Digitalization of Procurement: Expectations vs. Reality

Digitalization is upon us, and the world has accepted that industries need to adapt to the changes to thrive. Those who stubbornly refuse to transition to digital tools and methodologies could be left in the dust as their competitors take advantage of the conveniences and efficiencies that the digitalization of procurement processes brings.

The assumption is that many businesses and organizations are actively digitizing their procurement processes. The truth, however, is that companies and organizations in the country have been slow to convert their manual processes to paperless SOPs.

What’s the Status?

The Deloitte Global Chief Procurement officer Survey 2018 gives weight to this observation. The report reveals that only 18 percent of procurement leaders have a digital strategy; only 6 percent believe that the digital processes they currently have are enough to increase their efficiency in delivering objectives and improve their enterprise value, and an even smaller 4 percent think procurement can make a significant impact on their overall digital strategy.

Another Deloitte report reveals that although organizations are investing more in innovative digital solutions, only 14 percent of chief procurement officers have a clear digital strategy aligned with their company’s needs.

These results suggest that although CPO’s and C-level officers are aware of the importance of digitalized procurement, not all have the resources to make it happen. As a result, the application of new technologies is slower than is expected and necessary.

The outlook remains positive, however. Digital procurement is still in its infancy, and organizations are putting together resources to fund their respective digital procurement infrastructures.

The Possibilities in Digital Procurement

With digital solutions, data becomes more accessible to people involved in procurement and supply chains. The process becomes streamlined given the improved connectivity, and the inclusion of new technologies (e.g., infrastructure and wearable sensors, expanded cloud storage and collaboration, cyber tracking, virtual reality, and spatial analytics) increases efficiency rates.

There are more possibilities in digital procurement. Major companies like Amazon and PaaS (platform as a service) providers like Steve Apps, for one thing, are already providing platforms that can make it easier for procurement teams to digitize their processes and execute vendor risk management (VRM) seamlessly.

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Organizations can milk procurement software and technology further if they customize solutions and improve on generic, off-the-shelf products.

Moving Forward

CPOs and executives have to remember that digital updates on existing processes could take weeks or months to show viable results — maybe even years. It is a long-term investment for which they would need to be patient. It’s especially true for companies that are looking to reduce costs while improving efficiency and output quality.

What’s important is to start on the digital track, and to do it as soon as possible. Deloitte recommends that organizations start small. They can choose one or two new strategies, preferably those that can be implemented with ease. Organizations must also act quickly and maximize the momentum they gain with their initial foray into digitalized procurement. Finally, they need to think big, remember the lessons learned, and make better decisions moving forward. With this game plan, organizations can make their expectations a reality.

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