Archive: June, 2018

5. The future of procurement technology and data

AI, algorithms, bots – familiar terms even if we’re not sure what they do or how they impact our daily lives. For most consumers, new technology suggests lower prices. For most employees, it’s a threat to their livelihoods.

This is the final blog in the series about procurement technology and data. In this blog I consider the future.

Despite implementing a variety of procurement technology solutions, I find little evidence that computers are lowering the cost of procurement or making it redundant. Technology, however, is having a profound impact. For all the improvements in technology, such as P2P, eRFX, and analytics, much of it requires significant on-going investment to load data and a detailed understanding of the way the system works in order to interpret the reports.

This begs the question about the future role of procurement and the nature of developing technologies. RIP Procurement or a new dawn?

The Future of Employment: How Susceptible Are Jobs to Computerisation provides some useful insight that can be applied to the procurement profession. Computers have replaced many jobs that are routine, that is, follow explicit rules. Many manufacturing jobs, like those on a production line, are now done by robots. However, as Google and others have shown with autonomous driverless vehicles, computerisation is no longer confined to routine manufacturing tasks. Despite these advances, Moravec’s paradox still applies. Contrary to traditional assumptions, high-level reasoning requires very little computation but low-level sensorimotor skills require enormous computational resources. As Moravec writes, “it is comparatively easy to make computers exhibit adult level performance on intelligence tests or playing checkers, and difficult or impossible to give them the skills of a one-year-old when it comes to perception and mobility”.

Recent technological breakthroughs are, in large part, due to efforts to turn non-routine tasks into well-defined problems. Defining such problems is helped by access to lots of data. The rules for turning left on an empty British road can be defined easily. Turning right on a dual carriage way at rush hour requires the ability to crunch a lot of data quickly.

Looking at CIPS core skills programme the key requirements are partly knowledge based (know the procurement cycle and contract law) and partly skills based (negotiation and performance management). Even a sceptic like me can see how rules could be developed for some core skills and be delivered at a lower cost by a computer.

The days of the traditional roles in procurement of junior buyer (checking purchase orders), buyer (running tenders), category managers (defining the category strategy) are numbered. The future of the procurement lies in specialisation in three areas:

  • Supplier relationship management – recognising those supplier relationships that are critical to the buying organisation and developing strategies to drive the greatest value from them
  • Analytics – analysing big data, identifying trends and applying them in a commercial environment
  • Technology – identifying tasks that can be defined by rules and using computers to do them

Despite the rise of the electronic messaging and social media, verbal and visual interaction will remain a critical factor in building relationships so location must be a consideration. To prevent these specialisms being outsourced to low cost country economies, local procurement professional must be able to demonstrate that they can manage internal and external relationships better. That means that anyone wanting a role in procurement must have emotional intelligence and grit.

The majority of procurement professionals have experienced considerable change during their careers already. New technology means new challenges but I think the procurement profession is well placed to take advantage of it.