The issues and challenges of procurement digitalization

💡 Maintaining the supply chain: this is the primary mission of Procurement within the company. Whether they handle strategic or non-strategic purchasing, the Procurement departments of today play an essential role within companies and have become the business partners of the C-Suite. Generating savings levers, preserving cash, regulating turnover, contributing to risk management or even innovation and CSR: Purchasing departments play a critical role in value creation within companies. These factors create the argument for Procurement to be a part of your organization’s digital transformation efforts.

A) Digitalization of Procurement: an essential part of the digital transformation of companies

Digital transformation has been a focal point in organizations for several years, and the Purchasing department is no exception. Thanks to technological developments over time, what was originally adopted by a minority of players has now become a necessity to anyone hoping to build sustainable business activities. While many companies were still hesitant, the Covid-19 health crisis disrupted the global business landscape and pushed many to take the digital leap. In response to this tidal wave of change, Procurement departments started to evaluate their priorities, starting with cost reduction and supplier management. The crisis proved to be the catalyst of change, bringing digitalization of Purchasing to the forefront.

🍋 The digitalization of Procurement software is a key component of digital transformation.

Responsiveness and adaptation: these buzzwords started to apply to Procurement activities as the business and organizational effects of Covid-19 rippled across organizations. In recent years, the number of Procurement departments to have integrated or initiated the digital transformation of Procurement increased 16% (Source: AgileBuyer – CNA). While it’s needed now more than ever, this transformation calls for deeper consideration.

What does the digital transformation of Procurement software entail?

➡️ A strategic transformation
➡️ An organizational transformation
➡️ An operational transformation
➡️ A human transformation (above all)

So why is Procurement digitalization so important? What does it really imply? And above all, what are the risks for companies who fail to digitize their purchasing methods.

B) Skipping Procurement digitalization: the costs for companies

🍋 Companies who refuse to conduct Procurement digitalization expose themselves to expenses that may jeopardize the sustainability of the entire company

Why is Procurement digitalization imperative today? The answer can be summed up in one word: costs.

Costs for your organization

While Covid-19 has prompted companies to review their priorities, the main incentive to go digital remains the same: to optimize the organization. And for the very valid reason that digitalization benefits the overall performance of companies!

60% of companies expect digital transformation to optimize their organization

(Source: IDC – Cegid)

Best practices to optimize your organization:

➡️ Implementing Procurement software in cloud mode
➡️ Digitalizing purchasing processes
➡️ Automating the right tasks

In a nutshell, optimization is intrinsically linked to digital tools. However, tools alone won’t suffice for effective and complete optimization. This is why company-wide transformation goes hand in hand with Procurement digitalization. Once an
organization is able to connect all the dots, a change in tools, processes, and practices can create a more efficient organizational structure, both overall and long-term.

What are the benefits of organizational optimization?

👍🏽 Remote operation of company activity in the event of a crisis
👍🏽 Increased operational efficiency and Procurement performance
👍🏽 Fluid internal collaboration, particularly between the Procurement and Finance Departments
👍🏽 Effortless external collaboration, especially with prescribers and suppliers
👍🏽 Procurement departments focus on creating value for the company

So, what exactly are the costs for companies who are slow to embrace Procurement digitalization?

Financial costs

Procurement departments could reduce their costs by up to 30% in ETI/SME-SMI thanks to digital transformation

(Source: The Hackett Group)

Operational costs

91% of SMEs/ETIs in the private sector who have initiated a digital transformation say that the digitalization of their company
has allowed them to increase operational efficiency (reduced costs, more reliable operations, risk management, fewer delays).

(Source: OpinionWay)

⬆️ This figure jumps up to 99% for companies whose digital transformation is at an advanced stage.

Business costs

60% of companies expected to be overtaken by digitized competitors within 3 years.

(Source: IDC – SAP Ariba)

💡 Companies that postpone digitalization of Procurement allow competitors to significantly outpace them. While digitalized Procurement departments are working to create value for their organization, non-digitalized companies are busy catching up overall organization, operations, competitiveness), which is often very costly.

Costs for your employees

The digitalization of Procurement is not just a matter of tools, it is above all a human transformation. In reality, the digital transformation of Procurement affect the organization but more importantly the wellbeing of it employees. Without Procurement digitalization, employees bear the brunt of a company’s lack of organization, resulting in costly losses, including time, productivity, and employee engagement.

How does the lack of Procurement digitalization affect your employees?

Due to a lack of centralized data and effective communication, employees waste time searching, retrieving, and transmitting information, both internally and externally. Without a centralized digital Purchasing solution, employees have to juggle
numerous software programs, resulting in an overall reduction of productivity. A lack of process standardization and compliance causes employees to invest more time and resources in repairing human errors (entries, transactions, etc.) greatly contributing to a loss of efficiency within companies. When faced with a lack of organization, employees often disengage in terms of performance (lack of motivation, loss of productivity, and a drop in performance, or worst, departure from the company) and their use of Procurement software (by abandoning the tool).

85% of employees lose at least 1 to 2 hours in productivity per week looking for information.

(Source: Dynamic Signal)

💡 These costs do not only apply to Procurement teams but all shareholders across the supply chain, including buyers, specifiers, and suppliers.

Costs for your business teams

While the absence of digital transformation generates costs on an organizational level affecting employee management, it can also impact the finance department.

Costs for your Administrative and Financial Department

💸 Dysfunctional collaboration between all the departments of the company
💸 Complex budget management
💸 Unreliable performance measurement (reporting)
💸 Tricky development management
💸 Difficult costs to limit and cut
💸 Complex process optimization
💸 Slower growth for the company as a whole

🍋 Renouncing the digitalization of Purchasing decreases value creation driven by the CFO.

The primary mission of the administrative and financial departments is to support company growth. To do so, it must maintain successful alignment between the organization’s operational priorities and those of the market while overseeing proper
strategy execution across all departments. Without a powerful tool, the CFO is forced to concentrate their efforts on ways to upgrade company activities rather than focus on value creation. Therefore, digitalizing Procurement provides the CFO with the
necessary tools to drive growth within the company.

91% of CFOs believe that one of their main responsibilities is to identify and target new opportunities to create value in the company.

(Source : Accenture)

Costs for your support teams

💸 Limited assistance to support employees using purchasing tools
💸 Considerably higher volumes (tenfold) of support requests
💸 Longer ticket response time
💸 Difficult to optimize support costs
💸 Multiple and laborious documentation updates
💸 Low visibility on tool-related issues

🍋 Disregarding Procurement digitalization results in continually overwhelmed support teams.

The core purpose of support teams is to support users on their tools. Thanks to digitalization, support teams now have the opportunity to transform the user experience. At best, this support promotes employee productivity on E-purchasing
software, and on a more global level, fosters better Procurement performance. At worst, a lack of digitalization promotes a poor user experience, resulting in employees neglecting the tools and poor Procurement performance. E-purchasing software
features include on-demand access, personalization, and integrated support: critical factors companies forfeit in performance by delaying Procurement digitalization.

The digital transformation of Procurement is now essential for all companies and their departments. But what role does procurement software play in this transformation?

In 2020, 68% of user support officers reported that they felt overwhelmed by the workload.

(Source: Zendesk)

Costs for your Procurement department

💸 Irrelevant Procurement management
💸 Precarious cost control
💸 Damaging supplier management
💸 Tedious standardization of processes
💸 Fragile security of supply
💸 Critical risk control
💸 Complex budget management
💸 Questionable data reliability
💸 Difficult traceability flows

🍋 Giving up on Procurement digitalization means giving up on the performance of Purchasing.

The primary function of Purchasing is to control the supply chain. To do so, Purchasing departments must be able to rely on fundamental factors such as centralized, secure, and reliable data. These constitute crucial elements of Purchasing activities
that directly influence the quality of risk management, cost reduction, and supplier sourcing. E-Purchasing software gathers all of these aspects under one tool, a blessing for Procurement. This is an opportunity for Purchasing departments to actively
participate in value creation within their company in the same way as the CFO.

81% of directors overseeing the digital transformation of Procurement (compared to just 61% of other leaders) said the change their role is undergoing has improved the management of supplier performance.

(Source: SAP Ariba)

C) The role of E-Purchasing software in digital transformation

Ivalua, Synertrade, SAP Ariba, Jaggaer, Oracle Procurement, Coupa… There are many E-Purchasing solutions in the form of SaaS (Software as a Service), offering support to the digitalization of Procurement. These solutions make it possible to centralize all the necessary data and tools for Procurement operations in real-time. The many advantages on offer make them unanimously popular in companies implementing them, particularly for the savings they can generate. So what are the main benefits of digital purchasing solutions exactly?

Simplified Procurement Management

This is the first benefit of E-Purchasing solutions. Above all, E-Purchasing software allows companies to:

⬆️ Centralize Procurement data and tools
⬆️ Automate repetitive and time-consuming tasks
⬆️ Gain a clear overview to improve monitoring
⬆️ Enhance the measurement of Procurement related activities
⬆️ Facilitate the management of calls for tender

30% is the savings rate made on annual expenses that an accessible E-Procurement software can generate.

(Source: Claritum)

Higher Quality Processes

Thanks to their different features and functionalities, E-Purchasing solutions improve the quality of Procurement processes. By having a single tool that centralizes all the relevant elements required to manage Procurement, companies can:

⬆️ Monitor Procurement processes from start to finish
⬆️ Standardize all processes, whether they involve internal or external players
⬆️ Secure data to increase its reliability
⬆️ Ensure a complete traceability flow

Thanks to the high quality of process execution, international Procurement departments have recorded 2 to 3 times
less transactional errors.

(Source: The Hackett Group)

Procurement Innovation

Far from replacing human labor, E-Purchasing software frees up time for more strategic activities. The main innovative benefits are:

⬆️ Contributing to the improvement of product and services by collaborating with the R&D department, particularly through co-innovation methods.
⬆️ Helping Procurement management become more sustainable (CSR).
⬆️ Anticipating trends thanks to predictive Procurement offered by analytical tools.

30% of an organization’s competitive advantage stems from the employees’ adoption and creative use of new

(Source: Gartner)

Let’s not forget that technological innovations are directly integrated into E-Purchasing solutions, this means tools are continually updated and optimized. For instance, the integration of RPA or Machine Learning allows for companies to get the best out of their Procurement management.

While they play an essential role in Procurement digitalization, E-Purchasing solutions alone cannot guarantee an effective and sustainable transformation. So how do we leverage the adoption of E-Purchasing software towards driving effective digital transformation?

This is chapter 1 in a series of 10 articles created from our white paper on Procurement digitalization. Want to access the rest of the white paper? Sign up below, and we’ll email it to you.

Sarah C

Sarah oversees all things inbound marketing, exploring the many business uses and topics surrounding digital adoption. Her previous experiences include B2C and product marketing in the social listening space, uncovering emerging industry trends.