From better spend visibility to reduced order times and more, can your organization afford to miss out on the benefits of digital procurement?
Most MRO procurement teams now use eProcurement systems, according to the 2022 Indirect Procurement Report produced by RS and the Chartered Institute of Procurement and Supply (CIPS).
The report’s findings, based on a survey of indirect procurement professionals, demonstrate that the need to improve operational efficiency and eliminate internal complexity is the biggest reason for adoption. In a quarter of cases, though, the change was prompted by the retirement of a legacy system.
The report also shares the benefits of digital tools mentioned by survey respondents: better spend visibility (70%), improved management information (59%), reduced order process costs (47%), shorter time to order (46%) and visibility of off-contract spend (39%). As one participant put it, “It’s safe to say that tossing out the pen and paper and replacing it with a customizable dashboard and real-time alerts would make any procurement officer happy.”
“Procurement software can automate many of the tedious processes employees have to slog through on a daily basis,” they continued. “Sure, a digital transformation may be costly, but the money saved after a successful integration should outweigh initial spending.”
Better Data for Better Decision-Making
Similar findings emerged from the PwC 2022 Digital Procurement Survey, which reported that 77% of companies are now equipped with source-to-pay digital solutions and procurement departments around the world are setting ambitious digitalization objectives for 2025.
The same survey also found that the top priorities for digital procurement are cost reduction followed by improved supplier relationship management. The latter is driven by better quality data, which the Indirect Procurement Report found to be a key benefit of digitalization.
“Even the best procurement people struggle to achieve compliance when poor data is involved,” said Simon Hilton, Senior Vice President of Business Development for RS Integrated Supply. “Any good procurement team needs access to reliable data.”
Respondents to the RS and CIPS survey share this view. “It is critical for procurement to adopt the latest technology that enables the team to visualize purchasing spend,” said one. Another commented that “Visibility features give users actionable insights into their procurement processes.
“Not only that but forecasting tools can provide a roadmap for fluctuating demand and lay out possible paths to take for the greatest gains,” they continued. “Pivoting a business still awash with analogue record-keeping practices can be time-consuming, to say the least. But an operation that has fully adopted a digital transformation can make changes in the system that will immediately be distributed to all important areas.”
Empower Your Users Through Technology
The PwC Digital Procurement Survey contained other interesting findings too. It identified, for instance, the benefits for all employees of implementing digital systems that optimize processes and make them easier for end users.
“Digital procurement empowers the end user by providing the tools necessary to make decisions for the better of the organization,” Hilton said. Digital systems allow organizations to decentralize decisions by placing buyers with deep category expertise where the money is being spent.
“The combination of accurate data and a digital procurement system enables the leveraging of that data for purchasing indirect materials,” Hilton continued. “Instead of spending time building an RFP process, you are empowering your team to develop and manage the process themselves.”
Improving digital reporting and analytics, Hilton believes, is essential to improving the process. ““By turning your data into an asset and giving your team the tools to make the decisions they need to make, you are creating a true competitive advantage.”
He is not alone. According to consultants Bain, the data generated by digital procurement solutions can identify ways to improve performance and pinpoint areas for innovation and collaboration – as well as identify risks with sufficient lead time to react. “Data muscle is transforming the strategic role of procurement,” they state.
Create A Virtuous Circle of Visibility
Wondering how this all works? A study published by Deloitte demonstrates that digital procurement generates data that in turn creates a virtuous circle of increasing visibility over the supply chain.
This insight helps you to make better procurement decisions. To work properly, for instance, software that manages procurement from sourcing through to contract needs to have continuously updated supplier prices and availability. The same data allows procurement teams to spot a trend before it affects the business.
As the study itself puts it, “With improvements in data, analytics, computing power and visualization, digital procurement also has better evidence-based options for decision making, which can improve both the value and accuracy of strategic decisions and the speed of execution.”
Expert Advice for Getting Started
While 75% of large firms already use digital procurement tools, the RS and CIPS report shows that fewer small companies have made this transition – just 58%. How do these organizations get started on a digital journey?
1. Source tools that fit your business
“It’s not only about saying ‘let’s digitalize procurement,’ but when and what needs to be digitalized,” says Yoliana Bayona, an Advisory Services Director at PwC Luxembourg and the analyst behind its 2022 Digital Procurement Survey. “Different elements need to be assessed for the procurement digital strategy to be in line with the company’s objectives.”
2. Procurement must play an important role in your organization’s broader digital projects
“Procurement must be involved when talking about supply chain transformation,” says Costi Campi, Senior Vice President, Global Procurement, for RS Integrated Supply. “We should have as much influence as other departments, because procurement is where it starts. If we are not aligned, success is that much harder to achieve.”
3. Highlight the real-world benefits of digital procurement to crucial stakeholders
For procurement teams, for example, “Digital tools can end the nightmare of massive tail spends by making all spending visible as it happens and preventing off-contract spend,” says Helen Alder, Head of Knowledge and Learning Development at CIPS. They also make it easier to claim discounts and warranties.
“A key metric for many of our customers is production downtime,” says Brandon Coombs, SVP of Operational Excellence for RS Integrated Supply. “Our goal is to improve up-time through process improvements centered upon a ‘right the first time’ approach. To achieve this, Procurement plays a critical role in maintaining part availability, through its focused efforts at managing supplier relationships, lead times, and other service level targets.”
Digital procurement has become an essential tool for modern organizations looking to streamline their procurement processes and improve efficiency. The advantages of digital procurement, such as improved spend visibility, faster order times, and enhanced management information, have been widely documented in recent reports. By utilizing digital procurement, organizations can decentralize decisions, empower end-users, and leverage digital analytics to drive improvements in their procurement processes.