Press release
New York – Sept 13, 2018 – A new report from Bain & Company, Digital Procurement: The Benefits Go Far Beyond Efficiency, reveals that 80 percent of executives believe they need to do more to take advantage of the latest digital procurement tools. Yet, the crowded digital marketplace has left many executives unsure where to start reaping the benefits of digitizing their procurement practices. The report, which includes results from a survey of 243 procurement professionals, ranks 22 digital procurement solutions on their proven success in the market, and gives procurement executives a roadmap for success in transforming their teams from back-end operations to key strategic partners in the organization.
Bain & Company finds global investments in procurement digital solutions increased to $475 million in 2017 from $378 million in 2014. Despite this, fewer than 10 percent of companies are deploying procurement solutions based on key technologies such as Big Data, blockchain technology or the Internet of Things, according to research from Procurement Leaders. Further, a full 60 percent of companies are not using any tools or are relying on improvised Microsoft Office tools for workflow assignment and supplier relations management.
“The Digital revolution is giving Chief Procurement Officers an opportunity to change the nature of their conversations with business unit leaders,” said Coleman Radell, a partner in Bain & Company’s Performance Improvement practice and the co-author of the report. “Forward-thinking procurement teams are grabbing a seat at the table and directly influencing an organization’s ability to speed innovation.”
Along with reinforcing the market need for digitization in the procurement space, Bain & Company’s research highlights the five most important digital solutions, according to the businesses surveyed:
- Inventory management systems. Hardware and software systems that record, track and manage inventory levels through the procurement value chain.
- Multidomain master data management. Collection, cleaning and management of data from across a company’s businesses and functions into a “single source of truth” repository.
- Contract life cycle. Solutions standardizing and automating contract initiation, creation, negotiation and execution.
- Supplier quality management. Software allowing buyers to engage and collaborate with suppliers to manage product quality, delivery and other aspects of supply.
- Spend analysis. Collecting, cleaning and analyzing organizations’ expenditure data to drive internal strategy, decision and compliance.
Making the most of the opportunities these tools present can feel daunting to CPOs, and many mistakenly assume that these digital solutions need to be fully integrated into existing enterprise resource planning (ERP) systems. Instead, many new tools can often sit on top of most ERP systems without being formally integrated. This facilitates test and learn processes.
A helpful practice for CPOs when faced with the task of digitizing their procurement function is to create a digital procurement roadmap for the organization, which will ultimately reduce costs and free capacity for more strategic activities. In the report, Bain & Company details the three-step process that procurement executives can use to start shaping a digital vision:
- Gather input. Collect information on digital trends from the company’s leadership, the industry, the market and procurement executives. What are the company’s digital goals and strategies? What vendors and solutions are other companies in the industry utilizing?
- Create a vision. Focus on 3-5 years from now. What processes should be digital? What solutions does the company want to implement? Define how procurement will work with business unit leaders and vendors to accelerate innovation and results.
- Design a roadmap to get there. CPOs should set detailed priorities, including near-term goals, to achieve the organization’s digital vision. They should also prioritize clean data, an agile operating model and a digitally skilled workforce when implementing new solutions.
“Agile procurement teams with deep knowledge of emerging technologies can help speed new products to market,” said David Schannon, a partner in Bain & Company’s Performance Improvement practice and a co-author of the report. “As a growing number of companies embrace digital procurement, those that remain on the sidelines will become less competitive over time.”
In addition to building a digital roadmap for procurement, CPOs can fundamentally shift their roles and help accelerate digitalization across their companies, evolving their purviews from buying products to offering holistic solutions, advocating for innovative technologies, forging partnerships with cutting edge vendors, embracing a more agile way of collaborating with partners and building a bench of digital-enabled talent.
Editor's Note: To arrange an interview with Mr. Radell or Mr. Schannon, contact Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102
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