In the current business scenario, growth is connected to technology and an inability to adapt new technologies can leave a firm at a disadvantage. All businesses must focus their efforts on digital transformation to stay relevant. Digital procurement is one of the essential technologies that sit at the core of a business to enhance a company’s profits and regulate its dependencies on its vendors through strategic management initiatives. Procurement experts view the adoption of digital procurement solutions as essential for business growth.
Understanding Digital Procurement
Digital procurement is the use of transformative technologies to utilize the data of the current business to optimize the procurement process and reduce waste while also promoting profits. It helps in managing the end-to-end supply chain along with the costs and dependencies associated and also maintaining relationships.
Digital procurement solutions integrate with all relevant software solutions at a workplace and centralize the collection of data and provide a platform for proper analysis. This aids decision making by drawing insights about inefficiencies in the current system.
The different kinds of technologies that are leveraged for this process are:
- Established technologies that are used across the industries and are a primary component of a digital transformation. These are inclusive of software solutions used commonly in organizations such as solutions for e-Procurement, Sourcing, Contract Management, Basic CRM tools, invoicing tools, and Online Auctioning tools.
- Evolving technologies that have been introduced but are not commonly used. These provide an edge to the company and can be used for gaining better insights for decision making. These can include the use of newer concepts such as Machine Learning and Artificial Intelligence. It also includes other technologies such as Predictive Analytics, Prototyping tools, Robotics and other visualization tools as well.
- Emerging technologies that are cutting edge and are still in the early stages of research and adoption. These can provide a significant competitive advantage and a first mover’s advantage to the companies. Current trends in emerging technologies include IoT tech, Augmented and Virtual Reality tools and also the use of Blockchain.
To implement an excellent digital procurement environment at companies, the companies have started to form dedicated procurement transformation teams that dedicate their efforts towards the modernization of the procurement systems.
Use of Digital Technologies for Optimization of Procurement
Most procurement agents in UK believe that an investment in procurement technologies can boost business growth. There are primarily three functions for procurement:
- Sourcing: The latest efforts in strategic sourcing are centred at enhancing the resilience of a supply chain and ensuring proper business continuity. The use of procurement technologies provides transparency in procurement activities and the costs associated with them. This allows the business leader to have a better understanding of suppliers and dependencies. The dependencies can then be reduced by diversifying the sourcing and the underperforming suppliers can be rehabilitated to prevent any wastage. This also promotes better relations with key suppliers.
- Procure-to-pay: Using a digital P2P system, simplifies complex processes and eases invoicing. It also enables an environment of reactiveness by proving a process for reordering based on analytics and integration of own systems with vendor systems. It also allows proper spending analytics through the collection of all transactional data, which can easily be traced back to specific suppliers and can then be analysed efficiently using inbuilt analysis tools.
- Supplier Relationship Management: Maintaining relationships is at the core of a business. If you don’t maintain a relationship, you can miss out on major benefits such as better trade terms and discounts. Having a repository of all transactional data and the ability to view this data in a segmented fashion allows the teams to leverage the information to maintain much better relations with the suppliers.
Going about a Procurement Digital Transformation
A digital transformation for procurement requires proper analysis and help from procurement experts. The general steps are as follows:
- The first step is that the company should have a look at the current systems and the issues. In ways, the company should conduct a root-cause analysis for the current issues in procurement and then for a proper problem statement that can then be addressed using procurement technologies.
- The next step is to look at the possible technologies that can be implemented or developed to solve these problems. These don’t need to be a standalone tech solution. You can come up with a combination of solutions that can solve a procurement issue and remove any inefficiencies in the system.
- The last step of planning and the first step towards transformation would be to form a roadmap. This roadmap will form a basis for driving the transformation and identify key stakeholders who can contribute and benefit from the transformation.
Most procurement agents in UK have been advocating the requirement for keeping up with the times to maintain a competitive advantage based out of procurement processes. This enables the company to have a robust supply chain that can survive difficult times.