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The case for digitalising procurement

Image: Adobe Stockk / PST Vector

Jack Macfarlane, Founder and CEO of DeepStream explores the benefits of digitalising procurement and how to make a winning business case for investment in new technologies.

Digitalisation is transforming the procurement sector, benefitting businesses and workforces around the world.

However, getting ringfenced budget to be able to invest in new technologies, skills and processes can be difficult in today’s economic climate – for any department.

Add to that ongoing uncertainty, complexity in global supply chain dynamics and talent shortages, and you’re left with a procurement function that risks becoming weakened without it.

Like with many things, you must spend money to make money. So how can procurement leaders craft a compelling business case to win a slice of a tightening budget?

Today’s procurement challenges

Procurement, while a fast-paced and rewarding career, presents its share of challenges, especially in the current climate.

In the wake of global events like the Covid-19 pandemic, geopolitical conflicts, inflation, and the ongoing energy crisis, professionals find themselves engaged in protracted periods of crisis management to prevent operation interruptions and ensure value for money.

In an environment where bottom lines are often squeezed, procurement departments are compelled to wage a budgetary war, as the global GDP growth forecast stands at a mere 2.6% – the lowest annual rate since the global financial crisis.

Within this landscape, procurement teams are grappling with accomplishing more with fewer resources, amplified by skill shortages and the rise of professional burnout.

It is estimated that 66% of procurement teams have not grown in the last two to three years, and nearly a quarter of junior procurement specialists plan to exit their roles.

In the face of sustained economic pressure, procurement teams must identify avenues for cost reduction and expenditure optimisation, all without compromising quality or compliance standards.

One strategic approach to both economise and alleviate long-term workload pressures is to digitise the procurement process. And many businesses are already reaping the rewards.

The shortcomings of the ‘traditional way’

During the procurement stage, a high volume of information is exchanged between parties prior to contract agreements. Here, there is a lot of room for human error, slow pace and wasted time trying to find data or emails.

Workdays can become consumed by manual tasks such as downloading and organising documents copying and pasting data from one spreadsheet to another or digging through emails.

Legacy procurement processes hinder efficiency but also cast shadows over transparency and data accuracy. This can have repercussions by causing misunderstandings, inaccuracies, and a lack of due diligence, all of which can carry legal, compliance, and fraud risks.

This remains a reality for many procurement professionals today despite there being a wide range of digital solutions available on the market.

From a business perspective, this hardly optimises the valuable time and expertise of their procurement teams and introduces a high level of risk that can be avoided.

In response to these challenges, businesses are increasingly embracing digital procurement, and bidding farewell to the ‘traditional way’ of doing things.

Modernising procurement through digitisation

Digitised procurement prioritises simplicity, user experience, automation, and seamless integration. These software tools serve to streamline processes, reduce learning curves, and optimise efficiency while mitigating risk.

Every stage of the procurement cycle stands to gain from the benefits of digitisation, spanning RFx, supplier discovery, negotiation, contract management, and reporting.

Here is an overview of the multiple advantages businesses can anticipate when transitioning to an e-procurement model:

Time efficiency

E-procurement solutions render email chains and attachments obsolete, which allows procurement teams to redirect their efforts toward strategic initiatives, sparing them from administrative burdens. Client surveys have revealed that users, on average, save over 2.5 hours per day in procurement operations.

Compliance and governance

Technology and automation ensure high compliance and governance standards, as all communication is meticulously tracked and timestamped, providing comprehensive management oversight. Furthermore, available tools facilitate cross-departmental collaboration, ensuring accurate tracking and effective management of procurement activities across the business.

Improved transaction terms

Efficient engagement with suppliers fosters competitive bidding. E-auction technology empowers users to negotiate more favourable terms for both quality and pricing and deploy auction strategies that yield substantial financial savings.

Enhanced supplier engagement

Outdated technology and processes can be frustrating for procurement teams and external suppliers alike. E-procurement simplifies and streamlines the bidding process, offering suppliers increased clarity and visibility, and automated nudges that can boost adoption rates and expedite timelines, ultimately enhancing the overall supplier engagement experience.

How to craft a compelling business case

Digitising the procurement process is an exciting prospect, but at a time of budget cuts, how can teams successfully advocate for change?

The initial step is to create a well-researched and persuasive business proposal that articulates the ‘how,’ ‘why,’ and ‘when.’ This document or presentation should include key elements like the projected timeline for completion, resource requirements, success metrics, and the anticipated value over the long term.

This is also your chance to highlight the prevailing issues within the procurement function and how digitalisation can help to resolve them.

To make your case even more persuasive, clearly explain the detrimental impact of legacy technology and processes on both the department and the wider business, which may include financial implications, reputation, risk mitigation, and the workforce. To strengthen your case, support your claims with real-world evidence.

The next step is to present a variety of solutions that can resolve these challenges. In the context of e-procurement, this would include an overview of the available market tools, their associated costs, key features, and an objective evaluation of their pros and cons aligned with your organisational objectives.

Now is the time to address cost. Using your existing procurement budget as the basis, assess what adjustments, additions, and removals are necessary.

Consider the timeline and any supplementary resources that are needed for a seamless transition and to maximise the spend, such as training initiatives, recruitment of new personnel, or structural adjustments.

Additionally, it is important to take a forward-looking perspective when considering the technology investment and its potential ROI. Recognise that today’s need might not be tomorrow’s, with the rapid pace of technological advancement requiring well-judged foresight.

Artificial intelligence (AI) is revolutionising operations across industries, including procurement by augmenting processes and making them faster, smarter, and less resource intensive.

Although AI is in its formative stages, experts forecast that it will have human-like intelligence within the next 100 years.

Given the existing market presence of AI-driven procurement tools, it is plausible to expect their functionality and accessibility to expand at pace. Therefore, it is essential to gauge the pace of transformation before committing to any new product or platform and plan ahead for it.

Picture of Jack Macfarlane
Jack Macfarlane
Founder and CEO of DeepStream

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