Early adopters of Digital forces – social, mobile, cloud, big data & analytics, and AI & robotics have a clear competitive edge in their line of business. It is becoming the new basis of competition, helping organizations build new business and operating models. Sourcing arena is transforming rapidly as Digital services become increasingly important to the business environment. Digital demands companies manage an ever larger pool of smaller deals that are, in many ways, different from their traditional category scenarios. Hence category management for Digital technologies are complicating an already intricate procurement value chain.

Digital poses a tremendous change to the way of working for procurement that require a fundamental “rethink” regarding organization and capabilities, both of which will need to be reshaped over time. Successful Digital category strategy encompass the niche players along with traditional providers to optimize the costs and right balance the skill gaps with capability mix. It’s bringing in a new set of players who do things differently instead of just bringing more suppliers into the mix. So managing an eco-system of multiple suppliers throws a different challenge to client procurement organizations. Few of the challenges/opportunities of integrating Digital into procurement models and what are the ways to handle them is provided below.

Changing category value proposition: Procurement organizations can create new business models for itself and move from being a cost center to a profit center. This is possible because procurement possesses strategic know-how about suppliers and their markets and a deep expertise about the goods and services that are procured, as well as the alternatives on offer, including emerging innovations

New ways to contracting: Clients have to manage broader ecosystem of suppliers, disparate processes, service levels and pricing units. Procurement, legal and vendor management teams who are accustomed to dictating their standards to suppliers need a different approach to manage the complexity driving the standardization wherever possible.

Confidentiality and IP Rights: Confidenti­ality and intellectual property provisions and other restrictions on use of data abound in signed Digital contracts. Companies should review their Digital sourcing deals closely to ensure that they don’t restrict their data use or analysis rights.

Realize the full potential of Digital: Procurement organizations should have the knack of leveraging the Digital as a new frontier to change the world of customer needs. From big data analytics to 3D printing — is revolutionizing organization’s operational and administrative processes and creating innovative digital products and services. Reflecting the effects of Digital cutting-edge technologies and data management on strategic and operational procurement , category strategies for Digital demanding a constant change.

In conclusion, procurement organizations need innovative category approach encompassing Digital services to accelerate adoption of new technology formats for operational efficiency, cost optimization and for business growth.

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Recommended Reading

Category Management in Purchasing: A Strategic Approach to Maximize Business Profitability

Category Management in Purchasing is a comprehensive guide to strategic category management which provides a step-by-step guide to its implementation and use, and enables readers to deliver value and cost savings when sourcing and purchasing. Now in its fourth edition, this text has cemented its place as the essential reference for category management practitioners.