Amazon has reinvented Procurement and forces you to change with it

Amazon has created a de facto standard for purchasing experiences: simple, easy, and accommodating to the user. Many people wonder why buying at work should be so different from buying as a consumer. Amazon’s behavioural algorithm-based recommendations and simple evaluating criteria have reshaped requisitioning processes.

“How do we bring the ‘Amazon effect’ into our organization?” many executives ask. In our Procurement As-a-Service Blueprint, we use the term ‘Amazon effect’ to describe a move to simple, seamless, digital buying experiences with procurement becoming more user-focused—driven by more technology and changed user expectations.  Amazon is changing how consumers view the world; Procurement professionals cannot afford to ignore consumers’ perceptions of how simple business-to-business (B2B) interactions should now be.

Digital commerce provides the consumer not only with a plethora of choices but also with the ability to conduct background research before making a buying decision. Information sources that consumers use daily, in their buying processes, are typically reviews, product-focused websites, and social media. In enterprises, procurement is no longer so focused on the requisitioning of contracted products or services. Constantly updating the array of product and service options available to buyers has become part of the brief. The problem is, most procurement functions have not yet adapted to these new expectations.

The Amazonification of procurement: the move to simple, seamless, digital buying experiences

Procurement functions and service providers are challenged to follow suit and harness the power of the digital procurement experience, to accommodate changing buying behaviour and meet consumer expectations. Efforts to create Amazon-like experiences by providers include:

• Creation of cognitive buying assistants using front-end technology that allows stakeholders to interact with procurement in natural language—using text, speech, and images—then directs them to what they need within about 90 seconds.
• Introduction of intuitive catalogues (including punch-outs), comprehensive search capabilities, shopping carts, and all the convenient consumer shopping features which with buyers are familiar, delivered on one platform.
• Employment of artificial intelligence (AI) advisors (cognitive computing applications) such as a procurement market intelligence advisor to perform primary and secondary market research on suppliers and categories and prepare holistic reports.
• Implementation of chatbots to ensure that at any stage of the process, the user can receive help quickly and be direct to the most optimal outcome. Interesting examples include Amazon’s Alexa on the Echo platform, which allows users to talk to the device and interact with the conversational AI. Chat-bots or virtual procurement agents will be tasked to guide the sourcing process.

How artificial intelligence, automation, and analytics have reinvented B2B procurement services

Procurement services have undergone a significant transformation over the last decade. Increasing competition, tight margins, and a growing demand for agility and flexibility in the delivery of services have changed the dynamics of the market and the characteristics of services that cater to the ever-changing needs of buyers. These needs are continuously morphing, driven by a new set of expectations displayed by the customers of procurement functions: the internal stakeholders. The new tools in the toolkits of procurement and service providers are artificial intelligence, automation, and analytics.
These technologies are revolutionizing how vendors and buyers interact with each other enabled
by technology.

HfS’ Triple-A Trifecta (Exhibit 1) is a helpful framework in which to think about the different clusters of technologies central to the ‘Amazonification’ of procurement. To automate most processes, use smart analytics to identify patterns and support decision-making; infuse this with AI to learn about behaviour, then create intelligent interfaces and support users with recommendations and actions. 

Exhibit 1: The HfS Triple-A Trifecta: automation, analytics, and AI

Source: HfS Research, 2018

Our research uncovered some promising use cases and investment areas that service providers are exploring currently.

Use case #1: Amazon digitises procurement

Amazon is building a system that will automatically solicit bids, evaluate responses, and generate contracts. Data input and classification will become much more advanced when the intelligent system executes transactions independently. Such an advancement in technology—that automates significant portions of processes traditionally performed by people—underscores the need for procurement professionals to reinvent and reorient their roles in the sourcing and procurement value chain.
New technologies are taking over and reducing human intervention, with humans solving the hardest and rarest exceptions in the processes.

Use case #2: Smarter procurement platforms make life easier for enterprise buyers

Procurement platforms have played a big role in the changing dynamics of the procurement services market. Platforms like SAP Ariba, Coupa, Tradeshift, and SMART by GEP make it easy for buyers to purchase the goods and services they want when they want—just like they would on a consumer shopping portal. In SMART by GEP, for instance, users can select from visual, content-rich, pre-approved catalogues without worrying about procurement compliance or approvals. With punch-out catalogues, buyers can purchase directly from a supplier’s e-commerce portal (via the platform). As on consumer shopping portals, buyers can compare across different suppliers or lines, fill shopping carts, and place easily trackable purchase orders.

Use case #3: Increased supplier collaboration

An example of a platform enabling collaboration with suppliers is TCS’ TAP Purchasing, a cloud-based, integrated solution that enables increasing spending under management, ensuring compliance with purchasing policies and promoting better collaboration with suppliers.

A recurring theme in our interactions with buyers is one of previous investments in procurement technology hampering the ability to make further investments or leverage current ‘best-of-breed’ technology, leading to capability gaps in the procurement technology stack. TCS’ TRAPEZE Procurement Manager is an example of an offering that targets this challenge; it has individual modules catering to each process within the source-to-pay (S2P) value chain. It helps to address specific gaps in the existing eProcurement platform. It also provides an e-commerce-like buying experience to enterprise buyers.

Use case #4: Killing two birds with one stone—marrying improved customer experience with increased compliance

“Make buying easy,” is Genpact’s simple mantra for enhancing the stakeholder buying experience significantly, not only in terms of improved user experience but also in terms of driving compliance; decreasing maverick spending; and improving process efficiency, real-time intelligence, and insights to enable faster, better, and more effective decisions in sourcing and procurement. This applies not just to requisitioners, but also to suppliers, accounts payable, category managers, and the finance function.

Use case #5: Artificial intelligence will change the game by connecting all the dots in procurement

A wide range of information and advanced technologies, including artificial intelligence, will transform the procurement experience for all involved. Accenture envisions using AI to make the market, supplier performance, and pricing data readily available and transparent. It will enable the sourcing processes to be run by virtual procurement agents, like Alexa (or similar voice-based platform), to become a major interface with an Amazon-like shopping experience. This, in turn, will solve procurement’s sticky downstream issue of invoice matching and reconciliation, by making payments accurate and automatic.

IBM is taking strides towards bringing AI to life for procurement, with investments in cognitive technology. Cognitive buying assistants are the front-end tech that enables the interaction with procurement to be more natural, informed and quick. IBM’s partnership and co-investment in cognitive procurement capabilities, with SAP Ariba, is a big step toward infusing mainstream procurement technology—the Ariba platform—with cognitive capabilities.

The bottom line: Your future as a procurement executive depends on your ability to embrace Amazonification

Whether you like it or not, you have been forced to leave your procurement comfort zone. The advent of digital technologies is making procurement a simpler, real-time and data-rich experience – and the role of the procurement professional is being redefined with it. The key is now to embrace these technologies and focus on making procurement a more strategic function by focusing on developing more strategic relationships with suppliers and internal business line stakeholders. 

The future of the procurement function hinges on its ability to be flexible, to modify its role, to become an enabler to the business, a broker of capabilities, and, above all, to create superior user experiences for all its stakeholders. ‘Amazonification’—driven by the Triple-A Trifecta of automation, artificial intelligence, and smart analytics—is a critical path towards this end; it will continue to evolve and drive change, especially in companies with the economic leverage to involve suppliers to invest in, create, and adopt new technologies.