New technology is disrupting nearly every aspect of business in ways companies can leverage to increase their bottom line, and procurement is no exception. Digital transformation in the procurement process can cut costs, save time and better inform strategy and decision-making.
The central goal of procurement is still to protect and improve profit margins by getting the best price and quality for goods, but technology is making the process more efficient and cost-effective.
While procurement still has its hands in all aspects of a company, it's becoming a smaller, more centralized function with the help of technology.
AI-enabled software and robotic process automation (RPA) technology is taking over many of the tedious tasks that not only accounted for hours of work and higher staffing requirements, but also for costly human errors.
Additionally, advanced data analytics reporting is helping decision makers improve procurement strategy and optimize their supply chain like never before.
Here are 8 digital transformation trends affecting procurement today:
1. Creating and Optimizing a Digitization Strategy
Companies not actively pursuing increased digitization in their procurement process will miss out on cost cuts, better data accuracy, valuable analytics and the other benefits of new supply chain technologies.
As a result, a growing trend in procurement is measuring and reporting on digitization as a strategy. Digital transformation is inevitable in the space, so companies with goals and insights on their digitization process will have a smoother transition in adopting new technologies.
The strategy should include assessing the company's current digital transformation status, the inventory of digitization projects, the costs of implementation and the impacts and benefits of the projects.
It should also involve continuous monitoring and evaluation of project performance and strategy effectiveness.
Companies that focus on auditing and optimizing their digitization strategy just like they would any other strategy that affects their business can better overcome barriers to change.
2. Collecting Data and Running Analytics Reports
Big data is a trend that's growing as new tools enable companies to collect vast amounts of data and generate valuable insights from it.
In the procurement space, analyzing spending data to find areas for improvement used to be a human task, but now it can be automated.
Procurement professionals are no longer "number crunchers" as their companies adopt procurement technologies that deliver greater accuracy in less time.
According to ProcureCon's 2018 report, 66 percent of surveyed companies are already automating spend analysis by using technology that compiles, classifies and cleans supplier spend information.
Beyond spend analytics, companies are starting to leverage predictive analytics in the procurement process to forecast revenue, prevent disruption and identify new market opportunities.
AI-enabled software can even clean and curate its own data, making it easier than ever for companies to benefit from procurement performance reporting without raising overhead costs.
3. Optimizing the Supply Chain Like Never Before
Supply chain optimization was once all about cutting costs at every link in the chain. Now that technology is cutting labor costs and eliminating human error, efficiency has become the greatest cost-saver for procurement professionals to prioritize.
Since technology can help spot missed cost saving in the supply chain, procurement departments can redirect their attention to making their own operations more efficient, centralized and accurate.
With analytics tools producing procurement performance reports faster than employees can do, staff members can spend more time leveraging the insights gained instead of generating the reports.
They can focus on finding and implementing automation throughout the procurement process to eliminate labor-intensive routines and eliminate costly human errors.
4. Addressing Cybersecurity and Business Continuity Concerns
With the rise of data accessibility and usage comes a growing concern over data security.
To ensure business continuity, procurement professionals need a cybersecurity strategy for safeguarding the sensitive personal and financial information they utilize.
Breaching of this data can affect the entire supply chain, put the company at risk of privacy law compliance issues and even affect business continuity. It's more important than ever for business owners to work closely with IT and use the latest schemes for data theft prevention.
5. Automation with AI and RPA Technologies
Procurement professionals are now looking into technology that can automate tasks throughout the procurement process, from processing their company's demand to approving payment to suppliers.
Traditional methods in assessing demand for procurement, with spreadsheets and checklists, left too much room for human error. Cutting-edge inventory management systems can eliminate the error and ensure the numbers in your software match your physical inventory count. Your system can instantly alert you when there's a stock shortage and place a new order on its own so that there's never too little or too much stock.
The receipt and approval of payment can also be automated, with machines that utilize real-time signals of material delivery and trigger automated secure payments to suppliers in response. With automated transactions, employee intervention to address incongruity is minimal.
6. Cutting Overhead Costs in the Procurement Process
With new technologies now available, procurement professionals should take a different approach to cutting overhead costs in procurement process itself.
Fewer employees are needed to perform procurement functions, and decision-makers need to consider the labor cost cuts that can come from investing in disruptive technologies.
Procurement can become a smaller and more virtual function within a company the more they utilize these technologies, and the reduction in overhead operations costs as a result trickle to their bottom line.
Companies that reduce their spending on in-house employees and leverage not just technology, but also the "gig economy" to digitally hire remote specialists as needed, will have a competitive edge over companies running traditional procurement operations.
7. Blockchain is Making the Supply Chain Quicker, Easier and More Accurate
Blockchain is not just for bitcoin. It's also a technology procurement professionals can leverage to get a better view of the supply chain.
When supply chains utilize blockchain, procurement officers can access a supply chain operating system complete with accurate data on all transactions made throughout the supply chain.
Blockchain technology can record the quantity and time of transferred goods, such as raw materials or parts, as they travel between supply chain nodes. This chronological record-keeping mechanism it offers makes data collection secure, accurate and automatic so that suppliers are held accountable and procurement officers can get the insights they need for better decisions.
Of course, companies will need to weigh the costs of deploying blockchain against the benefits it brings, but in industries where counterfeiting is a costly issue within the supply chain, blockchain can pay off.
8. Leveraging Supplier Data
Technology is enabling procurement officers to gain better insight into supplier risk.
By analyzing historical data on suppliers' performance, they can effectively evaluate supplier risk profiles and predict risk events.
As procurement processes become increasingly data-driven, procurement officers will factor in the availability of a supplier's historical data when considering purchasing from them.
With improvements in supplier performance tracking thanks to digital transformation, procurement officers can now take a fresh approach to leveraging supplier relationships.
Data can also provide another opportunity to cut spending in the procurement process.
When data collection and reporting hold suppliers accountable, supplier management doesn't have to be a big expenditure.
In fact, according to research from Informatica, companies can save as much as $6 million a year in supplier spend by leveraging supplier data.
Digital transformation is affecting every aspect of the business world, and digital procurement is already a reality.
The world of procurement is changing rapidly, with fresh and new opportunities for procurement to play a strategic role in business.
Procurement functions still deliver on traditional cost savings. However, a shifting focus on digitization is also improving procurement efficiency and performance measurement in a way that makes an impact on the company's bottom line.
Companies that don't take advantage of disruptive technologies risk falling behind, while competitors that stay ahead of the trend will forge ahead of them.
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