have you segmented the stakeholder base to better understand their needs and wants?
• Have you aligned your engagement model with each stakeholder’s requirements?
• Is the stakeholder experience consistent across all interaction channels?
Digitally Enabled Workforce
• Are employees able to self-provision their laptops, phone, tablets, etc.?
• Has training been modernized to take advantage of new digital formats?
• Is there a plan in place to maximize the use of video conferencing, including suppliers?
Digital Service Orchestration
• Have you evaluated your current state for RPA opportunities?
• Is there a clear inventory of procurement’s available services? Is it well understood?
• Is there a vision for delivering procurement-as-a-service?
Digital Network Ecosystem
• Is there a vision for extending supplier networks to all trading partners?
• Is there a strategy in place for taking advantage of emerging technology?
• Has crowdsourcing been considered? Enterprise social networking?
Insight Driven Enterprise
• Have you evaluated your current BI solutions to understand their roadmap to cognitive computing?
• Do you have a plan in place to deliver predictive forecasting in areas like commodity volatility and risk?
• Is mobility part of the overall strategy? I.E. How are you enabling access to real-time analytics on a tablet
or phone?
Digital Transformation Assessment
Are you ready? Do you have an overarching strategy for digital procurement?

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This document contains trade secrets and information that is sensitive, proprietary, and confidential to The Hackett Group the disclosure of which would provide a competitive advantage to
others. As a result, the information contained herein, including, information relating to
The Hackett Group’s data, equipment, apparatus, programs, software, security keys, specifications, drawings, business information, pricing, tools, taxonomy, questionnaires, deliverables,
including without limitation any benchmark reports, and the data and calculations contained therein, may not be duplicated or otherwise distributed without The Hackett Group Inc.’s
express written approval.
www.thehackettgroup.com

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