Introduction:
Digital transformation is changing procurement worldwide. With the switch from manual to digital procedures, procurement departments are changing drastically. Advancements in technology are driving this shift to boost efficiency, lower costs, and boost performance. This article discusses the benefits and drawbacks of digital transformation on procurement and how procurement teams can prepare for a successful transition.
Key Takeaways
Digital transformation in procurement involves replacing manual procedures with digital ones.
Digital procurement became the industry standard in 2022 with 86% of organisations utilising P2P software.
Digital procurement saves money and improves efficiency, but transitioning is difficult.
Preparing for digital procurement transformation and adopting the proper tools will help your company succeed.
Procurement is going digital. Procurement software is replacing paper forms and Excel sheets.
A 2022 PwC analysis found that 86% of enterprises used procure-to-pay (P2P) software, 70% used a market solution, and 14% built their own.
Additionally, 82% of highly digitalised organisations create value from procurement data they get through these platforms.
Global business is now done online. Future procurement success depends on how a department investigates, buys, and manages.
Digital transformation in procurement is separating firms who want a competitive edge from those that are left behind.
What’s Digital Transformation?
Businesses or organisations undergo digital transformation to fully use digital technology. Increase productivity, find and generate lasting value, and streamline corporate procedures to boost efficiency.
Digital revolution affects all industries. One-click ordering, same-day delivery, social media-based customer service, and immediate access to almost anything have produced an on-demand society. This is the age of convenience and access.
Uber, Amazon, and DoorDash set new standards for real-time user experiences, personalisation, and customer service.
Digital transformation in procurement can help you use new technology to strengthen your value chain.
What Is Digital Procurement—Digital Transformation?
Changes from manual to automated and optimised procedures drive procurement digital transformation.
Digital procurement systems improve requisitions, accounts payable, and other procurement steps. Digitalising procure-to-pay streamlines the process.
Before digital procurement, most procurement value came from cost cuts and savings. There’s more to gain from going digital than just cost reductions and supplier negotiations.
Modern eProcurement technologies go beyond cost savings to improve supply chain management and big data analytics.
Digital procurement helps firms increase profits, become more competitive globally, and find value in rich data and analytics.
Digital procurement requires CPOs and other procurement experts to provide sustainable value through sophisticated analytics and other skills rather than simply decreasing costs.
Benefits of Digital Procurement
Digital procurement offers efficiency, transparency, and cost-effectiveness. Procurement software simplifies the process, helps you implement your plan, and offers these benefits:
Cut costs and control spending
A centralised digital platform helps procurement directors regulate costs.
Programmed rules, permissions, budgets, and expenditure constraints are virtually hard to breach. This reduces costs and helps remain on budget.
Greater Efficiency and Productivity
Traditional procurement procedures like producing purchase orders from paper forms or matching invoices by comparing two pieces of paper were done manually.
Procurement automation lets your team make better decisions and create value.
Adding AP Automation software and accounts payable digital transformation to digitise the procure-to-pay process boosts productivity and accuracy.
Improved Supplier Management
Big data analytics and reporting interfaces from procurement software let you track and manage suppliers.
Spend analytics software lets you track supplier performance, contract management, and supply chain risks via KPIs. This data can also help you strengthen supplier relationships.
Full Spend Visibility
You may also see your expenditure habits with procurement software data.
These reports can help you identify overspending, make better purchase decisions, track procurement KPIs, and adapt procurement strategy to internal trends.
Easy Compliance, Lower Risk
Digital compliance enforcement is easy.
Approval routes, restrictions, and regulations assure team compliance. Since everything goes via your system, this reduces rogue spending from prohibited suppliers and enhances risk management.
Centralised Data Insights
Modern procurement platforms interface with ERP and accounting software, providing a data-rich ecosystem where you always have the data you need.
It’s there when you need it, not when you ask for it.
Change to digital procurement: what are the challenges
Most organisations face difficulties while switching to digital procurement.
Change is always painful, but digital procurement’s long-term benefits exceed the short-term discomfort. Expect problems like:
Opposition to Change
Users of the ‘old system’ and workflows may be slow to adopt.
Employee resistance to digital transformation is prevalent and difficult to manage. Fears of job loss or AI replacement in procurement roles may contribute.
Broad change management best practices and a change management strategy with rigorous onboarding, training, support, and benefit communication help reduce this.
Maintaining Legacy Data
Importing old Excel sheets into your new system is great for historical records.
This may be impossible. If so, data cleansing and formatting may be laborious.
Integrating Existing Systems
Developers must manually integrate some digital procurement systems.
Manual export and import may be needed. Avoid this by looking for options with out-of-the-box integrations with your preferred systems.
ROI sales to C-Suite
Digital transformation takes time and money. Every company unit may be evaluating a digital transformation plan.
Digital procurement may involve internal selling to higher-ups to prioritise.
Moving to e-procurement software can yield 20x returns for Planergy clients and a few months to value.
Transitioning to digital procurement challenges
Prepare for these issues before starting your procurement digital transformation.
Starting with all stakeholders, establishing a digital transformation implementation strategy, and communicating regularly can help. Doing so will provide benefit for years.
Digital Transformation: How Can Procurement Teams Prepare?
Successful digital procurement transformation requires a thorough strategy (focused on growth rather than cost reduction), a supportive culture, and a digital procurement platform.
Without these, your digital transformation may fail.
Digital transformation may greatly enhance procurement, but it’s important to prepare for large changes. Prepare your company for digital procurement with these strategies:
Set Goals
Clearly explain how digitising procurement supports your digital transformation plan.
This includes cost reduction, value creation, supplier collaborations, and supply chain risk reduction.
Identify Skills Gaps
After doing things ‘the old way’ for so long, you may lack digital procurement abilities.
Find skill shortages in data analysis, software configuration, or procurement software use. Then, train or hire to fill those gaps.
Your Current Pain Points
Before converting to digital procurement, procurement teams should evaluate their procedures and identify bottlenecks. Prioritise these difficulties while implementing a new system.
Set and Track KPIs
Without evaluating effect, are you improving?
Tracking procurement KPIs during your digital transition can help you assess your effect.
Check historical performance to assess if the adjustment is worth it. This shows where you’re succeeding and where you can improve.
Use Change Management Best Practices
Digital transformation change management programs address the above issues.
The strategy should include how you will convey digital procurement’s benefits, onboarding and training, and team assistance with new tools and procedures.
Select Software
The digital procurement solution you chose is the most crucial aspect of your plan.
Your procure-to-pay software must provide the functionality and flexibility you require end-to-end. Choosing anything without utility may hurt.
Planergy may be customised for organisations in many sectors and will future-proof your demands as the firm expands.
Remember that 70% of companies use market P2P solutions, while 14% construct one.
Buying a solution is usually cheaper than building one that will be harder to adjust as your needs evolve.
Digital transformation: how can procurement teams prepare?
Avoid the following problems by being proactive with your digital transformation plan and future procurement operational model.
Digital procurement has numerous benefits if you have a good strategy and the necessary digital solutions to accomplish it.
Digital Transformation Is More Evolutionary
You never finish your digital transformation success story. Tech keeps improving, procedures keep simplifying, and procurement organisations keep discovering ways to provide value.
Excel and paper forms may become obsolete, but the desire to improve will always exist.
The procurement department should always seek innovative ways to enhance and boost productivity.
True digital transformation is the start of an endless improvement process.
Conclusion:
Digital procurement transformation is a major step towards efficiency, transparency, and cost-effectiveness. Digital procurement systems are challenging to implement, but the long-term benefits are worth it. Setting goals, filling skill shortages, and choosing the correct software may help procurement teams succeed in this shift. Digital solutions streamline procurement and drive ongoing improvement and innovation as technology evolves. Adapting to digital procurement can help companies succeed.
