In business, procurement is the bridge that connects a company’s internal and external processes to effectively empower their operations.
From driving communication between suppliers and financing teams, to collaborating with customer service representatives, procurement is far-reaching and critically important. However, the modern processes of many companies are falling behind the competitive curve and causing them to lose profitability.
In short: New technologies are pushing the potential of procurement to higher levels, and businesses must adapt to take advantage. But this means more than just implementing new tech, like digitization, into procurement processes.
For procurement to thrive, companies must shift their strategic and operational goals to match this new age of industry standards.
Biggest Problems in Procurement
Procurement is the most important interface between a business and the outside world, but is often just treated as an administrative back-end, which doesn’t get nearly enough attention.
Because of this, many organizations are seen approaching procurement with a reactive mindset rather than a proactive one. This is usually due to companies keeping their procurement people stuck performing manual tasks, rather than adopting the modern digital standard.
1. Operational Challenge: Reactive Procurement
There’s a slew of reasons why businesses who still perform manual procurement processes aren’t accurately predicting their needs. To name just a few of them:
Companies who are still purchasing external market reports (rather than generating their own through digitization) receive data that is months out-of-date by the time of publication. On top of that, the work volume associated with procurement is growing larger as industries evolve. Even worse,countless internal company teams remain disjointed, operating in isolation even though their processes directly overlap with each other.
Overworked and relying on dated information, a lot of additional business inefficiency is created through the lack of communication between suppliers, marketers, and accountants who are all trying to play catch-up while unsure of what’s going on within each other’s operations.
2. Strategic Challenge: A Frequent Fear of Automatized Solutions
All of the above problems are easily addressed through the implementation of digitized procurement and the automated processes that digitization enables. However, many companies refuse to pursue automatization, and even when they do, lots of them don’t implement those processes effectively.
For one thing, there’s an existing fear that automatization means people will lose their jobs, but that isn’t really the case. If anything, eliminating the need for human hands to perform mundane tasks increases employee satisfaction and strengthens their company roles (but more on that in a moment).
Secondly, even if the top-level management of a company does understand the benefits of automatization, odds are their employees don’t. It’s the higher-ups who set the tone when talking about automatization, but often management personnel underestimate the need to create clear expectations for their teams before the digitizing process even begins. Because they don’t take the time to quell common employee concerns, fears arise and productivity is lost through unfocused workers who are too busy wondering if they’re losing their jobs.
3. Operational and Strategic Challenge: No End-to-End Planning
The final problem that plagues procurement processes involves companies who do adopt digitization but do so without an end-to-end strategy.
There are companies out there spending millions upon millions on digital applications, like self-service portals and internal social networks. But many of them do so without a complete plan in place, acting simply because they know digitization is important for the future.
While they aren’t wrong in that regard, those companies are proceeding too rashly. Blindly moving toward digitization without a clear strategy only ends up eating away resources without providing the desired results.
Solutions: Digitizing Procurement
Procurement processes entered the realm of information technology a little over a decade ago with tools such as automatic invoice control. The tech has expanded ever since, and with the introduction of big data, the capabilities of digital procurement are skyrocketing.
1. Operational Goal: Digitization to Bring Everything Together
Big data is huge right now, and it’s dramatically influencing automatization along with all other kinds of business operations. When it comes to procurement, big data is letting companies get the most out of their daily functions, especially when it comes to securing better prices.
Before, marketers, suppliers, accountants, and members of every other department operated largely in isolation from each other. One person would be assigned to do the ordering of resources, while another person did the data entry of orders for the suppliers, and so on. The result of these separated tasks is a disconnect in operations, which creates ample room for inefficiencies to arise.
But by combining all procurement processes under a single digital system, this separation effectively disappears. Communication and transparency are maximized, waste is cut away, and operational costs are reduced. Plus, with the capability to cross-analyze the data of all departments, new productive opportunities will reveal themselves across the board.
Simply put, when removing people from isolated points of an organization and bringing them together, within a few months companies will have fostered more connected work crews that provide much better results.
2. Strategic Goal: Providing Employees the Room for their Full Potential
As mentioned earlier, automatization is a benefit for general employees, not a job-losing risk.
When a company implements digitization and automated processes, employees no longer need to perform typically redundant daily tasks.Instead, their time is freed up to complete more important work that requires a human touch. After all, for any project to be most successful, the people behind it must be fully applied.
This means that companies aren’t looking to replace employees through automatization. Rather, they’re allowing them to focus their attention on more sophisticated challenges suited to their personal expertise. Those employees can then give their full efforts on the projects that make a difference, instead of wasting time on mindless work.
In these processes, automatization provides employees the time they need to personally visit with partners to gain valuable first-hand information.Such visits allow procurement personnel to better understand their customers,foster closer partnerships with clientele, and anticipate their future actions.
In the end, supporting these mindful efforts is what separates the highest performing companies from those who lag behind the rest.
3. Operational and Strategic Goal: Keeping an Open Mind to Stay on Top of Tech
Continuous study, and a constant eye on the technological horizon, is necessary to take full advantage of everything digitization offers.In other words, top-level management cannot afford to get lazy, or they better move over for those who aren’t.
It’s evident from the companies investing incredible sums into digitization, without good results, that throwing money in an unclear direction and simply going through the motions isn’t enough for success. A well-defined plan, and thoughtful implementation that accounts for the structure of every department within a business’ operation is required.
To reinforce this point, just look at how Asian nations are experiencing the most success in terms of digitization. The reason why is easily traced back to the relative youthfulness of the continent’s employees. When compared to the U.S.and Europe, many industry professionals from countries like China, Vietnam, and Cambodia are up to 20-25 years younger than their western counterparts.
When considering how quickly business technologies are developing, the decision to adopt modern processes should be simple. But the simple truth is, a 45-year-old manager will usually show more hesitance toward implementing new technologies than a 25-year-old manager who grew up alongside similar kinds of tech.
All-in-all, this phenomenon highlights the key importance of company leaders’ willingness to remain open minded and cope with the ever-changing state of their industry. Otherwise, they will certainly be left in the dust by their more technologically savvy competitors who do.