Value Creation Through Digital Transformation in Procurement
By Eric Edwards | December 1, 2022
The recent global pandemic exposed many economic vulnerabilities, not the least of which were weaknesses in many supply chains. But COVID also revealed the growing value placed on the expertise of procurement professionals and a shifting company viewpoint from back-office worker bees to valued C-suite consultants.
How and why is this happening?
Some would say it’s about time after years of talking about it pre-COVID. But procurement professionals and their executive leaders are realizing that digital procurement technology can create a better overall value proposition for their company, in addition to the traditional goal of finding more significant cost savings.
Procurement departments are adopting digital sourcing strategies to automate routine processes and fill employment gaps. Going digital also shows real-time value through more accurate spending transparency, better supplier relationship management, and advanced leveraging of data and analytics.
Prioritizing a digital procurement strategy to gain competitive advantage
In June 2022, a ProcureTech survey of 170 global procurement leaders revealed 90 percent believed the digital transformation of their procurement processes would be THE top priority within the next three years. In fact, it’s become necessary to meet the growing global challenges of rising costs from supply chain disruptions.
The survey also found:
- 87% prioritize building data teams to gain predictive insights and deploy new technologies.
- 81% believe more internal support is needed from within their businesses to realize digital transformation fully.
- And 50% aim to move to a business procurement-centric organization, acting as advisory consultants and business partners rather than executing routine processes.
Like a chasm left by an earthquake, the gap between the procurement haves and have-nots will exponentially widen as we move further into the decade.
5 Benefits of digital transformation in procurement
Global procurement leaders know the best value will come to their organizations not from pinching more pennies. While digital procurement has been a topic for several years, the receding pandemic and geopolitical conditions have brought the topic to the forefront of many companies.
Let’s quickly look at five benefits of digital procurement.
1. Increased efficiency through big data
In a McKinsey report about driving value through digital procurement, “big data” and advanced analytics are having a tremendous impact on taking data-driven decision-making to new levels of sophistication.
The article states, “Imagine a procurement team so deeply connected to every tier of its supply base that it has access to all relevant data on cost structures, supply availability, lead times, financial and operational risks, and service and quality metrics. This procurement team would be well-positioned to negotiate the “right” prices, instantaneously adapt its own planning, or switch to alternative suppliers in the event of supply shortages.”
The article mentions that digital procurement could help its suppliers improve possible deteriorating quality levels by proactively catching issues earlier and accurately identifying root causes. In addition, the digital transformation of procurement also reduces the risk of human error, especially in repetitive tasks and processes.
2. Supply chain optimization
Once, supply chain optimization was a fancier name for cutting costs at every chain link. Now, efficiency has become the highest priority cost-saver since technology can reveal value, cut labor expenses, and drastically reduce human errors.
Also, with analytical tools that create procurement reports faster than employees can, staff resources can devote more time to strategic development, instead of checking boxes and generating reports.
3. Attracting a different kind of procurement talent
The “Great Resignation” left thousands of unfilled jobs including in procurement departments. According to a survey from Pew Research Center, the “quit rate” in the U.S. reached a 20-year high at the end of 2021, with an equal 63% stating leaving jobs for “low pay” and “no opportunities for advancement,” reasons that could be associated with most procurement departments.
Before COVID, many companies’ “digital procurement strategy” relied on many highly valued Microsoft Excel experts. While some companies may think their Excel jockeys are digital geniuses, their process is very much analog.
Tomorrow’s procurement professionals will no longer be “number crunchers” as their companies adopt emerging procurement technologies. Instead, procurement departments will be a cross-functional team of IT professionals, business analysts, data experts, and experienced artificial intelligence users seeking to drive value above all else.
4. New thinkers + traditional procurement doers
Increasingly, businesses that value procurement functions must put teams together differently than before to ensure top performers focus on the highest value work, leaving more routine or mundane tasks to outside vendors and automation. Integrating traditional procurement talent with new people with new ideas from inside and outside the business should create a strategic, high-performing sourcing team that increases its influence across the organization.
5. Digital transformation enhances supplier relationships
Developing a different kind of talent pool will take time, but possibly procurement’s biggest immediate opportunity is to develop strategic supplier relationships as supply chains become more complex.
Digital procurement allows companies to diversify their sourcing capabilities using real-time data to communicate with suppliers, create shared data, and set collaborative goals and key performance indicators (KPIs). Businesses that effectively transform digitally will better survive current supply chain crises and be better positioned to thrive in the coming decade and beyond with robust and diversified supplier networks.
Educational resources to start digital transformation in procurement
The procurement industry has talked about truly going digital for a long time; now’s the time to enact the plan for digital transformation. Educational resources and consultants are the first steps to making digital transformation happen.
Here are some links to get you started:
- Una is a national leader in the GPO space focused on helping companies manage their indirect spending. Here are two articles you can review.
- Procurement Magazine has a list of the top 10 procurement consultants.
- Deloitte has an interesting article about procurement leaders investing in maturing technologies such as artificial intelligence, predictive analytics, intelligent content extraction, and collaboration networks.
- Effso has a great article on how to start the digital transformation from digital procurement evangelist Jacob Larsen.
- Lastly, here’s an article from Jija.io, which includes the evolution of digital procurement.
We invite you to reach out to us. Una’s contracts help differentiate an organization’s supplier base and can introduce you to new relationships while promoting business continuity. Una can help you manage your spend categories that are frequently left alone, allowing for the generation of new savings and value you may have overlooked.
Contact our team of sourcing advisors to learn more.
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