The increasing role of technology in procurement can no longer be overlooked.
According to Deloitte’s 2021 Global Chief Procurement Officer Survey, digital transformation is one of the top three priorities for most CPOs.
In fact, enterprises have experienced a 20% digital transformation increase since 2019. It’s evident that the use of technology in procurement is on the rise.
But where exactly is technology being deployed by procurement management teams?
What are some of the reasons enterprises are integrating more tech?
And what does the future of procurement look like with all this technology?
These are just some of the questions we’re going to tackle in this blog. But first, a look at the situation on the ground.
The Current State of Affairs in Procurement Regarding Technology
Today’s procurement objectives, weighed against the backdrop of a world staggering to recover following the slow-turn caused by COVID-19, have shifted from pre-pandemic expectations.
The biggest priority for CPOs at the moment is driving operational efficiency. This is a radical move away from what has traditionally always been the main priority – cost reduction.
Operational efficiency cannot be achieved without strategic adoption and integration of technology. This is demonstrated in the fact that among those surveyed by Deloitte there was a strong push to invest heavily in procurement solutions.
Procurement officers are cognizant of the fact that in order to promote growth in a post-COVID era, they must make use of technology in procurement efforts. Procurement, simply put, must be reimagined in light of the future which is undoubtedly tech-centric.
In yet another survey, this time by McKinsey, procurement offers around the globe were asked what was on the top of their mind in terms of technology, procurement management, and recovery strategies for 2021 and beyond. The results were telling:
· Relying on technology to recalibrate cost-saving targets using zero-based value creation techniques
· Unlocking new opportunities stemming from mutually exclusive partnerships
· Leveraging digitization as well as spend analytics to accelerate value capture
· Leaning on tech to facilitate remote-working hybrid models for employees adapting to the new normal
Technology’s role in procurement is only going to get bigger as time goes on. Let’s now examine how it is currently being utilized in procurement management.
Current Technology Deployment in Procurement
How widespread is the use of technology in procurement today?
If we carried out a cross-sectional analysis of a typical organization, we would discover the following technologies being used in the procurement management process:
· eInvoicing software
· eSourcing solutions
· eAuctions solutions
· eProcurement solutions
· Contract Management solutions
· Electronic Catalogs software
· Spend Analytics software
· Supplier Networks solutions
· Supplier Information Management solutions
These claims are supported by research presented in Deloitte’s The Future of Procurement in The Age of Digital Supply Networks report.
Contemporary digital technologies can be divided into three:
(i) Core technologies – these are solutions that are already standard features. Examples are eInvoicing and eAuctions.
(ii) Maturing technologies – these are technologies not yet widespread but still enjoy a moderate adoption rate across industries. Examples are predictive and advanced analytics.
(iii) Emerging technologies – these are technologies whose potential is inherent and whose impact may yet revolutionize procurement as we know it. Examples include blockchain and spatial analytics.
Technology has shown to be extremely advantageous to procurement teams that have adopted it. Here are five of the top benefits that can be harnessed when using technology in procurement.
Benefits of Technology in Procurement Management
The fact that 89% of U.S. businesses have a digital-first company strategy is a testament to the centrality of technology within enterprises. For CPOs and their teams, it’s because the benefits are undeniable. They include:
Benefit 1: Visibility
The procurement management process is now more transparent and efficient owing to technology. The fact that teams can follow the chain of command from requisition orders to accounts payable in detail means every function can be examined, monitored, and improved.
Benefit 2: Agility
Because of the fast-paced nature of the world, agility is a highly desired trait within purchasing and supply chain management in 2020. The ability to move quickly and make decisive sound decisions can only be done thanks to the on-hand data and insights provided by e-procurement solutions.
Benefit 3: Automation
Key areas that have benefited immensely from the use of technology in procurement include contract management and vendor management. What is supplier relationship management (SRM) without technology? Through these procurement solutions, teams are reminded of contract deadlines, due dates, deliveries, and renewals allowing them to stay on top of contract issues seamlessly.
Benefit 4: Decreases Cycle Time
Legacy procurement management processes are time-consuming. For example, manually processing a single invoice takes on average 25 days, whereas with eInvoicing management software, the time is cut down drastically to a mere 3 – 5 days. Technology decreases the entire procurement cycle time.
Benefit 5: Cost-Effective
Non-automated procurement management is costly. Reducing the bottom-line and streamlining costs is for most CPOs a high priority. Technology promises to assist in achieving this objective and for the most part, has proved to be effective in keeping costs relatively lower.
The use of technology in procurement is now standard modus operandi in the majority of enterprises. And it has proved to be a game-changer.
Technology has not only brought about greater visibility, ability to track data and connect expediently with vendors, but it has also helped buyers develop a competitive edge and allow better decisions to be made.
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To discuss procurement software with a consultant or to schedule a demo of our solutions, contact us today.