Rethinking Procurement for the Digital Era

Mention procurement, and often CDOs cringe.

Many see it as an onerous process where one needs to clearly identify the requirements for buying anything, from stationery to multimillion-dollar mainframes and to parts and services.

In a dynamic market environment where requirements are often not well defined, this can be a huge challenge.  

So, SAP Ariba, under president Barry Padgett, is looking to transform procurement from within.

Becoming Strategic

“Procurement needs to become more strategic. Why? Because this is where all the spend occurs in the business and offers a lot of opportunities to drive transparency and efficiencies,” Padgett said at a recent interview.

He noted that many companies do not have the procurement visibility they need to do business. It becomes especially dangerous in a constantly shifting business landscape, where the ongoing trade wars can catch some companies unaware.

“Without having the visibility, companies are one step closer to a disaster. You need to not only know who you are doing business with, but also who your suppliers are doing business with and so on. Getting the transparency to do this is important for risk management,” said Padgett.

For digital leaders, this transparency also improves demand planning.

“For example, when someone wants to configure and buy an Xbox, the order will go through the Ariba platform in real time. It gives you the opportunity to [finetune] your inventory management according to actual [market] demand. It makes the business much more efficient,” said Padgett.

The Platform Play

SAP Ariba is enabling this transparency by becoming a platform with a long-term view of “building indispensability.”

The company is building a strong ecosystem around this platform so that its customers can leverage bespoke solutions for specific needs. It is adding SAP Leonardo machine learning capabilities to the platform and support for blockchain that allow companies to verify their suppliers’ credentials and claims.

“There are some useful cases using artificial intelligence and blockchain for provenance, like whether your supplier is using child labor for mining or it is a women-owned business as it claims to be. Transactional data also offers a huge store of data for machine learning to find out where the inefficiencies lie,” said Padgett.

SAP Ariba’s global footprint also offers an advantage when navigating data sovereignty concerns.  

“We have achieved size and scale over the years, so we have local data centers around the world. It is an expensive way to solve this issue but is effective-especially when you are doing business with both private and public companies,” said Padgett.

Padgett does not see SAP Ariba authenticating suppliers, a role that other B2B supply chain internet pure plays are claiming to offer.

“But this is where the platform and the supplier network become valuable. We onboard suppliers who have gone through vetting of some kind by our customers,” he said.

In addition, SAP Ariba is adding attributions to the suppliers “so the customer can decide further.” “So, for example, an Australian customer can diversify their supplier base easily. But we do not want to be the regulatory body authenticating the supplier base,” said Padgett.

Different Personas

The procurement function itself is evolving. It is no longer as centralized as it was in the past – nor should it be.

“Yes, we still have professional buyers who have a centralized, specialized function on buying [key products and services]. But we are also adding functionalities to allow infrequent buyers to procure easily,” said Padgett.

By identifying and catering to different personas in an organization, SAP Ariba allows the procurement team to focus on the core products and services, while still having the transparency on the spend across the enterprise.

More importantly, the company is allowing CDOs to transform the infrastructure without being bogged down by procurement processes.