E-Procurement solution

Increase your ROI thanks to digital purchasing technologies

Published By
Olivier Audino
Procurement strategy

How to double the ROI of your Purchasing Department? Digital technologies

The health crisis has led companies to rethink their various processes, including the purchasing process. Having become a lever for improving company performance, the purchasing department had no choice but to adapt to the economic situation by opting for digital technology, procurement. This innovation will change practices within the purchasing department by bringing agility to processes and by increasing the performance of the function through the use of digital tools. The digitalization of purchases can double the ROI of your Purchasing Department. This is the result of a survey carried out by Hackett Group in 2016 and reported by the MH&L blog. What is digitalization purchases? How the digital technologies can help the procurement department optimize its results?

What is the digitalization of purchases?

e-purchasing, e-procurement, e-sourcing... these are all words that evoke The digitalization of purchases. The latter is defined as the dematerialization of the purchasing process, or the digitization and automation of purchases made on the Internet. It comes into play from the selection of products or services, via a digital catalog or e-catalog, to the selection of suppliers or e-sourcing, through digital ordering or e-ordering, e-invoicing or e-invoicing and online payment.

Les digital purchasing technologies seek above all to streamline and centralize the management of purchases and supplies through the use of innovative digital tools. As a result, they optimize the time and resources needed to make purchases. They also make it possible to facilitate decision-making and communication between the various stakeholders. Unlike e-commerce, e-purchasing uses a closed supplier system. In other words, the platform is only accessible to registered users.

E-procurement software, also called P2P, generally offers functionalities, such as supplier management, inventory tracking, and automated order management.

Digitizing purchases can double ROI according to MH&L

To highlight the benefits of digitalization of purchases on the performance of the purchasing department, the MH&L blog refers to a Hackett Group study carried out in 2016. The latter gives surprising results: a well-equipped Purchasing Department has operating costs that are 18% lower than average and operates with 28% fewer staff.

The miracle recipe? The use of digital technologies Purchase that offer quality services, reduce errors and provide functionalities that allow staff to be freed up for higher value-added tasks.

Optimization is therefore the key to success. But how is that possible in practice?

Chris Sawchuk, procurement research manager, explains that major accounts are now focusing on digital purchasing technologies, including the Purchasing Cloud, mobile platforms and all the digital tools that can generate business in order to change the way Purchasing teams work, especially in terms of forecasting, schedule management, relationships with suppliers, while keeping an eye on the customer experience.

The study reveals 5 winning strategies for these organizations:

  • The appropriation of digital tools
  • Reallocation of resources in order to create added value
  • Making decisions based on analytics
  • The focus on a service adapted to customer expectations
  • A training effort specific to the Purchasing function

The “Amazon effect” on purchases significantly impacts the expectations of employees, and in particular suppliers. And the results are there:

  • An 18% reduction in labor costs (the highest item in terms of Purchasing costs)
  • An increase in subcontracting by an average of 13%,
  • A return on investment of 9.5 compared to 4.6 on average for other businesses
  • A better distribution of tasks within the purchasing function for optimal performance: a large majority of staff are assigned to tasks with higher added value, such as supplier sourcing, developing purchasing and planning strategies... Only a small handful of employees are responsible for operational tasks and compliance management. Only a small handful of employees are responsible for operational tasks and compliance management.
  • With regard to investments in digital purchasing technologies, companies are investing in particular in new applications and infrastructures based on the cloud (P2P, e-sourcing, risk forecasting, expenditure analysis, etc.). This goes hand in hand with a base of employees and consumers who are increasingly adept at new technologies and new business models.
  • 23% more expenses to train Buyers in tools, but a 71% decrease in the cost of processing Purchasing projects and orders
  • Continuous and selective outsourcing of tasks such as supporting procurement systems, supporting suppliers, and collecting market information to acquire more expertise and respond to business needs with agility.
  • Better efficiency in the way the purchasing function works: a 2- to 3-fold reduction in the need for post-order transactions (to resolve disputes over the price, quality and quantity of the order). The cost gap can be in the millions of dollars.
  • The icing on the cake: the reduction in turnover by 50% for the Purchasing and Procurement teams.

What are the motivations for companies to switch to the digitization of purchases?

There are four main motivations for businesses to adopt new digital purchasing technologies :

Cost reduction

Faced with the rise in the cost of raw materials, reducing costs has become an imperative for all businesses, especially for the procurement function. To enable the company to remain competitive in the face of an unstable environment, buyers must look for effective and sustainable solutions to reduce costs.

In addition to this problem of rising prices, there are other problems, such as shortages, inflation and the decline in activities in certain sectors. All this motivates purchasing departments to move to The digitalization of purchases.

Digital transformation

Digital transformation no longer concerns only large companies today. Small and medium-sized businesses (SMEs and ETI) also have an interest in accelerating their digital transition to take advantage of its many advantages. Among them is a higher ROI in the short, medium and long term. One of the ways to start this digital transformation is to streamline procurement processes by adopting web technologies.

The selection of suppliers

Until a few years ago, supplier sourcing was not on the list of priorities for companies. However, observers have noted a reversal of the situation in recent times. They have seen a surge in the desire of companies to do quality sourcing to meet their needs for transparency, sustainable development and the search for competitive advantage. To achieve this, procurement departments must focus on finding strategic suppliers who share their values. La digitalization of purchases makes it possible to streamline and simplify the process of selecting suppliers or e-sourcing in order to reduce supplier risks and increase company margins.

Better risk management

Supplier risk management is a major challenge for the procurement function. By centralizing the management of purchases via an online platform, the digitalization of purchases or e-procurement aims to reduce these risks. Indeed, by automating the purchasing process, this practice reduces the number of actors and errors.

For the purchasing process to be fully digitized, P2P or Procur-to-Pay solutions, such as Sourcing Force, complete the list of digital purchasing technologies.

Traditional purchasing process VS digitalization of purchases

Here are the main differences between a traditional purchasing process and a digital purchasing process:

Traditional buying process

Before the digitalization of purchases, the buying process was long and complex. The buyer selected the products from a paper or pdf catalog. He then wrote and sent an authorization request printed or by email to his line manager. After obtaining the agreement, he sent the request to the procurement department for a price check. The latter then prepared the order form. The latter must be signed by the purchasing manager and then sent by email to the supplier. After the order was delivered, it was still necessary to check that the invoice corresponded to the order form. This whole process is synonymous with wasting time and making mistakes.

Digitized purchasing process

The digital purchasing process starts with the selection of suppliers or e-sourcing. This makes it possible to create a personalized catalog that gives a detailed description of products and services: prices, delivery times, etc.

To place an order, the buyer will just have to enter the platform by identifying himself. Once on the catalog, he must select the products and quantities he wants. The order form is then automatically generated according to the approval procedures predefined internally.

For their part, suppliers, having their dedicated portal, can download invoices. Thanks to artificial intelligence or capture tools, a reconciliation between the invoice and the order form is carried out.

By simplifying the workflow, the digitalization of purchases brings numerous benefits to businesses, resulting in greater performance and greater flexibility.

Digitization of purchases: what will the buyer of tomorrow look like?

The buyer's missions have continued to evolve since the 1850s. This profession is now changing at the pace of digital transformation. Thus, we distinguish the traditional buyer from the buyer of tomorrow or digital shopper.

The latter entrusts all the repetitive tasks as well as those related to the order to e-procurement. He can then devote himself to developing the procurement and procurement strategy, which is a more valuable task. By doing so, it can improve the performance of the procurement function, and the company as a whole. THE digital shopper then becomes a real asset for the company.

Thanks to the data provided by the software of digitalization of purchases, it can be much more proactive and predictive. These are all qualities that will allow it to have a significant competitive advantage.

The essential steps in the digital transformation of the purchasing department

The introduction of digital technologies in procurement goes hand in hand with a reorganization of processes and services. This starts with team training and the acquisition of new skills internally. The recruitment of profiles that can ensure the training in the digitalization of purchases can thus be considered in order to facilitate the transition.

Then, innovative procurement management tools must be adopted. In order for them to provide optimal results, they must above all meet the challenges of the purchasing department while being easy to use and quick to install.

Innovation combined with The digitalization of purchases also makes it possible to improve relationships between suppliers and purchasing departments by optimizing exchanges and streamlining the flow of information. Purchasing departments can then improve their search for suppliers and create a network of strategic partners through e-sourcing.

With a turnover of 6 to 7 billion euros, the market for e-procurement solutions continues to evolve today within organizations. These digital tools at the service of the purchasing function, such as e-sourcing or purchase-to-pay, are currently being deployed massively within companies. They allow purchasing departments to improve their performance and improve their ROI by reducing their costs.

Ready to move on to the process of digital shopping ? Discover our P2P solution, Sourcing Force, a complete and customizable integrated Procure-to-Pay suite. Thanks to its à la carte modules, you decide where to start and which tasks to digitize.

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