Procurement’s potential to deliver strategic wins for the business is being hampered by slow adoption of digital tools and platforms.

Arnaud Malarde, Smart Procurement Expert at Ivalua, explores the need for procurement departments to digitise their operation in order to meet the evolving demands of the business. 

Over recent years, increasingly connected supply chains have exposed businesses to a wide range of geopolitical risks. As a result, the procurement department has become instrumental in helping businesses to tackle their greatest challenges. Whether it’s reducing supply shortages, curbing inflationary impact, or mitigating disruption from global black swan events – a high functioning procurement department is more important than ever.

But the procurement function is currently being held back by a chronic lack of digitisation. Research shows that procurement leaders say less than half (47%) of current procurement and supplier management processes have been digitised. Organisations are also wasting more than a fifth (22%) of their time dealing with manual or paper-based procurement processes. Half of procurement leaders (50%) recognise the issue, saying the rate of digitisation within procurement is too slow. Every organisation needs to evaluate their procurement digitisation progress, and ensure transformation is a top priority.

Procurement can help organisations react to future challenges, and ensure the business is on track to achieve ESG standards. But for this to happen, digitisation is essential.

The old ways are not always the best

The time to digitise processes was yesterday – as it’s already having a serious impact on the businesses which haven’t. A lack of digitisation wastes time through drawn out, manual tasks. Not only this, but it also limits organisations’ ability to make quick, informed decisions regarding their suppliers. After all, if procurement teams are bogged down in low-value tasks, and can’t access information quickly through digitised procurement solutions, how can they be expected to make informed decisions quickly?

Inflation currently remains high and for most, the economic outlook is uncertain. But, a lack of digitisation is also preventing organisations from tackling rising inflation and spiralling costs. Procurement teams need granular visibility into current supplier data. Without it, it’s easy for inefficiencies to pile up. As a result, businesses miss opportunities to identify savings through initiatives like early payment terms.

What’s more, slow digitisation is making it almost impossible to attract and retain the best talent for 41% of procurement leaders – creating more disruption for procurement teams in the long run, as they lose talent to more tech-savvy competitors.

Businesses need to act fast to utilise the full potential of digitising procurement processes. This will help drive savings and improve efficiency. Not only this, but it will also reduce risk at a time when curbing needless spend is crucial.

Don’t let AI pass you by

Businesses that remain reluctant on procurement digitisation are putting themselves at a disadvantage today. Not only that, but they are sabotaging their efforts in the future as well. By failing to digitise processes, businesses will be unable to make use of emerging technologies further down the line.

AI can be the catalyst for procurement transformation, with clear use cases for automating spend (re)classification, supplier deduplication databases, contract risk analysis, and invoice data capture. In fact, 63% of procurement leaders say they have already implemented or plan to implement AI or machine learning technology.

But to harness these technologies in full, it’s important to build a solid data foundation. To do this, 85% of organisations revealed they have implemented or are planning to implement data analytics within the procurement and supplier management function. But just 30% said they are “very confident” in the quality and accessibility of their supplier data when it comes to supporting effective procurement. Poor-quality data will limit the insights produced by AI and prevent organisations from achieving its full benefits. Organisations need access to actionable data insights into their supply chain processes.

Achieving this starts with digitisation. Businesses must take a smarter approach to procurement, which builds a solid and reliable data foundation that will inform decision making. This will help reduce the risk of ‘garbage in, garbage out’ and ensure organisations are on track to make the most of any emerging technologies.

AI-dapt or perish

To ensure their place in the future, businesses must digitise now. This will not only be fundamental to removing the tedium of manual, paper-based tasks – but also to put them at the forefront of the procurement AI revolution. To do this though, they must walk before they can run, taking a smarter approach to procurement that builds a solid data foundation for transformation.

After all, those who can transform quickly will be able to spend more time on high value tasks and improve visibility into suppliers to reduce risk or identify opportunities. This will help them catch up with other businesses and give them the edge over competitors.

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