Should you invest in procurement transformation initiatives?
The procurement industry, like many others, is undergoing a significant digital revolution. Procurement transformation is an integral part of this digital shift, aiding organisations to adapt their procurement processes to current market conditions.
The global economic landscape in 2023 is in constant flux as a result of geopolitical conflicts, supply chain disruptions, rising costs, and the general economic downturn caused by the COVID-19 pandemic.
These occurrences have caused significant issues for the procurement industry, especially due to the reduced demand and heightened costs across the market. Therefore, it is no surprise that conversations around digital transformation have risen in prominence over recent years.
According to research, one of the key considerations of procurement professionals in 2023 is pursuing procurement digital transformation and modernising the landscape, improving organisations’ ability to adapt quickly to changing market conditions.
This focus is represented by the growth of the global procurement software market, which is projected to be valued at $9.5 billion by 2028. As transformation initiatives take centre stage in streamlining business procurement processes, procurement professionals aim to achieve a digitalisation rate of 70% for both strategic and transactional processes.
What is procurement transformation?
What exactly does this transformation process entail? The core components include:
● Organisational design
Refers to the way that procurement processes are organised, from internal activities to external relationships.
● Process optimisation
Refers to the process of automating repetitive functions and utilising data analytics for decision-making.
● Category management
Refers to the practice of categorising specific goods and services for spend optimisation.
● Supplier relationship management
Refers to the process of maintaining good supplier relationships to ensure communication and collaboration.
Do you need procurement transformation?
Transforming your procurement processes may be a challenging task to undertake. However, if you feel your business could benefit from the following, it may be worth considering implementing transformation initiatives.
Reduced costs
A streamlined procurement process helps you identify cost-saving opportunities easily, significantly reducing spend on goods and services which in turn supports the business bottom line.
Enhanced efficiency
Digital tools can be used to automate repetitive tasks and make certain procurement processes such as PO and invoice approvals much faster, enhancing the efficiency of the procurement process.
Improved quality
Data-driven decision-making informed by advanced data analytics and improved quality control standards can help businesses enhance the quality of goods and services that are purchased.
Increased transparency
Automation increases transparency as it improves the tracking and monitoring of activities within the procurement process. This also helps cultivate trust with internal and external stakeholders.
Motivated employees
Digitalisation eliminates repetitive mundane tasks that can demotivate employees and instead assigns strategic, high-value tasks to them, which can keep them motivated in the long term.
What are some cases of successful transformation of procurement?
Some instances of organisations successfully transforming their procurement processes are provided below:
Unilever
Unilever is a consumer packaged goods company that maintains a huge global presence. The company leveraged procurement transformation tactics to save over €1 billion in annual procurement expenses and acquire 100% visibility into the supply chain in 2020.
Siemens
Siemens is a multinational automation company that has also implemented procurement digital transformation initiatives by leveraging digital technologies and cross-functional teams, which resulted in 30% procurement savings and 20% supplier satisfaction in 2022.
Starbucks
Starbucks, the multinational coffeehouse company, carried out its transformation by developing supplier management programmes, saving over $300 million in annual procurement savings and improving supplier performance by 15% in 2021.
Set your business up for success by transforming your procurement processes today
With the heightened use of technology in all aspects of business and the volatility of the economic landscape, the need for businesses to adapt to changing market conditions becomes vital.
Procurement transformation is an initiative that should be taken by all businesses that engage in procurement activities to future-proof their operations and ensure business continuity.
