It’s a challenging time to be in the procurement field. COVID-19 proved that our supply chains are weaker than we thought and highlighted our need for real-time technology tools to stay on top of volatile markets. Procurement, however, has lagged behind other fields, with a slower transition to cloud technology and digital transformation. What is the state of digital transformation in procurement today?
What is digital transformation in procurement?
Purchase Control defines digital transformation as “a comprehensive embrace of digital technologies by a business or organization.” Like digital transformation in other fields, the goal is to improve efficiency through automation and real-time cloud enablement for better business decision-making.
While digital transformation in the procurement field uses advanced analytics and real-time data for better organizational value, we’re not there yet. True digital transformation will eventually move beyond e-procurement to use AI automation to transform efficiencies and workflows.
Traditionally, logistics and procurement teams have been slower to discard legacy platforms and embrace the digital revolution. However, we expect the COVID-19 shake-up, in addition to the data we’ve captured on the value of new technology tools, to accelerate the movement from traditional operating models toward more of a strategic role in most organizations.
A recent report showed that best-in-class procurement teams can save 70% or more per order by embracing next-generation digital tools. But only 32% of procurement teams have created the implementation roadmap for their digital technology tools. What are the challenges organizations face when attempting to modernize their procurement tools and workflows?
Challenges of achieving digital transformation in procurement
By nature, procurement is squeezed between key players in an organization. Stakeholders include a variety of customers from the C-suite to external vendors. With most organizations focused on traditional methods for purchasing, from Excel spreadsheets to faxing, many of these stakeholders will likely be heavily invested in “the way things always were.”
Yet 68% of CPOs report they are, at minimum, automating procurement with the latest IT tools. Some of their initiatives also include the goals of better data quality, improved compliance, and lowered costs. However, of that 68% only 15% are using AI and machine learning, 3D printing, or some of the other latest tools. ProcureCon Indirect reports, “Many organizations are taking a wait-and-see approach before adopting emerging technologies.” Budget pressures and even a lack of fresh talent may be holding organizations back from the more aggressive pursuit toward digitization. But without a strategy to overcome these challenges, many organizations will flounder in their march — or crawl — toward digital transformation in the procurement space.
What are the trends driving digital transformation in procurement?
We believe procurement, like IT itself, is evolving from a back-office function to a more strategic and innovative driver of the business. SourceToday reports five digital procurement trends that will continue to impact organizations this year. For example:
- More organizations will create digital-first strategies that impact procurement. Embracing evolving AI tools is inevitable; competition alone will dictate these more sophisticated workflow tools.
- Companies will seek more SaaS solutions and move more legacy platforms into the cloud. Organizations that labor under an ERP will likely decouple some functions and store more data in the cloud.
- Organizations will grow more agile and accept that change is continual. This will increase the evolution of the procurement office and change not only processes but also cultures.
- Companies will develop collaboration between procurement and data science. While this was an unlikely scenario in the past, the future will marry procurement to the capture and analysis of real-time data. This is the only way organizations will continue to compete in increasingly volatile markets.
- Robotic process automation (RPA) will become more common, along with other types of automation driven by rules-based logic and machine learning.
The challenges we’ve felt in procurement due to COVID are not done with us yet. For many organizations reluctant to update their digital tools, it will be just one of the latest significant drivers of an IT transformation. We anticipate the next five years will bring unprecedented change to a field that is almost notorious for its embrace of legacy applications. There are signals all around us that the times are changing in the procurement field.
In the face of this change, isn’t it good to know that you have an ally in the Windsor Group? We help organizations digitally transform and adapt their processes, cultures, and workflows. Contact us today.