Six Reasons Why Digitization is Essential for Operational Procurement

12.06.2020

Topic: Usability and User Experience | Procurement | Skills Shortage | Digitalization

Digitization is now firmly rooted in the strategy of many companies, and procurement departments are no exception. Digitization is not an end in itself, however; in fact, the opposite is true. In this blog, we explain why digitization adds real value to operational procurement.

1. Digitization boosts efficiency

Chief procurement officers are evaluated not only on their ability to secure optimum prices and conditions when purchasing products and services. They are generally also expected to boost efficiency within the procurement department. This can be measured by indicators such as the number of purchase orders per procurement officer, or simply by cost per purchase order. According to a recent study by the German Association for Materials Management, Purchasing, and Logistics, the cost per purchase order tends to lie somewhere between $68 and $140. This wide range clearly suggests that there is room to optimize and to cut costs.

Digitization of operational procurement processes can make a particularly valuable contribution here. For example, the time procurement officers need for a purchase order is significantly reduced when data is automatically transferred from request forms to the ERP system. Efficiency increases when data no longer has to be manually transferred.

2. Digitization provides real-time information

Procurement departments are increasingly required to provide information and data in real time. Digitization is the only way to meet this requirement. Not only can digitization speed up or indeed completely automate individual stages of processes, it can also eliminate wait times. For instance, digital processes mean that all documents and information are made immediately available, and staff no longer have to wait for the internal mail to arrive.

3. Faster processes lead to more satisfied stakeholders

Speedier processes result not only in an ability to provide prompt, up-to-date information. When operational steps are performed more rapidly, orders can also be placed more quickly, which in turn means that employees receive what they need faster. But speedier processes are also attractive for suppliers, who no longer need to query protracted turnaround times. Digitizing processes thus ultimately helps boost satisfaction among both internal and external stakeholders.

4. Digitization yields business insights

Digital processes are far easier to monitor and evaluate than analog ones. This can enable procurement departments to both optimize their processes and provide other departments with valuable business insights.

For instance, supplier reliability in relation to delivery times is extremely important to departments further down the supply chain, particularly those concerned with key raw materials. By providing information about supplier reliability, procurement departments can shift from being service providers for other departments to true business partners.

5. Digital processes lead to higher acceptance

Digital and browser-based apps offer better usability. They tend to be simpler, more intuitive, and more user-friendly than interfaces such as the one for demand creation in the traditional SAP ERP-GUI. They are certainly far more convenient than filling out paper request forms.

But user-friendliness and usability are more than just a nice-to-have side effect of digitization. Digital processes that provide a good user experience will actually be used. This leads to less “maverick buying,” i.e. the purchasing of goods and services outside procurement departments. This is in the interests of all procurement managers, who are often evaluated partly on their ability to minimize this.

6. Only digital processes will make a good impression on digital natives

Procurement departments are not only under pressure to boost efficiency. Another growing issue is staff shortages. It is becoming increasingly difficult to find qualified candidates to fill positions in operational procurement, in particular.

This makes staff satisfaction all the more important. By relieving staff of repetitive manual tasks, digitization can lead to more motivation among employees. In addition, it offers the opportunity to standardize. With a digital workflow solution, requests arrive in a single, standardized format, rather than being received in paper form, by e-mail, by telephone, and even verbally. This simplifies procurement officers’ work considerably. And new recruits who belong to the “digital natives” generation take it for granted that they will be working with digital solutions.