In this world and time, technologies are progressing at an unprecedented rate, increasingly reshaping the world. The digital revolution has transformed everything it touched, including the business world. However, surprisingly, procurement departments have been left behind.
Deloitte defines digital procurement as the application of technologies that can make Strategic Sourcing predictive, automate Transactional Procurement (P2P), and enable Supplier Risk Management to become proactive. This idea opens the world of businesses to several delightful opportunities that significantly improve business models.
While procurement plays an important role in ensuring smooth execution of multiple operations, digital procurement can guarantee that your organization reaps greater profit as well. Read on to find out how exactly digital procurement can help impact your bottom line.
1. Enables End-to-End Control
Having access to factual, detailed procurement data mitigates all sorts of uncertainties. One of the most significant advantages of going digital is access to a large amount of real-time data, as it enables proper control over procurement operations. Multiple departments can corroborate information and decisions and communicate almost instantaneously through digital means.
Through purchasing software, data related to purchase requisitions, purchase orders, assurances about quality, information on costs, bargains, and suitable suppliers can be recorded and retrieved by anyone across multiple teams.
This increased transparency streamlines the production process and allows taking easy charge. Better control will enable organizations to keep track of their productivity and take adequate measures to improve it. Efficient firms with seamless inter-communication channels are able to respond swiftly to market challenges. Improved flexibility can give organizations a cutting edge in today’s turbulent markets.
2. Saves Time
Paper-based procurement that heavily involves human intervention wastes a huge amount of money as well as time. Collecting data, tracking orders, and communicating across various channels manually can be an ordeal. Digital procurement processes, on the other hand, allow information flow at superior speed.
Automating repetitive tasks frees teams to spend less time collecting invoices and performing menial, repetitive tasks. Such work is assigned to bots, freeing up talent to be used elsewhere.
This freed-up time can be invested back into the company, especially on human interaction tasks such as building relationships with suppliers, negotiating and setting strategic goals, enhancing customer support, etc. All this translates to better performance of your organization.
3. Helps Manage Supplier Relations
Supply risk poses the biggest challenges in the procurement process. As supply chains expand, manually tracking supplier reputations and performances in a particular industry becomes more and more complicated.
By using sophisticated procurement technology, third-party information can be stored in detail and continuously updated in a single, detailed record. Within this record, operational performance statistics, history, reviews, and the current financial health of suppliers become extremely easy to access.
Insulation against data corruption is ensured through a network of computers. This superior performance tracking ability can help organizations gain invaluable insights, allowing them to effectively negotiate terms of contracts with suppliers. It allows them to round up well-reputed suppliers known to offer quality goods and timely deliveries, and compare their products and prices.
Standardized supply chains make for standardized products and deliveries. The ease of maintaining supplier relations granted through digitalization makes room for increased profits, assured quality, and better time management, all of which impact an organization’s performance and reputation directly.
4. Saves Money
Not only does the shift from paperwork cut costs, but digitalization of procurement processes can also save money considerably. Following a more transparent spending structure and access to tech-enabled analytics on trends, identifying better and newer saving opportunities becomes way less complicated.
Inventory management becomes easy, and prevention of potentially costly errors becomes straightforward. Access to real-time data about dispersed prices can help secure great deals in the market, cutting company costs further.
The ease of tracking ensures that no money is lost through rogue spending on purchases from less-known suppliers outside of the company-defined channels. Dark spending is bound to get reduced through increased transparency about spend behavior.
All this has the potential to save organizations copious amounts of money that can then be spent more efficiently for business development. In the increasingly competitive markets of today, all this can give your organization advantages over its competitors.
Employee bonuses/salaries can be increased, which makes for happier, more productive employees. Savings can be invested back to improve product quality, and cutting down production costs frees up opportunities to cut down prices, both of which make for happier consumers.
5. Facilitates Risk Management
For the procurement department, risks begin right at the point of analyzing needs, following through with the supply chain, and staying close in case of unforeseen events. These risks might include inaccurate need analysis, poor supplier selection, disorganized supplier management, error-prone data entries and so on.
A Procure-to-Pay system starts to facilitate risk management right from inventory management to prevent incorrect order estimates, helps keep an eye on the supply chain, minimizes human error, and gathers data that can be used for making strategic decisions.
Risks can be mapped and visualized, and efficiency of operations increased through access to improved analytics, tracking facilities, and insights. For example, with the help of digital procurement, you can track the performance of a supplier. If there is a pattern of late deliveries, you can identify this supplier as a risky one and mitigate this risk by sourcing a reliable supplier.
As shown by the state of markets during the COVID-19 pandemic, resilience can make or break organizations. It is effective risk management that builds this required resilience, and digitalization aids in its development thoroughly.
Adapting to this rapidly changing world instead of resisting and postponing changes remains the best way to move forward. Procurement departments within organizations provide irreplaceable value to the businesses, and it is evident that they benefit tremendously from going digital.
By adopting digital procurement, companies can expect to gain superior control over their transitional procurement processes, improve efficiency and predict and manage risks efficiently. Therefore, investing in digitalization is essential for any organization to stand the test of time and excel in the future if it aims to improve its performance.
Prasanna Rajendran is the Vice President at Kissflow, where he heads the business operations of Kissflow Procurement Cloud, a flexible procurement software for procurement teams to streamline all their purchasing processes in a single place. He has over 20 years of experience in technology and has helped Fortune 500 companies with custom solutions in the sourcing and procurement space.