The onset, spread, and continuing fight against COVID-19 defined 2020. Such high-impact, low-probability events are rare, and for many of us, this is the first time in our lives that we are experiencing disruption at this scale.
The coronavirus pandemic is likely the greatest global disruption we have seen since World War II. According to the International Monetary Fund, following the global financial crisis of 2008, the overall global GDP impact, because emerging economies were not as affected, was a reduction of 0.1 to 0.2 percent. This year we are seeing a five percent GDP impact globally, which is much more significant.
I recently wrote about my own lockdown experience and have spoken with customers and business owners about how they are innovatively adapting to their “new normal.” We are relying more on technology, diversifying our suppliers, and digging into data for answers.
But if we take a note from history, we see that periods of crisis often lead to periods of great productivity and innovation. Even amid such chaos, the lessons of 2020 present a unique opportunity for procurement professionals to impact their businesses company-wide—perhaps a once-in-a-lifetime opportunity.
Fail to Prepare, Prepare to Fail
Last year taught us that events with a two to three percent chance of happening can and do happen.
As the head of Product Strategy for SAP’s procurement solutions, my team and I are focused on how technology can help close the gap between what is and what could be. We cannot ignore the prospect of future disruption; we can only plan for it. And one way to address disruption is to build fail-safes into our technology.
Another less immediate, but no less important, component of our work is supporting our customers’ moves to automation and digital transformation.
Beyond COVID-19, macroeconomic trends including declining productivity growth, rapid digital economic expansion, and increasing slowbalisation—the slowdown in globalization due to trade wars and nationalistic tendencies—are forcing companies to reevaluate their supply chain solvency.
This is where procurement can have an enormous impact. By utilizing technology to automate back-office functions such as the day-to-day processes of running reports and reviewing transactional events, we can empower individuals to leverage their skills to drive more impactful and innovative outcomes.
Victoria Folbigg, vice president of Procurement at SAP customer Zuellig Pharma Holdings, put it best:
“When I look at the system now as the head of procurement, I am not looking at features and functions. I am looking at the problems that I need to solve through a system that enables us to drive the resiliency that the company needs.”
She went on to say: “Now we are all thinking about preempting. How is the technology going to help me [in the future]? I need to have the basic explanation at my fingertips, fast, in order for me and my team to concentrate on the real, strategic, creative kinds of analysis.”
Procurement teams, until very recently, were primarily responsible for cost savings. While this is still important, the natural move to automation through digitalization and intelligent technologies has helped eliminate repetitive tasks, effectively shifting the focus to actual business outcomes. As a result, individuals are free to lean into the strategic and creative components of their roles; those elements that require true human ingenuity and cannot be replicated by machines.
We can expect this trend toward the digital economy to continue and further accelerate. Procurement has a clear role in supporting that transformation and the incorporation of intelligent technologies such as artificial intelligence (AI), machine learning, and the Internet of Things (IoT) into our daily lives.
Solving for 10%
The challenge that companies like SAP face as a technology provider is ensuring our solutions drive clear, beneficial outcomes for our customers. When we talk about incorporating intelligent technologies into our products, we must consider how those technologies will be used.
By incorporating AI into your product or solution, you can make it 90% effective; but who is going to trust their business with a robotic or computational process that’s only 90% effective? Making it 100% effective is the real challenge.
Take self-driving cars: They work great in laboratories; they work great on test tracks; they work great when driven around deserts; but they are not 100% effective. Even with so much advancement, we struggle to finish the last mile of true innovation. And, perhaps ironically, the amount of data needed to get through that last mile is greater than it is for the first 90%.
The burden on companies like SAP is to solve the problem of “the last mile” for our customers, sustainably and predictably. Getting to 100% requires data, strategic thinking, and creativity.
In this, SAP is uniquely positioned to support our customers. More than $3.75 trillion in commerce flows across Ariba Network annually, representing millions of transactions. Over the years, that adds up. We are just at the beginning of our data journey, one that will benefit our customers and trading partners alike.
If we can make procurement more productive and innovative as a function, then procurement organizations can make entire companies more productive and intelligent.
Turning the Page
Living with the coronavirus pandemic and planning for a future with increasing uncertainty have many organizations watching global supply chains and taking stock of their own risks in the market.
Supply chains need to be structured differently moving forward to remain resilient and adaptable. Spend management organizations are going to play a pivotal and central role in leading that change.
Our top priority remains helping our customers weather ongoing disruption with intuitive tools to drive more profitable, efficient, and sustainable outcomes.
Like so many, I’m cautiously optimistic for 2021. I’m hopeful that this new year, and the next 10 years, will bring a resurgence of the “Roaring 20s” of the early 1900s, as companies tap into the power of the intelligent technologies they have invested in and finish the last mile of their transformation journeys.
If organizations are going to operate differently, if supply chains are going to be structured differently, and if procurement services are going to be engaged differently, expect procurement to play a pivotal and central role.
Baber Farooq is head of Product Strategy for Procurement Solutions at SAP.
