How to Gain an Advantage in Challenging TimesStrategic Sourcing
For procurement and supply chain professionals, the biggest takeaway from 2020 is that no matter how hard you try, you cannot predict the future. COVID-19 disrupted supply chains on an unprecedented scale, and businesses became much more reliant on procurement teams to help mitigate the impact.
This was easier said than done for some, with a lack of digitalisation in procurement hindering teams’ ability to support the business. However, for digitised procurement functions, COVID-19 caused less disruption, with a McKinsey study finding that businesses who had moved further and faster before the crisis significantly outpaced those who took a reactive approach.
The importance of procurement digitalisation goes beyond navigating the impact of COVID-19. As businesses look to restoring growth, it can help them restore growth and gain a competitive advantage by enabling unique business processes, and more effective collaboration with suppliers and internal stakeholders, while eliminating manual processes that can hamper productivity. This can create new revenue opportunities, unlock innovation and improve profitability. But, according to Ivalua’s latest report, the state of digitalisation in procurement is lacking.
No progress on digital transformation
In today’s turbulent landscape, businesses must digitally transform procurement so they can identify opportunities to innovate, collaborate and grow revenues. Many already know this, with 88% of UK businesses saying that digitalising procurement can help them to gain a competitive advantage. While many UK businesses recognise the need to transform, most still have a long way to go. On average, UK businesses have digitalised just 43% of their procurement processes, which is making it difficult for them to gain a competitive advantage.
Among the most digitalised tasks are transactional processes like invoicing (55%), purchasing (42%) and budget management (33%). But even these numbers show significant improvement is needed, as these manual, repetitive tasks are a constant drain on employee productivity and prevent spending time on more strategic objectives.
This failure to digitalise is having a big impact. Eight-in-ten (81%) UK businesses say it is preventing them from collaborating with suppliers and internal stakeholders, while a further 83% believe it is preventing them from innovating and executing on new revenue streams and opportunities.
More than two thirds (67%) of UK businesses also say the lack of digitalisation limits their ability to gain rich insights into spend and suppliers. Given that supplier visibility is vital to innovation and to identifying revenue opportunities, the slow pace of transformation in procurement is no longer something businesses can afford to leave unsolved.
Digitalisation is no longer optional
The risk is that digital laggards will be outstripped by digital-savvy rivals who leverage their spend and suppliers as a strategic asset to deliver value, rather than a cost to manage. Over the coming years, UK businesses need to move quickly to transform procurement and ensure they are not left behind.
To do this successfully, UK businesses need to take a smarter approach to procurement and move away from managing processes over email, phone, or paper, to instead capture everything digitally, including collaboration with suppliers and internal stakeholders. This will help businesses identify opportunities to innovate, collaborate and grow revenues, giving them the ability to build products and services that differentiate them.
By digitising procurement, businesses can free capacity for more strategic initiatives, improve decision-making with a single source of truth and actionable insights, and scale and improve the effectiveness of collaboration. With this solid foundation, businesses can unlock the true value of their spend and suppliers to create a competitive advantage, helping them to soar past digital laggard competitors.