Why you need a digital procurement strategy, now

By Malcolm Farrell

The digital revolution is underway. The question is: are you ready for it?

It is no secret that digitisation and rapid improvements in technology are revolutionising the way companies do business. Digital disruption affects companies across all industries and within every department. Procurement is no different.

According to a recent report released by PricewaterhouseCoopers (PwC) on the digital revolution, we "need to rethink the value added by procurement. As the primary owner of the supplier interface, [procurement] can keep − and even increase − its distinctive value proposition within the company by seizing some of these new opportunities. It can create new business models for itself and move from being a cost centre to a profit centre".

So, in the age of digital disruption, what do you need for an effective procurement strategy that delivers appropriate quality, cost savings and continuity of supply?

The following springs to mind:
- Extensive supply market knowledge as well as an understanding of market dynamics
- Access to competitive suppliers
- Product and related specifications knowledge
- Commodity strategies that are prioritised based on their efficiency to unlock savings and deliver to the bottom line of an organisation
- Automated technology that is used for procurement transactions to drastically save time and increase productivity, for example:
-- Quote management (request for quotation (RFQ))
-- Vendor onboarding
-- Vendor master data maintenance
-- Reporting from maintained, rich data sets
-- Access to extensive supplier database information through vendor marketplaces
-- Integrated requisition and sourcing
-- Catalogues to reduce unstructured spend

Many organisations find themselves in the business of wasting endless hours on tedious administrative tasks, such as research, manually managing vendors and processing RFQs. Those caught up in this administrative quicksand will struggle to position procurement as a strategic contribution to the business. But, according to Hackett's 2017 Key Issues Study, "by addressing its own shortcomings in capabilities and resources, procurement can transform as a function. Procurement leaders should ask some hard questions to assure themselves that steps are taken to avoid being left behind".

Digital strategies, while they do come at a cost, can remove unnecessary time spent and allow buyers to step up and do what they do best. Additionally, when fully assessing the internal cost implications that arise from manning administrative inefficiencies, having poorly kept vendor master data, unnecessary paper and waste - the benefits and associated savings of an appropriate digital strategy will far outweigh its cost.

Ultimately, Hackett's study puts it best: "if procurement is to remain relevant, it must embrace the tenets of digital transformation".

How can you empower your organisation's digital procurement strategy?
You can consider the following when aiming to empower digital procurement strategies:
- Establish the appropriate digital procurement strategy that is best suited to your organisation's needs
- Get connected to a comprehensive online supplier marketplace (the marketplace must be inclusive of rich, validated vendor information and healthy master data)
- Empower your buyers with quick access to efficient supplier research that will provide your organisation with real productivity and cost savings gains

In today's digital revolution, there are a number of tools available to buyers to:
- Improve productivity
- Drive cost optimisation
- Improve preferential procurement/supply chain transformation
- Manage supply chain risk

The above can be achieved through:
- Advanced supply market research with access to a comprehensive online supplier marketplace
- Quote management technology that will enable organisations to eliminate mundane administrative tasks and drive cost savings
- Catalogue technology that will enable businesses to migrate from unstructured to structured spend, delivering better prices and less margin for error
- Vendor management solutions to automate the management of master data and associated reporting that will, in turn, achieve managed and healthy vendor master data
- Automate the management of key compliance documents, such as Broad-based Black Economic Empowerment (B-BBEE) and tax clearance certificates
- Consider digital vendor onboarding solutions with approval workflow and integration into enterprise resource planning (ERP)
- eAuction solutions that will deliver quick savings
- Automate the validation of vendor master data to mitigate risk

Whatever your procurement strategy, consider how the digital revolution can influence your organisation. There is a real return on investment (ROI) value proposition just waiting to be unlocked.