Developing a Digital Procurement Roadmap

Procurement transformation is one of the top priorities for organizations worldwide. It became a critical initiative for companies by providing benefits such as higher efficiency, transparency, and cost savings. 

Thus, organizations wanting to gain a competitive edge and optimize procurement must consider digital transformation. In fact, a study conducted by Hackett suggests that over 84% of respondents acknowledge that digital procurement will help to improve procurement efficiency. 

In this article, we will explore everything regarding the digital transformation of procurement, from what it is to its benefits. We will also unveil the step-by-step process for creating a digital procurement roadmap and implementing it within the organization. Well, let’s dive into it! 

What is Digital Transformation in Procurement? 

Digital transformation in procurement is a strategic initiative aimed at optimizing procurement processes. Essentially, it is about leveraging technology and e-procurement systems to achieve higher efficiency and productivity by automating procurement processes. 

Examples include automating approval workflows, automating PO and invoice matching processes, and automating inventory management. For instance, you can set a certain threshold regarding inventory levels for a specific product. When the stock drops below the threshold, an automated workflow for placing a new PO will be triggered. 

In fact, current priorities around procurement departments are cost reduction (69%), digital transformation (51%), and strategic supplier sourcing (39%). All of these are interconnected and possible with digital transformation. 

Digital procurement transformation requires a reevaluation of current processes and the development of a roadmap for the successful implementation of the digital procurement system. 

Benefits of Procurement Automation 

The survey conducted by PWC suggests that procurement/purchasing departments have ambitious goals regarding procurement digitization, aiming to digitize 70% of processes by 2027. 

Procurement automation provides a variety of benefits to the organization and procurement teams. These benefits range from improved efficiency to cost-saving opportunities. These essentially are the main motivating factors behind the goal of digital transformation of procurement. 

Improved Value 

Digital procurement contributes to strategic value creation. By providing tools for supplier relationship management and enhanced collaboration, procurement software allows for the alignment of procurement activities with organizational goals. 

Companies can build stronger relationships with suppliers and make informed decisions regarding further collaboration. 

Increased Efficiency 

According to the report by PWC, 57% of companies are motivated to focus and prioritize digital transformation of procurement due to process optimization capabilities that lead to increased efficiency. By streamlining processes, digital procurement helps eliminate bottlenecks and speed up cycle times. 

Procurement automation minimizes manual processes, freeing employees' time for more strategic business activities. Also, it contributes to fewer errors that can potentially result in unplanned business expenses. 

Cost Reduction Opportunities

Digital transformation provides a variety of cost-saving opportunities for procurement departments. Around 47% of companies aim to achieve cost reduction via digitized procurement. 

A good procurement system provides 100% spend visibility and robust analytics that allow organizations to gain valuable insights into the performance of procurement processes. For instance, you can track business spending patterns and identify areas for cost savings. Another way to reduce costs is by identifying and eliminating areas of wasteful spending. 

Enhanced Transparency 

The procurement system enhances visibility into the procurement activities, which contributes to higher transparency. Higher transparency allows to ensure compliance with the set regulations and contributes to risk mitigation associated with fraud.

How Procurement Transformation Creates Value for Your Organization? 

Procurement transformation helps organizations optimize business processes and business growth. It is critical for strategic sourcing, compliance control, and improved visibility. To understand how procurement information creates value for your organization, let’s take a more detailed look at it. 

Process Improvement and Optimization 

First, procurement transformation helps to improve existing processes. It allows you to identify areas for improvement. For instance, decentralized procurement is one of the main challenges of manual process. With digital transformation, you can standardize the existing procedures for process automation. 

This is just one example of process improvement via the digital transformation of the procurement system. Continuous process improvement will help to reduce overall cycle times and enhance efficiency and productivity to achieve better performance within the organization. 

Improved Compliance Tracking 

Digital procurement transformation helps you optimize compliance tracking. When you have clearly defined policies and procedures but no centralized system, it can be difficult to track compliance. 

However, with the improved transparency that digital procurement tools provide, you will be able to track compliance with internal processes and set regulations more easily. 

Enhanced Visibility 

Procurement tools will enhance visibility and transparency within the organization. These will also contribute to higher team accountability levels. 

Procurement systems allow stakeholders to gain real-time visibility into the process, different stages, spending patterns, and other important data. 

Centralized systems provide robust analytics and reporting tools, allowing you to track processes, evaluate and identify improvement areas, and efficiently address potential risks. 

For instance, by tracing supplier performance, you will be able to identify top-performing vendors for further collaboration. It will help to mitigate risks associated with supply chain disruptions. 

Steps for Creating a Procurement Transformation Roadmap 

To see the anticipated results and benefits of digital transformation, you need to develop a procurement transformation roadmap. There are a few key steps to take in order to develop a good strategy, including process assessment, selection of the right technology, and development of a plan. So, let’s take a look at each of these steps in more detail. 

Assess the Current Processes 

To start the transformation process, you first need to evaluate existing procurement processes. Thus, assess every aspect of your current procurement process, from workflows to different management practices. This analysis will help you identify strong and weak areas of the current process, identifying gaps that need improvement. 

Set SMART Goals and Objectives 

After identifying the gaps and areas for improvement, it is time to set clear goals and objectives. Brainstorm the goals of digital transformation specifically for your organization. For instance, it can be cost reduction, better supplier collaboration, or other. 

When it comes to setting goals and objectives, make sure they are specific and measurable. The goals should also have a specific deadline to keep everyone on track. 

Incorporate the Right Technology 

The next step is to select the right technology. The right procurement tool will allow you to automate processes and centralize procurement management. 

When it comes to technology selection, make sure it offers features such as: 

• Inventory management tools to gain real-time insights on inventory levels and automate POs. 
• Supplier relationship management tools to enhance collaboration and track supplier performance. 
• Data analytics to gain insights regarding business spending and procurement processes. 
• Functionality to set user roles and permissions for better management. 
• Automation technology to automate approval workflows. 
• PO, invoice, and contract management functionality. 
• Three-way matching system. 

Also, when choosing a procurement technology, navigate toward cloud-based solutions, as these offer more scalability.

Develop a Transformation Roadmap 

After you have selected the right technology, you should start developing the transformation roadmap. Create a strategic plan that will highlight all the goals and objectives, timelines, and investments needed for the initiative. 

The strategy should clearly outline the scope of transformation. For instance, one of the major areas to consider is data integration. You must integrate data regarding suppliers, contracts, past transactions, markets, and others. Thus, you need a good plan for safe data integration to avoid data breaches or loss of important information. 

Improve Supplier Relationship Management 

Digital procurement provides companies with more communication and collaboration edges than traditional procurement ever did. Supplier relationship management is critical for procurement success. Thus, make sure to take advantage of the new systems and improve relationships with the vendors. 

For instance, you can enable suppliers to access procurement information and submit bids (conduct supplier onboarding beforehand). You can also establish real-time communication channels via the instant messaging capabilities of procurement software to negotiate contracts and get better deals. 

Conduct Employee Training 

When it comes to incorporating new technology or processes for higher efficiency, you should always conduct comprehensive employee training. 

Make sure the training covers all the aspects of changes, from new policies and regulations to guidelines on how to use the new software solution. 

Continuously Improve and Measure Progress 

To stay on top of the competition, you should always keep track of procurement performance. 

For instance, tracking business spending, supplier performance, and inventory optimization. To gain a better understanding and measure actual results, you can set KPIs for each process and area. Keeping track of procurement processes will help you stay ahead of the competition and identify risks or weaknesses in a timely manner. 

At the end of the day, keep in mind that digital procurement is an ongoing process. Thus, successful implementation is not enough. It requires constant process tracking and improvement to maximize results and ROI. 

Start Your Procurement Transformation with Tradogram 

If you are looking for a software solution to transform procurement and achieve efficiency, then you are in the right place. Tradogram is a digital procurement solution that comes in handy with a variety of useful features. 

Tradogram offers features ranging from spend visibility and analytics to inventory and supplier management tools. It will help you incorporate strategic transformation initiatives to achieve maximum efficiency. 

To find out how Tradogram can help you achieve organizational goals and digital transformation, schedule a free demo.