Digital-first procurement: navigating opportunity and risk
From advanced manufacturing to large-scale infrastructure, strategic digital-first procurement is key to de-risking supply chains, embedding resilience and delivering improved ESG outcomes.
Procurement leaders at large global companies share the same challenges despite operating in different markets. The need to optimise supply chains to reduce risk and gain greater levels of visibility is universal, all while delivering value for an organisation.
Supply chains are strategically important, with the ability to significantly affect and shape an organisation’s profitability, reputation, and environmental, social and governance (ESG) performance.
Procurement leaders must therefore create organisations that develop and deliver strategies that de-risk supply chains. This is in a world where the global economy faces multiple challenges, including pandemics, natural disasters and geopolitical tensions.
Effective digital-first procurement strategies are key to capturing the necessary data and providing the comprehensive visibility needed to manage complex and multi-faceted risks, while seizing innovation and opportunities in the supply chain.
Digital-first procurement demands a strategic overhaul – it cannot only be about adding technology to existing processes. It needs a cultural shift to integrate a digital golden thread that aligns the organisation’s overarching commercial vision and the enterprise-wide digital ecosystem with its ESG objectives throughout the whole procurement lifecycle.
Tackling Scope 3 emissions
One critical challenge for procurement functions to tackle across the supply chain is the reduction of carbon emissions. Organisations are grappling to understand indirect or ‘Scope 3’ emissions – the greenhouse gases emitted across their supply chains that typically make up 80 percent of an organisation’s emissions footprint.
The collective goal is to understand how to measure, track and put in place initiatives to reduce primary sources of Co2e emissions. Regulatory and legislative changes in the UK and the EU are accelerating the need for this.
UK public procurement regulations dictate that for certain contracts, a supplier ‘Carbon Reduction Plan’ is required – a requirement that is extremely challenging to meet if an organisation does not have true supply chain visibility or understanding of their Scope 3 emissions.
Shaping a digital-first strategy
To deliver this growing strategic procurement remit and tackle the Scope 3 challenge, organisations require a 360-degree view of their supply chains across all tiers. Digital-first procurement is key to maximising opportunity and driving value across supply chains. However, typical digital procurement practices often fall short.
Most organisations deploy essential tools, such as e-tendering platforms and purchase-to-pay systems, but they all too often lack the overarching strategy, integration and vital human-centred approach necessary to capture valuable data throughout the entire procurement process.
Through lack of strategy, companies are unable to tap into the expertise and insights that are available to them to shape an impactful procurement strategy that addresses the challenges of both today and the future.
Creating a digital golden thread
It’s therefore critical that digital-first procurement is at the top of the agenda for a procurement leader, so that it can be seamlessly embedded and aligned with corporate strategy. This thread ensures that organisations can identify and work with strategically aligned partners with the right digital capabilities, all the way from a global enterprise level, right down to individual programme and projects.
An increasing number of organisations are turning to software tools and third-party knowledge, insight and advice to manage supplier and data challenges and accurately quantify Co2e in the supply chain. Many companies are moving away from supplier spend-based methodologies and are now collecting supplier-specific and product-level data for a more accurate picture.
This more advanced but complex method increases the need for Scope 3 software tools and sustainable procurement services to help procurement teams track, manage and reduce Scope 3 emissions.
Combining human expertise with technology
No matter what sector, by combining human expertise with technology we can deliver valuable insights and enhanced procurement strategies. Leveraging robust data from diverse industries and geographies cultivates a holistic understanding from the procurement landscape. While digital tools are vital to procurement, their impact is maximised through human interpretation, intelligence and strategic application.
Alongside the tools, human expertise assists companies in making supply chain optimisations to effectively reduce their overall carbon footprint and enhance their sustainability compliance.
Similarly, when assessing supply chain resilience, these digital tools can analyse key supplier metrics, global risks and the likely impact of commodity prices. This will provide a comprehensive perspective to help procurement leaders shape and optimise the company’s supply chain.
The use of digital capabilities enable procurement experts to proactively identify and advise on the potential risks and opportunities relevant to the operating context of client needs.
Navigating risks, unlocking opportunities
Today’s procurement leaders are entrusted with navigating and managing multi-faceted global risks, where the actions of supply chains have a profound effect on an organisation’s financial and ESG performance.
A well-considered digital-first procurement strategy is therefore essential to enhance visibility and data accessibility. However, it must come with clear, actionable insights and expert strategic procurement advice. If embedded throughout an organisation, the human- and machine-centric approach can fortify procurement and risk management. It can seize emerging opportunities and cultivate a better understanding of a client’s supply chain, meaning it can not only make decisions, but the right ones.