In the modern business world, the rate of change seems to be relentless. Digital technologies are constantly evolving, with such capabilities as artificial intelligence, blockchain, big data and the Internet of things becoming more and ever prevalent.
This digital revolution has impacted on every part of our life – from smart phones, to smart homes, things we wear and even things we eat – it’s hard to think of one area that hasn’t been impacted by this rapid growth in technology.
But what about procurement – has it been left behind? We seemingly hear about customer facing functions like marketing, sales and service leading the digital charge, but not much attention (or investment) has been directed to the procurement side of the business.
This seems a little backward. The procurement team is charged with acquiring third-party goods and services, without which operations would stall. It brokers deals with suppliers – aimed at obtaining the lowest price for the best quality. Imagine individual business units trying to source the required goods for each of their projects – this would be costly, error prone and inefficient. They ensure the right goods are delivered on time and within budget. They control costs – they keep the business running!
So, we know that procurement is important – yet research suggests that very few businesses have embarked on a digital procurement journey. Even within the procurement profession, most teams understand the need and importance of digitisation but very few have a plan on how to get there.
There are several reasons why companies have been slow to embrace digital technologies within procurement. Many have had a negative experience implementing digital solutions. For others, the return on investment isn’t clear, or the executive team doesn’t understand why procurement should be a strategic priority for investment. As a result, those in charge of the company’s IT roadmap often deprioritise procurement solutions.
Investment in digital procurement go beyond just monetary savings. A digital procurement solution automates repeatable tasks to boost efficiency and drive down costs. For stakeholders, it provides a user experience like that of online retailers such as Amazon or eBay. It provides users with real-time analytics to help make better business decisions regarding purchasing habits and expense management. It transforms the way buyers interact with suppliers to help drive innovation and collaboration.
These automated and agile operations are transforming a range of procurement activities including spend analysis and procure-to-pay. By using a robotic process automation (RPA) a procurement team can improve efficiencies, reduce errors and accelerate processes. For example, think procurement’s P2P platform utilises RPA’s to automate the reconciliation of purchase order to invoice to receipting of goods (3-way reconciliation). This then allows for the automated release of payments and upload into an integrated accounting software. Using RPA think was able to completely transform one of their enterprise client’s procurement process from a manual 28-day process to a simple 4-day turn-around.
Traditional procurement tools and policies are process driven – inherent with a lot of rigour and control. Digital procurement, on the other hand, is outcome focused, looking at the experience of the user rather than the inherent process (as the process becomes automated). Compliance and control are present but embedded in the platform instead of being visible impediments to overcome. All business controls are built into the digital experience, so users can do what they usually do, without feeling as though they are going through a rigorous procurement process. Procurement teams are safe in the knowledge that all stakeholders are being compliant and buying the right goods from the right suppliers at the right price.
Companies are using these digital tools for advanced category management, better sourcing strategies and improved forecasting. These tools control demand and enforce compliance which allows procurement teams to reduce costs by buying and spending better. By engaging with a digital procurement platform, an approved catalogue of suppliers and/or products can be provided to the business, all of which have been vetted and approved by the procurement team. Further to this all products and services have been pre-negotiated with for the best possible price.
In turn, this will increase the procurement team’s influence and importance across the whole organisation as the percentage of spend under control rises dramatically. No more rogue spending, no more surprise invoices, no more uncertainty about whether goods have arrived – businesses can start to control the bottom line.
Ultimately, digital procurement increases the spend under management, which drives more value to the business. By going digital, the procurement team can increase its agility, speed and efficiency and start having a more strategic impact across the organisation. Users of the technology have more access to data, are more compliant, reduce risk and make better business decisions.
As digital disruption impacts every industry, organisations face unprecedented competitive pressures. The way customers, suppliers and partners interact has changed – antiquated procurement processes are under attack. Companies must think hard about what they want and expect from their procurement team.
Digital procurement is a competitive necessity. Without a shift to digital, the ability to become more innovative – be it selling new products, finding new customers or adopting new models is an impossible dream. Procurement managers are now at the forefront to drive this digital change for the business. They can help rethink its operating model, partnerships and culture. This will lead in transforming the role of procurement and help enable a digital vision for the entire company
The digital takeover is upon us and procurement teams must begin looking for solutions to initiate this change. Digital solutions such as think Procurement’s are a strategic driver in leading this digital transformation.
For more information about how think’s P2P platform can help your organisation drive the digital change – get in touch here.