Rahul Garg, Founder, Moglix.Com
Moglix is an Asia-based e-Commerce company that is intensively inclined towards B2B procurement of industry essentials. Rahul possesses a rich experience in technology and missions to make $100B impact on Indian economy with revolutionizing every aspect of B2B commerce and technology in this process.
As we enter the digital age, the industry is thinking of ways to become more efficient, deliver cost reductions to their customers, and become more competitive.
With today’s customers being better informed/connected, there is a rise in their expectations and an increased demand for personalization and customization. This, in turn, drives complexity to supply chain, requiring agility and multi-party orchestration.
For organizations confronted with increasing global competition, price volatility, and cost reduction pressures, a digital technology-focused procurement strategy becomes critical to the success of an organization. Such a strategy reimagines the supply chain to upgrade its role from tactical procurement to one that is value-driven and aligned to business goals.
"For organizations confronted with increasing global competition, price volatility, and cost reduction pressures, a digital technology-focused procurement strategy becomes critical to the success of an organization"
84% of procurement organizations believe that digital transformation will fundamentally change the way their services are delivered over the next three to five years. Yet only 32% have developed a strategy for getting there. - 2017 Key Issues Study, The Hackett Group.
So, it’s no surprise that digital transformation of procurement is high on CPO’s agenda.
Digital technologies have disrupted the way companies are doing business, thereby making them agile and dynamic. Technologies have been able to capture and analyze data to drive strategic decisions and transform operations. There is no doubt that the combination of new technologies - from big data analytics to automation - is revolutionizing companies’ operational and administrative processes thereby creating new revenue opportunities as well as streams for cost savings. While traditional procurement solutions primarily focused on spend visibility, digitalization of procurement has enabled multi-tier visibility and opportunities for improvement across the organization. It has reduced cycle-time in sourcing processes and hastened time-to-market.
Therefore, in such a scenario, CIOs will have to work closely with the CPO to understand how digital innovation can enhance not only organizational efficiency but also the procurement’s value proposition to their suppliers, customers, and internal process partners. No doubt then, the case for digitalization of your procurement function is indeed compelling.
To fully realize the digital revolution, procurement professionals must ramp up below four capabilities:
Unified Source to Pay Platform:
A digital source to pay platform will automate the entire procurement process from PR generation to creation of RFQs, negotiation, and selection of suppliers and generation of PO to gate entry to the generation of ASN and GRN and finally maintaining payment ledger.
End to end digitization of source to pay process unlocks 20% of working capital of organizations as the sourcing managers can now focus on strategic initiatives rather than transaction ones, thereby increasing the procurement value handled per employee. This also reduces the hassle of following up on emails and calls during negotiation with the suppliers. Also, the rejections and late deliveries are identified early enough to take counter measures, leading to reduced inventory costs
Additionally, this gives you visibility into supplier performance, thereby, helping you create strategic partnerships with your key suppliers.
E-sourcing is a primary tool that allows organizations to connect, screen and shortlist suppliers on a technology platform. It helps you connect with suppliers irrespective of the location and time, thereby, helping sourcing managers in maintaining transparent relations with the suppliers along with negotiation power with them This often takes the form of dynamic negotiations, in real time, between a buyer and a group of pre-qualified suppliers, each competing against each other to win the buyer, through the use of a B2B sourcing platform. The reasons why e-sourcing has become so prevalent is that, as in many other areas of online activity, the Internet brings suppliers and provider closer together, facilitating reduced costs, improved transparency and better supplier relations and a more efficient process.
With the use of e-sourcing, companies have achieved 50% improvement in the man-hour efficiency and reduced PO processing time by 66 %. (As per APQC)
All of the digital transformations generate a high-value by-product: data. The quantity of data rises exponentially, including new forms of data, as well as granularity and complexity. This creates unprecedented opportunities to pull new insights for procurement and maximize the impact of optimization levers, but also it brings in new challenges to leverage data. Basis our experience with 200+ customers, we have observed that 90% of the data is corrupt before it even reached CXO. Therefore, maintenance of a clean data sheet becomes a must, else, any kind of intelligence applied to corrupt data is extremely harmful as it leads to incorrect decision making.
It’s a digital ledger that increases process efficiencies in the purchase-to-payment cycle and improves trust and transparency within the networks and value chain.