Procurement Excellence: 5 Steps to Digital Procurement
Digital integration into procurement strategies has been a trend we have been observing for many years now.
Since the beginning of 2020, strategies in procurement have seen a major shift due to the Covid-19 pandemic. Understandably, organisations have been more reactive than tactical due to many external influences, including changes in their supply chain. Although these shifts in behaviour have been necessary, we feel it is critical not to lose sight of the long-term strategic plan.
Digital integration is one avenue to achieve competitive advantage in the long term - this article outlines how we feel this can be best achieved.
Technology enabled Procurement Excellence
We define Procurement Excellence to be; “meeting the objectives of the business, through effective competitiveness of suppliers, to obtain the right products, at the best price, at the right time, whilst reducing cost and leveraging scale and maintaining key supplier relationships”.
Technology is present in each of these elements and processes, and is enabling Procurement Excellence to adapt and evolve, from Strategic procurement through the wave of e-Procurement, becoming what we can now call “Digital Procurement”.
The Evolution from Strategic Sourcing to e-Procurement to Digital Procurement
Procurement moves to the centre of value creation
The integration of technology into procurement involves actions and changes in three areas
- Category/Product – it is important to adopt available technology to automate simple processes which have traditionally required manual input and manipulation. Spend data and the resulting information provide plenty of insight and allow foresight and predictions of spend; this in turn allows organisations to focus their attention to more complex categories and drive more value from these areas.
- Employees – reorganisation and centralisation of the procurement team is a complex but valuable step, allowing employees to focus on greater value areas of an organisation. The automation of procure-to-pay processes allows technology to handle the mundane tasks, and in this way the roles of employees evolve into a balance between analytical and creative thinking.
- Suppliers – Data and analytics allow supplier KPIs to be monitored, reported and tracked; this can enable clearer and more actionable discussion points. Hence, the traditional roles of supplier and customer can develop into a collaboratve relationship. Further development of these relationships can foster competition between suppliers, as all this information and insight now provides an organisation with an enhanced knowledge of their supplier base.
The 5 Steps to Digital Procurement
There are five technology-enabled steps to Digital Procurement, each one straightforward, system-based and each step drives improved operational performance.
Benefits of Digital Procurement; Competitive Advantage
- Transparency – through the lens of technology, there is greater visibility of the position and value of procurement within an organisation.
- Greater Savings – the renewed focus of the procurement team allows for more spending to be addressed, evaluated and tackled.
- Faster Results – technology improves the speed of the entire sourcing and management process, creating efficiency within an organisation and improved response to any financial or budgetary concerns.
- Optimised workforce – resource can be managed, and strengths of individuals can be fully utilised to analyse and deal with larger and more complex issues.
Challenges in adoption
As with any organisational change program, there will be challenges in adoption;
- Unclear Aims - it is difficult to know where to focus and which solutions to adopt, given the variety of options available in the marketplace, leading to indecision and slow movement.
- Multiple Initiatives - a disconnected approach results in no synergy between efforts, with effort, time and money wasted.
- Speed/Pace - if solutions do not provide fast results on an individual level, employees are disgruntled and disheartened.
- Lack of knowledge - most organisations are unaware of the technologies that may be offered, or how they may apply to solve the problems that they face.
A Digital Procurement initiative is not about software, it is a Procurement Transformation; an organisational change to both people and processes. However, the benefits are significant and without it, organisations run the risk of being left behind. Adopters of Digital Procurement will have a competitive advantage.
Points to consider
- Embrace digital procurement and rethink your procurement strategy
- Procurement principles remain the same, only the adoption of this has changed
- Start with Spend Analytics. Our ProIntell tool provides rapid, actionable insight
- Ride the wave of technology for competitive advantage or get left behind
Our clients are embracing technology to drive Procurement Transformation. If you would like to discuss how Digital Procurement can transform your organisation and deliver significant EBIT improvement, please get in touch.
Call us: +44 (0)203 693 7275