The Procurement Business Transformation 2.0: The Remedy of

Inefficient Procurement Operations

Ade Christian Sirait and Dodie Tricahyono

Magister Management, Telkom University, Jalan Gegerkalong Hilir, Bandung, Indonesia

Keywords: Procurement Business Transformation 2.0, Telkomsel, Indonesia.

Abstract: This present research is aim to analyze and evaluate the implementation of the procurement business

transformation 2.0 which has been going on from 2014 until 2017 in Telkomsel. Improvement in

procurement operation means increasing efficiency in procurement, decreasing of manual processes,

increasing self-service tools and reducing changes of order. The transformation aspect consists of three

categories: process, technology and people. As qualitative research, data were collected by in-depth

interviews with some experts in the procurement from internal Telkomsel as primary data, complemented

by observation and secondary data collection. The results confirmed that all aspects (process, technology

and people) are important elements in procurement business transformation. The present study suggests that

accuracy in the implementation of business transformation will help the company run the business to facing

digital industry nowadays to survive and growth for the long term.

1 INTRODUCTION

According to Sri Mulyani, the Minister of Finance,

the potential growth for digital business in Indonesia

is very high and reach 51.8% from total population.

Disruptive technology, startup development and

demand for digital products, requires the company to

be able to provide services and products that are in

accordance with consumer needs and adapt quickly

to changes that occur. As the 6th largest

telecommunication operator company in the world,

Telkomsel also deals with these challenges by

having a proper business strategy.

In the digital era, the procurement function as

well as an organization has been largely less

attention or investment (Accenture, 2017). The

digital revolution touches only a little to

procurement. What mostly organization do is simply

repeating the same processes with new software.

To deal with the digital revolution, an

organization should think beyond the traditional

processes. This is the reason why Telkomsel

implements Procurement Business Transformation

2.0 (PBT2.0). Especially in Requisition to Purchase

(R2P) stream, in order to become a true digital

procurement organization with high efficient and

potentially drive down costs.

To become a World Class Procurement, business

transformation needs to be done gradually. Because

procurement at Telkomsel is still in developing

stage. Procurement management determines the

operating model that will be applied in the PBT2.0.

Some important parameters, such as: process,

people, and Technology have been acknowledged.

The benchmarking process was done with a result

can be seen in Figure 1. Thus, the expected results of

the transformation are able to provide value creation,

cost leadership and faster time to market.

Figure 1: The Results of the Benchmarking Process.

The present study aims to analyze the

procurement business transformation to check

whether the processes are implemented smoothly or

wastefully, especially within the three aspects

Sirait, A. and Tricahyono, D.

The Procurement Business Transformation 2.0: The Remedy of Inefﬁcient Procurement Operations.

DOI: 10.5220/0008434205950601

In Proceedings of the 2nd International Conference on Inclusive Business in the Changing World (ICIB 2019), pages 595-601

ISBN: 978-989-758-408-4

595

(process, people, technology). From the analysis,

the present study suggests some recommendation to

improve the future performance of PBT2.0 in

Telkomsel automated and improve the performance

of procurement services.

The PBT2.0 framework can be seen in Figure 2.

The framework focuses on process, people and

technology.

2 THEORICAL BACKGROUND

2.1 Business Transformation

Business transformation is a change in management

strategy that has goals in directing processes,

technology and people in the company to be more

directed towards the business vision and strategy set

by management (Aspera, Lamberg, Laukia, &

Tikkanen, 2011; Bititci, 2007; Nieminen, 2014;

Nixon, 2003; Saul, 2011; Shaughnessy, 2018). The

company implements business transformation in

procurement in order to achieve efficient and

effective management of procurement activities.

Procurement is one of business management

function that ensures identification, sourcing, access

and external resource management needed by the

organization for a strategic purpose (Accenture,

2017).

The business transformation is a consequence of

the rapid change of digital technology. Some articles

focus on business transformation that related to

some issue, for example: digital maturity model

(Gill & Van Boskirk, 2016), community engagement

(Arroyo, Derek, & Walker, 2010), new business

model (Saul, 2011), strategic planning

(Shaughnessy, 2018), and restructuring the

organization (Parikh, & Joshi, 2005).

2.2 Theoretical Framework

According to Bititci (2007) and Eckhardt et al.

(2014), in order to succeed, the business

transformation must have the following elements:

Process

Transformation is aimed to achieve an efficient

and effective process. The process relates to time

and cost. The transformation of the procurement

process should decrease the total cost of

procurement.

People

The business transformation will be carried out

by people within the organization. The quality of

transformation should make people increase their

capabilities.

Technology

Technology as an enabler of processes that have

been designed and used by people in the organization.

Technology will make the monotonous process to be

Figure 2: Framework Business Transformation

Procurement 2.0.

3 METHODOLOGY

3.1 Research Methods and Object

Based on the problems and objectives that have been

determined, the present research conducts qualitative

research. To be more specific, the present study uses

a case study. The present study focuses on

Procurement 2.0 project in the first step (Request to

Purchase/R2P) transformation project in

Procurement Group under Finance Directorate

Telkomsel.

Although this project has already started since

2014, the results still far away from the position of

world class procurement. From an internal source,

out of five stages of world class procurement (from

stage-1/reactive, stage-2/developing, stage-

3/advancing, stage-4/high performing, and stage-

5/pioneering), Telkomsel still in the stage-2

(developing). In this stage, the organization has

characteristics of selected supplier base

consolidation, some sourcing strategy creation, and

track the commercial measure of performance and

saving.

3.2 Data Collection and Analysis

The present study interviewed seven experts from

internal who involve in the PBT2.0 in Telkomsel

procurement group. Three of them are General

Managers, three managers, and one operational

officer (see Table 1). Researchers use in-depth

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interviews method by considering that method is

powerful enough on data collection. Data will be

collected in written form, audio recording, photo and

video as the main source this research (Wahyuni,

2011).

The data is defined as people, things or objects

that can provide information, facts, data, and reality

related to what was studied or examined (Indrawati,

2015). Sources of data in research can be classified

into primary data sources and secondary data. The

primary data stem from the interview of experts with

an in-depth interview. Meanwhile, the secondary

data is obtained from the data collection at Oracle

for purchase order period 2017 with sampling. Table

2 shows the sample of questionnaires for the in-

depth interview which comprise of two groups: the

general questions and specific questions.

Table 1: Interviewee’s characteristics.

Experts

Position

Criteria

GM Procurement

Support - Procurement

One of the lead

projects of

Procurement

Transformation 2.0

GM Finance

Transformation

Functional Development

- Finance

One of the lead

projects in Finance

transformation; The

functions involved

in implementing

procurement in the

budgeting section

GM Learning

Development and

Knowledge

Management - HCM

The function users

who direct impact

on changes in

business processes

in procurement and

an expert in HCM

Manager RAN Design

and Planning East -

Network

Function user who

directly impact on

changes in

procurement

business processes

Manager IT ERP Non-

Core - IT

Involved in the

procurement

transformation

project in IT

Manager Procurement

System Operation -

Procurement System

Developing and

implementing

procurement system

Senior Officer Finance

Transformation

Functional Development

- Finance

Function user who

directly impact on

changes in

procurement

business processes

To validate the collected data, the present study

implements the triangulation process and expert

validation. Triangulation is a verification process

that combines several points of view and methods.

In social science, it refers to a combination of two or

more theories, data sources, methods or investigators

in a study of a phenomenon so that a single construct

can be formed (Wahyuni, 2011). The present study

implements the triangulation process by comparing

the information with in-depth interview methods

from the speaker as managerial level (General

Manager and Manager) and operational (Officer,

Staff) in the Telkomsel business unit.

Table 2: A sampling of questionnaire interviews.

Operational

Definition

Interview Questions

General

Operating model

or framework

yang implement

in Telkomsel on

business

transformation

procurement 2.0

What framework or

parameters need to be

considered in implementing

a business transformation?

Inputs from

Implementation

of procurement

business

transformation

2.0

What input can you give to

the implementation of the

procurement transformation

2.0 that has been

implemented?

Specific

Implementation

related process,

technology and

people who have

been implemented

on procurement

business

transformation 2.0

How has the business process

changes in the procurement

2.0 business transformation

implementation?

How is the use of technology

in the procurement 2.0

business transformation

implementation?

How are people change in the

procurement 2.0 business

transformation

implementation?

Once data has been collected, the data will be

analyzed by focusing on the implementation side of

business transformation especially PBT2.0 with

respect to the process, people and technology. Table

3 shows how the present study scrutinizes the data.

The present study also implements key informant

who has detailed knowledge of ideas, concepts and

relationships that relate with the phenomenon under

study. The expert opinions will validate the results

of the present study. According to Miles and

The Procurement Business Transformation 2.0: The Remedy of Inefﬁcient Procurement Operations

597

Huberman (1984), analytical activities will be

carried out interactively and continuously until the

data is saturated. Activities in data analysis include

data reduction, data display, and conclusion

drawing/verification

Table 3: Variables vs implementation aspects.

Implementation

aspects

Variables

Process

People

Technology

Business

transformation

implementation





PBT2.0

implementation







Impact of

PBT2.0





Inputs for

PBT2.0

implementation







4 RESULT AND DISCUSSION

4.1 Results

4.1.1 The Implementation Aspects

Based on the results of the analysis, it was found that

all the interviewees confirmed that the three aspects

of the process, technology and people are crucial

parameters for carrying out the business

transformation in general and also for the specific of

PBT2.0.

In addition to these parameters, some aspects

come to the surface, which is: visioning & facts-

finding; Top-level management support; and system

& organization. Table 4 shows the distribution of the

answers to all the interviewees.

Table 4: Other important implementation aspects.

4.1.2 The Impact of PBT2.0 Implementation

The response from the interviewees concerning the

impact of PBT2.0 implementation are as follows:

proactive system; automated & efficient; innovation

sustainability, compliance & accurate; vendor

engagement; and customer satisfaction. Table 5

shows the distribution of the impacts of all the

interviewees.

Table 5: The impacts of PBT2.0 implementation.

4.1.3 The Inputs for PBT2.0

Implementation

The informants also define the inputs for successful

PBT2.0 implementation, which are: socialization

process; integrated process; correct culture & change

management; data base & catalogue; and technical

capability. Table 6 shows the distribution of the

informants’ response.

Table 6: Inputs for PBT2.0 implementation.

4.2 Discussion

4.2.1 The Implementation Aspects

The results found that process, people and

technology are among the important aspects for the

implementation of business transformation in

general, as well as in procurement business

transformation (PBT2.0). Indeed, this result of the

present study supports what have already found by

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598

the previous authors (e.g. Bititci, 2007; Eckhardt et

al., 2014; Kwak, Watson, & Anbari, 2008,

Shaughnessy, 2018). However, some details of the

results concerning the three aspects are as follows:

 The process has a visibility horizon, faster

lead time, cutting manual process in helping

accelerate the process that has an impact on

the business and the results are better and more

efficient.

 Technology has used catalogues and made

purchasing easier, paperless, helped for

analysis. Technology as an enabler in

supporting custom processes, digitization

and online.

 People support faster transformation, less

control and more proactivity and involved

in helping determine needs, eagerness for

improvement program, organizations that

change, are open and helpful.

The present study also found other important

aspects that should be considered by the

organization if they are implementing business

transformation. First, the organization should have a

vision of how the project (PBT2.0) will change the

performance of the organization in the future. One of

the GM said:

“The visioning means we have as

aspiration, we will want like what? The

consultant may say that our organization can

become something.…. and then, our House of

Strategy

will define the operating model in order

to make a basic principle”.

Another manager added:

“We will start with a consciousness that

we need to transform…is it urgent or not….

So,

start from there, and from there we will

arrange the implementation program”.

Furthermore, the informant also added that the

organization also need to track the performance on a

periodic basis.

“I think we need also a monitoring

system than can check our performance on a

periodic basis to be benchmarked to our

targeted score”.

The second aspects that emerge from the present

study are top-level management support. This aspect

is important for making all the member of the

organization aware and get full attention to the

transformation project. One informant mentioned the

important to have an executive sponsor at the first

place. One GM also mentioned the important to have

top level support. She said:

“Tone-of -the-top, means it should be

pushed from the top level that transformation

is necessary to be implemented”.

The third aspect is about system and

organization. The system and organization will

guarantee that all members will understand who

does what and why. This is important to make the

transformation do not produce chaos and distrust

situation.

4.2.2 The Impact of PBT2.0 Implementation

There are five impacts of PBT2.0 implementation

has been discovered by the present study, which is:

proactive system; automated & efficient; innovation

& sustainability, compliance & accurate; vendor

engagement; and customer satisfaction. Two of them

are agreed by almost all the informants: automation

efficient, and proactive system. Automation means

there is no manual process anymore, especially the

monotonous and repeatable process. For example,

the auto approve feature that makes lead time faster

but with respect to compliance with the policy. In

consequence, the efficient in time, cost, and other

resources will be achieved. The proactive system

means that the system has the ability to give a

suggestion on what the best action should be taken

in the near future. The system may provide agility to

the organization. In the end, this system will

increase customer satisfaction. By having the

automation process, the problem of compliance that

stem from inaccurate data will reduce significantly.

One of the informants said:

“The more people involved in the

organization, the greater the error there

and more and more controls must be

inputted. People are very important to be

more proactive in transforming so the

transformation can support the company's

business”.

The Procurement Business Transformation 2.0: The Remedy of Inefﬁcient Procurement Operations

599

Another important impact that the present study

found is innovation and sustainability. By

implementing PBT2.0, people may have times to

think of new ideas. This new idea will make an

impact on the sustainability of their business.

Eventually, this will make the customer happy and

engage more supports from the vendor.

4.2.3 The Inputs for PBT2.0

Implementation

Almost of the informants agree that the process of

socialization of the transformation project is the

important inputs that should be prepared by the

organization before the transformation project begin.

Other inputs that have been discovered were an

integrated process, database & catalogue, and

technical capability. These three inputs reflect the

hard side of an organization that should be prepared.

It is connected to resource allocation especially the

budget. These inputs ensure that people understand

their roles and responsibilities.

One of the informants responded:

“The key is integrated, now procurement

has been integrated and must be developed to

budgeting, and planning processes, and if

possible, allowing all departments to cross-

check the inventory…”.

The other important input that has been revealed

from the present research is culture for change

management. Business transformation is about

changes, mostly fundamentally. Part of this culture

is: see the big picture, joint planning sessions,

informally/formally communications, talk with data,

mutual respects, and trust.

This secondary data is obtained from the Oracle

system to measure the lead time for the procurement

of goods and/or services. Measurements are made

from the request until the issuance of purchase

orders. After the implementation of the procurement

2.0 business transformation, on average it becomes 4

working days which previously was an average of

16 working days.

5 CONCLUSIONS

The present study has been succeeding to understand

the triangle of people-process-technology in the

transformation process, especially in PBT2.0. The

PBT2.0 as a change program should be prepared

carefully in order to run smoothly and has a good

impact for the organization, for example to have a

good reputation, increasing customer satisfaction

and also vendor satisfaction, and so on.

In order to carefully prepare, the PBT2.0 should

consider all the stages: pre-transformation, in-

transformation, and post-transformation. As a

conclusion, the present study suggests all the stages

and all the aspects in each stage. Figure 3 shows

these stages.

Figure 3: Input-Transform-Impact of PBT2.0.

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