The Role of Digital Tools in Modern Procurement

Digital tools have become essential to the efficient procurement process. More and more organizations switch to digital procurement to leverage data analytics, make informed decisions, and streamline supply chain operations. 

In this article, we will explore everything regarding the role of digital tools in modern procurement, from benefits to how to choose the right solution for your organization. So, if you are ready, let’s dive into it. 

What is Procurement? 

Procurement is a process that involves locating, acquiring, and purchasing goods/services. Essentially, it is the act of sourcing suppliers and purchasing goods and services necessary for business day-to-day operations. 

The fundamental elements of the procurement process include sourcing, supplier relationship management, POs and invoice management, and process optimization. 

Types of Procurement 

The main types of procurement include: 

• Direct procurement: This type of procurement refers to acquiring goods or raw materials directly related to the production of the end product. For instance, purchasing wood to make wooden furniture. 
• Indirect procurement: In this type of procurement, businesses purchase services or goods necessary for the business's day-to-day operations but are not directly connected to the production of the end product. For example, furniture, computers, and a variety of office supplies such as pens and papers. 
• Services procurement: This type of procurement focuses on sourcing services, such as consulting, legal services, or even outsourcing. 
• Global procurement. When it comes to global procurement, this process essentially refers to sourcing goods and services from international suppliers. 

Understanding Supply Chain Procurement 

A supply chain is a complex logistics system and process that turns raw materials into finished products, distributing them among the end customers. Supply chain procurement involves strategic sourcing, demand forecasting, supplier relationship management, cost management, and risk management. 

Why is Digital Transformation in Procurement Important?

“The main drivers for Procurement digital transformation are agility, greater control and consequently more efficiency.”

CPO in a very large company in the Banking, Insurance, and Financial Services sector.

Technology has completely shifted the modern-day business landscape. With more and more new solutions and SaaS (software as a service) tools, businesses continuously adopt these for better process optimization. 

As with many other aspects, digital tools also help to improve procurement processes. The key reasons behind digital procurement gaining so much popularity are cost reduction and strategic sourcing. 

According to statistics and predictions, around 72% of procurement departments will be digitized. Procurement departments focus on core objectives, building long-lasting partnerships, and efficiently addressing current challenges. All the current goals and focus points can be achieved and optimized with digital transformation. 

According to PWC, the main goals organizations shared as the reasons behind the digital transformation of procurement departments are: 

• 57% of companies aim for better process optimization for higher efficiency and transparency. 
• 47% of companies aim for cost reduction. 
• Around 19% of organizations aim to achieve better risk and crisis management via digitization.

The Role of Digital Tools in Procurement 

Digital procurement solutions provide a number of vital tools and features to streamline procurement in your organization. 

The key priorities when adopting a digital procurement solution are:

• Make data-driven decisions that support business growth. 
• Reduce costs and optimize budgets (over 69% of companies named cost-reduction as a key strategic priority for procurement departments). 
• Promote enhanced supplier collaboration. 
• Mitigate risks associated with fraud, such as duplicate invoices, data breaches, etc. 
• Centralize procurement management for maximum efficiency and high ROI rates. 
• Incorporate sustainable and ethical practices and make sure processes comply with the set standards and regulations. 

So, let’s briefly overview some of the tools that digital procurement systems offer. It will help to understand the role of digital tools in the procurement process and in meeting the key priorities. 

Advanced Analytics 

First, procurement software provides advanced predictive analytics tools. These tools allow you to gain 100% spend visibility, analyze business tracking patterns, and identify cost-saving opportunities. 

Also, advanced analytics provide you with key insights into the overall efficiency of current procurement systems and processes, allowing you to make informed and strategic business decisions for improvement. 

Workflow Automation 

Another useful feature that e-procurement tools equip your organization with is workflow automation. Workflow automation will allow the procurement team to automate day-to-day tasks and set up approval workflows to streamline procurement. It will decrease human error and increase productivity among the procurement team. 

Supplier Management Tools

Digital solutions, such as Tradogram, offer dedicated supplier relationship management tools for efficient communication and performance tracking. 

For instance, you will be able to identify top-performing vendors with performance ratings and manage risks by using dedicated supplier evaluation tools. This will allow you to develop a reliable and effective supply chain. These tools allow you to conduct accurate supplier performance evaluations by tracking POs, invoices, and supplier compliance with the set terms and conditions of the contract. 

Many digital procurement solutions also offer categorization tools. These allow you to easily store supplier data and create custom categories for better filtering and reporting. 

Collaboration Tools

Digital procurement gives you the opportunity to streamline supplier onboarding and collaboration with ease. For instance, you can allow suppliers to collaborate on documents in real time. Also, you can utilize the instant messaging feature for enhanced communication

Benefits of Digital Adoption in Procurement

Digital procurement comes in handy with a variety of benefits ranging from risk mitigation to enhanced visibility and control. Let’s briefly overview each of these. 

Sustainable Procurement 

Digital tools allow businesses to ensure that their procurement processes are ethical and align with the ESG (environmental, social, governance) goals. First, digital procurement reduces paper usage and encourages electronic documentation/signatures. It also enhances inventory management by providing real-time visibility into the stock levels. Thus, businesses can reduce the risk of overstocking and minimize waste by avoiding outdated inventory. 

Enhanced Supplier Collaboration

Digital procurement solutions boost supplier-buyer relationships by offering real-time communication channels and instant messaging capabilities. These features foster clear and fast communication with the vendors, leading to improved trust and collaboration. 

For instance, instead of sending an email with the document and waiting for a response, you can collaborate on the document and communicate in real time to streamline negotiations. 

Enhanced Visibility and Transparency 

Digital procurement provides you with enhanced visibility and transparency. First, you will gain access to robust analytics, which will allow you to make informed business decisions. 

Digital procurement enhances transparency by providing a centralized system where you can track and access documents at any time. Also, you will be able to assign user roles and permissions to improve the security standards of the process and prevent unauthorized usage.

Contributes to Increased ROI 

Another benefit of digital procurement is that it contributes to increased return on investment rates. By utilizing the features offered, businesses reach efficient automation levels, saving resources. 

Improved Operational Efficiency 

By replacing manual and paper-based processes that are downright inefficient, companies can immensely increase operational efficiency. Digital processes allow to reduce human error and save time spent on repetitive administrative tasks, such as manually filling in the purchase order details. 

By automating manual processes and repetitive tasks, your procurement team members can focus on more strategic activities that will contribute to faster business growth. 

How to Choose the Right Software Solution for Procurement? 

Nowadays, a variety of software solutions are available for procurement optimization. The key is to choose a perfect tool to streamline processes efficiently. 

User Interface 

When choosing a procurement solution, make sure it has a good user interface. Easy UI will allow you to onboard employees faster and make sure the software is used efficiently. 

Integrations with Accounting Systems 

Also, ensure that the software solution of your choice integrates with other accounting systems such as Quickbooks. 

Features 

If you want an efficient solution that will help you increase ROI rates, then carefully assess all the features offered. A good digital procurement solution should offer 

• Contract, invoice, and purchase order management tools. 
• Centralized database to store and access data from. 
• Supplier performance tracking and collaboration management tool. 
• Inventory management tool for sustainable procurement efforts. 
• Budget and spend management featu\res to optimize finances and reduce costs. 

So, if you are looking for software that offers all of the features mentioned above and even more, then Tradogram is the perfect solution for you. 

Optimize Procurement with Tradogram 

If you want to streamline procurement processes for maximum efficiency, then you are in the right place. Tradogram is an all-in-one digital solution that will allow you to optimize and streamline procurement processes within your organization for maximum efficiency. 

‍Tradogram offers a variety of tools to manage POs, invoices, and contracts, automate workflows, and improve supplier relationships. Moreover, you’d be able to gain 100% spend visibility and robust data insights with potent data analytics features to make informed business decisions.