Why digitisation is the most untapped resource for procurement leaders
- Written by Chris Willcocks, Vice President & Head intelligent spend management at SAP Australia and New Zealand
Digitalisation is the catalyst of a more efficient, risk-focused approach to procurement that prioritises long-term strategy over short-term tactics. Given its importance to future success, global digital transformation spending is forecast to reach $3.4 trillion in 2026 with a five-year compound annual growth rate (CAGR) of 16.3%, according to the International Data Corporation (IDC) Worldwide Digital Transformation Spending Guide. Despite this forecast, the adoption of procurement technologies remains slow, hindered by barriers such as budget and stakeholder buy-in.
Overcoming digitalisation anxiety
An Economist Impact study, sponsored by SAP, indicated more than a third of chief financial officers (CFO) cite budget constraints as the top barrier to procurement digitalisation. For chief procurement officers (CPO), the concern was more about the limited or low adoption of digital solutions, rather than costs. This perhaps signals the anxiety around the potential trade-off of adopting new digital tools in a business, especially among organisations that are yet to take the first step towards digitalisation.
Selling the benefits of digitalisation to get everyone onboard
But these anxieties can be easily overcome if leaders present business cases that better sell the added value digitalisation can bring to procurement. What businesses need to understand is that procurement is an essential business service and therefore needs to align with all stakeholder and business goals. However, procurement teams often fall short on their ability to consult the business or do so in language the business understands. Procurement teams can overcome this by consulting stakeholders to understand what they need and the needs of how they are going to procure it so a fit-for-purpose contract can be developed.
Part of that process could involve examining all the current procurement processes and then understanding where current inefficiencies exist. For instance, it could be around mitigating risks or automating monotonous administrative tasks so that teams can focus on more high-level, rewarding work.
Once these gaps are identified, discussions with the business can be had to help them understand where parts of procurement are ripe for digitalisation, and then conversations around budget will be more equal.
Procurement as a value creator
We do not need to look far to understand the fragile state of the current global supply chain, and how more important than ever it is to ensure that the digitalisation of procurement is top of mind of businesses. Being able to engage in efficient procurement processes means a business can work smarter than their competition and minimise supply chain risks in the future.
This was what procurement experts Mutual Marketplace wanted to deliver for its customers by maintaining a single supplier register, while automating and streamlining its supplier management process after recognising that there was lack of integration with source-to-pay processes and framework for evaluating suppliers, and its supplier data was incomplete and outdated.
As technology and automation take over, the current way of conducting procurement with paper-based processes will ultimately disappear. The increased use of technologies such as predictive or advanced analytics, video and automation into largely paper-based processes will push procurement leaders to make better-informed decisions – it’s just a matter of knowing how to tap into those digital procurement resources.
