Insights

Digital Procurement

From Myth, To Unleashing The Full Potential

We are in the midst of a digital revolution.

By 2030, an estimated 60 percent of the world’s population will access the internet exclusively via mobile devices, with the number of such devices expected to reach more than six per person on average. Over 90 percent of all data now available was generated in the past two years, and this number is expected to double every two years.

Each day, large globalized corporations – many of them historically leaders and players in their markets – are confronted with new challenges: new competition, new business models, value migration, intermediation, and disintermediation. The relatively stable competitive environment of the 2000s is a thing of the past, and threats – some with irreversible consequences – loom from every side. Who can forget the emblematic examples of market leaders missing the digital transformation? Borders, once a US bookstore leader, driven into bankruptcy in 2011; Kodak, defunct in 2012; Blockbuster, the American videocassette rental leader, vanishing in 2014.

The challenge is on: digital transformations are yielding tremendous performance opportunities. Procurement organizations must begin their journey without delay. From culture to IT systems, through to governance and supplier relationships, the time to act is now.

We are witnessing a new wave of digital disruption: The appearance of Uber has led to 30 percent to 40 percent decreases in taxi revenues in certain countries; the projected market capitalization of Airbnb is as much as the largest public hotel company worldwide (and almost twice the second). These are just two examples of a widely documented trend.

Adapting business models is a matter of survival for large corporations. There is no shortage of success stories: large banking companies going into online banking; the development of Industry 4.0; multichannel retail distribution; Uberization, and more.

Purchasing, specifically, is challenged to capitalize on these transformations, which represent the opportunity to cross the next frontier of cost optimization and achieve previously unheard-of cost savings. There moreover exist greater efficiencies to be gained in how the procurement function operates: Digitally enabled collaboration with internal stakeholders and suppliers, automated/robotized processes and activities, partnership with startups...

These trends have a significant impact on the way companies operate. Given the new challenges and concepts, how should procurement be used to capitalize concretely on digital transformation and how should the procurement system be migrated?

Digital Procurement


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