As companies continue to invest in digitization, procurement departments may be falling behind the curve on the technology front. If this trend continues, buyers may miss out on the increased efficiencies, productivity gains and other benefits associated with investments in innovations like cloud-based software, artificial intelligence (AI), machine learning (ML) and data analytics.
According to a new Ivalua survey of 850 procurement leaders in the UK, US and Europe, more than half (53%) of procurement and supplier management processes have yet to be digitized. As a result, procurement teams say they’re wasting more than one-fifth (22%) of their time each year dealing with paper-based or manual processes.
These paper-based and manual processes are inefficient, error-prone and costly. For example, it takes time and effort to manually process invoices and/or approve purchase orders (POs). And data entry errors are inevitable when employees have to manually enter—and re-enter—data into spreadsheets and databases.
Unable to Keep Up with Constant Change
Responsible for acquiring the goods and services that an organization needs to operate and serve its customers, procurement departments need modern tools, software and applications that help them save money, assure high levels of quality, manage risk and stay compliant. Yet the Ivalua study reveals that half of procurement leaders (50%) think that the rate of digitization within procurement is too slow, while 47% say existing procurement systems can’t keep up with constant change and deal with market and economic uncertainty.
This is having a major impact on procurement's ability to work on strategic tasks, as a lack of digitization:
- Limits organizations’ ability to make quick, informed decisions regarding their suppliers (47%).
- Prevents organizations from tackling rising inflation and spiraling costs (46%).
- Makes it difficult to attract and retain the best talent (41%).
“Organizations are wasting millions in staff time every year on manual processes. This is bogging teams down in low-value tasks, limiting their ability to focus on more strategic priorities,” Ivalua’s Alex Saric said in a press release. “Given inflation remains high and the economic outlook uncertain, it’s never been more important to digitize procurement processes, and free up teams to tackle these challenges.”
Rolling Out New Digitization Initiatives
New technology is disrupting every corner of the business world, and procurement is no exception. “Digital transformation in the procurement process can cut costs, save time and better inform strategy and decision-making,” VISICHAIN states in “8 Digital Transformation Trends in Procurement.” “The central goal of procurement is still to protect and improve profit margins by getting the best price and quality for goods, but technology is making the process more efficient and cost-effective. “
Some of the digitization opportunities for procurement include AI-enabled software and robotic process automation (RPA) technology that can handle tedious tasks, minimize human intervention and avoid costly errors. Advanced data analytics reporting helps decision makers improve procurement strategies, while solid cybersecurity strategies help safeguard sensitive personal and financial information.
Procurement professionals are also exploring technology that automates tasks throughout the procurement process—from processing the company's demand to approving supplier payments. They’re also using technology to manage inventory. “Traditional methods in assessing demand for procurement, with spreadsheets and checklists, [leave] too much room for human error,” says VISICHAIN. “Cutting-edge inventory management systems can eliminate the error and ensure the numbers in your software match your physical inventory count.”
More than 50% of procurement leaders may be concerned about their digital transformation progress, but that doesn’t mean they’re not making digitization a priority within their organizations. In fact, the new Digital Payments: Modernizing Procurement Processes report from PYMNTS and Corcentric says that digitization procurement is “top priority” for most manufacturers and retailers right now.
The study found that 31% of retailers are investing in procurement systems and 53% plan to, whereas 42% of manufacturers are already investing in upgrades to their procurement technology, with another 44% formulating these investments. It also found that 66% of retailers and 59% of manufacturers believe modernizing their business processes is the most important reason to invest in digital procurement technology.