Procurement in the future: Humans need not apply

Future of Procurement

Are humans obsolete? It’s a strange question to ask, but if you read articles commenting on the current rise of automation, robotics and artificial intelligence, you cannot escape the notion that many futurists believe that we should all prepare to be replaced by machines. To be fair, there is some basis for the alarm currently ringing through the economy and society. From the safety of their offices, white-collar workers have watched automation run riot through blue collar jobs. Now that machines have moved from the factory floor to the back offices, it’s only natural that the “office worker” – the broad term that includes procurement professionals – plans for the rise of machines. The question isn’t if a change is coming. The question is what the change will be – and more importantly – how to plan, not only to survive, but to thrive, following the automation revolution.

To understand what we are on the verge of, consider what CEOs state as their top four concerns:

  1. Rising costs
  2. The emergence of new business models
  3. New buying patterns, and finally
  4. The emergence of new competitors and industry disruptors

All these concerns are inexplicably linked to the automation revolution – either as the cause and/or the effect. Rising costs demand that organisations embrace cost-effective automation. But technological advances, such as automation, do not exist in a vacuum. Broader technological advances enable automation to fuel new business models, alter customer buying patterns and lead the emergence of new competitors and disruptors.

The big technological innovation that’s changed our world is, of course, the internet. To consider how the internet has fundamentally changed white collar jobs, we only need to look at its impact on newspapers and journalism. Not too long ago, newspaper reporters were taking comfort from the idea that computers might put printers, truck drivers and newsstands out of business, but surely they, the reporters, would still be necessary. However, news aggregators and declining ad revenues, combined with many other large and small changes, have resulted in the death of many newspapers, not to mention the sharp decline in the career prospects of journalists and writers.

With the decline of journalism, we see the impact of all top four concerns of CEOs. The internet has changed how people consume their news and altered their buying patterns. Bloggers and news aggregators were competitors and disruptors and they’ve forced the industry to consider new business models. In the meantime, the news floor found itself weighed down by costs of bit writers, support staff and others that were no longer cost-justifiable. As a result, news organisations have embraced software and services that reduce their costs by eliminating previously manual processes.

However, journalism isn’t dead. It’s just changing, as have other professions that orbited the news media, such as advertising agencies. Investigative journalists and reporters have moved to new platforms that only exist because of the internet. Writers have rebranded themselves as “content creators” for a multitude of new outlets from blogs, to YouTube, to newsletters. Advertisers too have changed with the time, now focusing on engagement as opposed to simply blasting ads to create awareness. Procurement professional must do the same. But before procurement roles can be altered, we need to understand how automation is changing the role.

Robotics in procurement.

Robots are already in our offices. If your organisation is not employing Robotic Process Automation (RPA), it should be cause for concern, not complacency. RPA is the use of computerised tools to carry out repetitive, typically clerical, tasks. RPA is not a physical robot but a software bot that helps you save time by liberating you from doing repetitive tasks that need to be done. Organisations implement RPA within their procurement function because they want their procurement professional to spend more time engaging in growth-enhancing activities – not waste time doing process tasks of a largely clerical nature. In short, more thinking and less paper pushing.

On the surface of it, RPA is great. Just dig below the surface, and RPA is still great – but will RPA be good for you? Getting back to our earlier example of how automation changed the journalism industry, it used to be that the first job a new hire on the news floor would get was to write up sports scores. The task was extremely mundane and routine. The definition of busywork, the writing up involved looking up scores from sports matches played overnight and writing up the results so they could be included in the next day’s paper. Most newspapers had templates, so even the writing part of the job was extremely minimum. This role was the first to be automated, which is a good thing for the bottom lines of media organisations, but not so much for young journalism graduates who used to use this role as an “in” into the news floor.

Unless your role exclusively involves the kind of process work that RPA is poised to take over, RPA alone will not make you obsolete. However, RPA is an extremely powerful tool and it will shape procurement roles of the future. An RPA implementation could start with something as mundane as having vendor email attachments downloaded and filed into a specific folder. Advanced RPA implementations include integrating demand forecasts with online vendor qualification and reverse auction tools. RPA setups can also include the automated setup and issuing of purchasing orders. Indeed, the entire vendor selection cycle can be automated with the right RPA tools and services.

If your organisation started RPA integration tomorrow and in six months’ time their RPA setup was as advanced as automating the entire vendor selection cycle, what would your day be like? Would you rejoice at being free from the yoke of routine paperwork? Would you struggle to fill your time? More importantly, would the tasks with which you fill your time be growth-enhancement activities, or simply more busywork that the next round of RPA will remove from the hands of humans and assign to bots?

The ideal short-term scenario for procurement professionals is that RPA allows them to work 8-hour days and not be forced to pull 10 to 12-hour days to simply get everything done that needs to be done. But the fact that RPA is out there means that we need to take careful stock of what we do with our days. If your analysis of how you spend your time indicates that a great deal of your day is spent on process tasks and not value-enhancement activities, you must change. But the question is, what do you change to?

From procurement to the three-pronged management.

Procurement of the future will not be about purchasing. It will be about the three-pronged management areas of supply, risk, and brand.

Our world is not stable. We are living in an era of increased technology disruption, added to the traditional disruptions of geopolitics and natural events. As a result of this instability, the traditional approaches of procurement are not sustainable. You should not negotiate annually with your established networks of suppliers or sources. Instead, the procurement roles of today and tomorrow should be about supply management.

Suppose for a moment that your organisation has put in place good robotic process automation. As a result, a lot of your clerical work is taken care of by the RPA. Furthermore, the RPA is designed to provide you with up-to-date data about changing markets, rapidly inform you of situations that can affect your supply chain, and more. The obvious growth-enhancing activity you can undertake with your time and the enriched data that the RPA provides you is to both reactively and proactively manage the supply chain.

Free from mundane tasks, procurement professionals will be asked to undertake more cognitively intensive tasks, such as discovering if the organisation is making good use of opportunities for concerted action among different divisions and/or subsidiaries, or discovering or anticipating supply bottlenecks and interruptions to ensure a continuous supply, not to mention moving away from the traditional procurement goal of cost saving and toward managing total value beyond simple economics. Total value management includes risk management, and increasingly, brand management.

Risk is ubiquitous in the world of business. The risks that need to be managed tie in directly with the top 4 concerns of CEOs:

  1. Rising costs
  2. Emergence of new business models
  3. Changes in sales patterns and
  4. New competitions and disruptions

As a result, there can be no greater growth-enhancing activity than managing risk, especially today when, according to an Accenture study involving 125 chief procurement officers, 70% believe procurement-related risks have increased. The cause of the increased risk is the instability of our current economies. But despite the increase in risk, the same Accenture study has shown that many organisations remain ill-equipped to fully cope with procurement-related risks.

Crucially, one of the shortfalls in risk management is tied to supply chain management, falling short on supplier reliability and price volatility. Also, an organisation’s overall procurement capabilities may not include taking full advantage of risk-focused tools and services, such as predictive analytics. Finally, risk management in our new world involves building multi-faceted relationships between suppliers and procurement officers, not only based on past dealings, but also predictions about the future. Because organisations can no longer afford to react, they must proactively manage risk, and for that, a strong brand is necessary.

Traditionally, brand management is something procurement professionals have left to the marketing department or to external marketing agencies. However, an organisation’s brand is not just about selling goods and services to the client, but also about trust. At the end of the day, marketing is about generating goodwill. Procurement officers can both help to create goodwill by providing assurances regarding the ethics and sustainability of the supply chain, and by cashing in goodwill to have clout within the supply chain. So that, if necessary, win-win scenarios can be negotiated with suppliers to facilitate faster changes to the supply chain in response to altered conditions. Stepping out of the procurement comfort zone to actively help build the brand of the organisation, is another value-enhancing activity that human procurement officers can perform to stay a step ahead of the robots. But to do so, procurement officers must understand concepts, such as the sustainability agenda.

The triple bottom line: understanding the sustainability agenda.

The triple bottom line includes judging the impact of organisational actions on society and on the environment, in addition to the traditional financial consideration. While the concept is not new, there is increased focus on corporate responsibility. It is very likely that the job descriptions for chief procurement officers and senior managers in the future will include sustainability strategies.

The sustainability agenda isn’t just about being “green”. Sustainability is about socially and ethically responsible purchasing, minimising environmental impact through the supply chain and delivering economically sound solutions. Sustainable procurement is about achieving a balance between the three pillars: people planet and profit.

Some methods through which procurement can aim to achieve sustainability are by attempting to reduce costs through saving water and energy, promoting the re-use of products and recycling, and by attempting to minimise packaging and transportation throughout the supply chain. The sustainability agenda is very much the type of non-automatable supply chain management that will keep human procurement professionals a step ahead of automation – but only if the human in question has the right skills.

Need to up-skill to close the skill gap.

Procurement is changing. It is now a multifaceted proposition that demands that professionals focus not only on the traditional procurement activity of cost management, but that they take a broader, total-value outlook. With the ability to relegate many administrative processes to robots, organisations now demand that their procurement officers undertake more value-enhancement activities, such as actively managing the supply chain, managing risks better and helping with brand building. However, the majority of current procurement professionals do not have the skills to navigate the bold new world of procurement. The skill gap is an ongoing challenge for procurement leaders, but the changes that are assailing the procurement sector can help to bridge this gap.

We mentioned that, at the most basic level, the Robotic Process Automation (RPA) can free up time. We propose that up-skilling is a very good way to spend time gained through automation. Up-skilling can take the form of learning new technical skills, such as market analysis and strategy development for risk mitigation. But up-skilling should also include soft-skills like learning how to influence during negotiation and sales techniques to help with brand management. The overall focus should always be to consider which of your current skills and activities are processing and repetitive analysis that a robotic process can take over, without feeling the loss of the human factor. The next step is to plot a course away from such automatable skills into skills that would be worse or impossible without a human present.

Both individuals and organisations must identify the skill gap that not only exists today, but the gap that will open in the near future. Only once the skill gap is identified can both individuals and organisations take steps towards closing it. The purchasing officers of today will need to become the supply chain managers who are proactive about risks and who make an active contribution towards the brand of the organisation tomorrow. To do so, individuals and organisations not only have to build capability in technical fields, but also continue to develop soft skills. Procurement officers must broaden their horizons beyond the cost to include sustainability and take a total value view. Because to return to the question with which we began: No, humans are not obsolete – but an individual can become obsolete if they allow their skills to stagnate.