A new book by two Boston Consulting Group (BCG) partners asserts that all procurement decisions should be founded on data and analytics. To make this happen, companies need to stop focusing on individual tools and instead define how the full value potential of digitization can be unleashed across the end-to-end procurement process. The book, Jumpstart to Digital Procurement: Pushing the Value Envelope in a New Age by Wolfgang Schnellbächer and Daniel Weise, is based on insights gained from nearly 100 digitally focused procurement projects in the past two years.
“BCG research shows that 70% of digital transformations fall short of their objectives, and transformations of procurement functions are no exception,” says co-author Wolfgang Schnellbächer. “To realize digital procurement with all its benefits—especially those most valuable in a post-pandemic world—companies need a revolutionary approach.”
Jumpstart to Digital Procurement introduces BCG’s Procurement House, which comprises the three main dimensions of the authors’ approach: value, enablers, and data foundations.(See Fig. 1.)A company must identify the primary value it wants procurement to generate and the enablers that best support this value. It can then choose the right digital tools and applications.
The approach allows procurement specialists to use digital tools to capture a wider scope of value. “We have seen value impact of 3% to 5% beyond traditional savings,” says co-author Daniel Weise, who is BCG’s global topic leader for procurement. “More importantly, the benefits also relate to areas that are especially relevant to companies today—such as innovation, quality, sustainability, speed, and risk.”
Among the powerful tools discussed is BCG’s AI Negotiation Coach which learns over time, advising buyers which go-to-market approaches and commercial and technical optimization tools to use. The current standard version of BCG’s coach recommends over 10,000 combinations of 100 approaches and tools, guiding buyers to the appropriate strategies in specific supply situations.
The book provides an in-depth discussion of each value dimension, explaining how digital can help resolve the typical challenges of conventional approaches and which enablers are required to facilitate implementation of the digital solutions. It also provides an outlook on the topics that will most likely become relevant for procurement managers in the near future.