“We are still trying to solve the same problems we were talking about two decades ago.” This sentence from the procurement manager of a multinational bank encapsulates the status quo in many companies’ procurement team. While lots of organizations are eagerly investing in the digitalization of customer-related business processes, it is not uncommon for back-office areas such as procurement to get a raw deal.
The procurement manager quoted is a client of Kearney, an international management consultancy that understands procurement strategies rather well. The consultants regularly ask companies across the globe about their goals, challenges and strategies in procurement. In doing so, it has become increasingly clear over the past few years that there is an urgent need for transformation in procurement. After all, the last time there was real innovation in this area was around 20 years ago:
- With the integration of the internet into procurement, electronic marketplaces emerged through which buyers could bundle their requirements
- Enterprise software companies such as SAP and emerging specialist providers invested massively in new web-based procurement applications
- The stock market darlings at the time were Ariba und Commerce One, both tech companies with the mission of revolutionizing procurement
However, as the procurement manager quoted at the beginning of this blog post noted, that was easily two decades ago. In the meantime, Ariba has become a business unit of SAP, Commerce One has completely disappeared from the market – and from the point of view of many buyers, procurement may have slightly improved in recent years. Nevertheless, really big innovations have largely failed to materialize. So what does digital procurement look like in 2021?
Self-Assessment Tool: How Digital Are Your Procurement Processes?
To help you answer this question, EASY SOFTWARE has developed a free self-assessment tool. It enables you to quickly determine the digital maturity level of your procurement processes. The tool is based on the “Digital Business Processes” maturity model of the ITC industry association Bitkom.
Bitkom has been working on digitalizing the business world for many years. In numerous studies and surveys, these digital experts have gotten to the bottom of what a good digital business process looks like. With the help of the maturity model, companies can seamlessly assess the current level of maturity with regard to the digitization of processes.
EASY SOFTWARE has adapted the generally applicable, cross-company Bitkom model for procurement. With our maturity model “Digital Procurement Processes”, we want to provide you with some orientation. So, where does your procurement department stand today?
- Are you making the most of new technologies and tools to automate your procurement processes?
- Do you have all the data and information you need to make the best decisions?
- How do you manage quality along the entire process chain – from purchase requisition to payment?
It goes without saying that there are no easy answers to these questions. But a good starting point could be to determine the status quo. The self-assessment tool is designed to help you identify the strengths and optimization potential of your procurement system in just a few steps.
Enormous Potential: 50% Process Automation Is Possible
Let’s look at the potential: What is possible in procurement in terms of digitalization – and can digital transformation fundamentally change procurement in companies? McKinsey estimates that 36% of procurement processes can be automated using technologies that are already available today.
Another 38% are also suitable candidates, but have their limitations. This part of the process differs so much from company to company, which means blanket statements are hard to make. However, even if only half of these processes can be automated, the overall automation potential is at least 50%. The prerequisite for successful automation is clean data, the quality of which can be improved using artificial intelligence and machine learning. The technical possibilities are now much more sophisticated than they were 20 years ago.
Perfect Timing: Global Megatrends Give Procurement a More Prominent Role
Here lies the great opportunity for procurement teams in companies. They should seek to transform themselves from being a cost-saving department to an “enabler” of strategic competitive advantages using new technologies. Given the challenges ahead, there is no time like the present:
- Global supply chains are becoming increasingly complex. Only transparent procurement processes make it possible to actively manage economic risks and effectively counter the mega-risk of climate change.
- Economic volatility is rising. After one of the longest upward trends in the past 100 years, global economic activity is becoming more and more unstable. Digital procurement strategies enable you to react to fluctuations in an agile manner.
- Digitalization pressure continues to grow. Companies that have so far been reticent about the digital transformation of procurement must jump on board. The more digital global supply chains become, the greater the pressure on each individual member.
So, a great deal will be expected of procurement teams in companies. Take the first step today by using the EASY SOFTWARE self-assessment tool to gain as many helpful insights as possible into the current status of your digital procurement.