Procurement departments are responsible for the long and complex purchasing cycle. This cycle is starting to be recognised as being increasingly strategic for companies. Procurement departments can, and must, offer helpful solutions to the challenges that companies face today, which include innovation, productivity gains and cost reduction.
To rise to these challenges, procurement departments must undergo a digital transformation. To give just one statistic, Manutan estimates that 70% of procurement tasks can be automated. This automation is what will allow procurement teams to save time, which they can then reinvest into strategic contributions.
Procurement management software automates the complete purchasing cycle, i.e. tracking purchase requests, orders, deliveries and invoices. A procurement management solution also handles supplier and budget management.
Practically, a procurement management software offers procurement departments four main advantages:
- Savings in terms of time and money
- Improved risk management
- Better balance of departmental needs
- Increased capacity for decision-making support and anticipation
The cost savings achieved by using procurement management software stem from three levers:
- Being able to harness comparison data (e.g. historical and seasonal data, or data from two different suppliers) that allows for better purchasing conditions.
- Being able to simulate logistical conditions in terms of rates or delivery points, until a balance that streamlines logistical costs is found.
- Being able to monitor stock more easily to avoid unnecessary orders.
Budget management also allows procurement departments to detect any possible exceedances in real time and apply any useful corrective actions as soon as possible.
Time is saved by the following, for example:
- Better targeting good suppliers, which leads to fewer errors, quality defects and disputes.
- Optimising administrative tasks, such as inputting orders or checking invoices.
Digitalising procurement management gives procurement departments unprecedented control over managing suppliers.
This access to a different and global vision has three major advantages:
- More accurate stock management: avoiding over-stocking or under-stocking through a reliable, customised identification of trigger points.
- An extensive knowledge of profiles in the supplier base: required to benefit from proven or even certified knowledge for the most strategic purchases.
- Monitoring of supplies by batch and order: essential for limiting the risk in the event of a quality defect.
Digitalising procurement departments, especially the interoperability of their management software with that of other departments, optimises communication and the potential for inter-departmental co-operation.
For example, inter-departmental approval workflows can be easily put in place for purchase requests, which prevents orders that are out of touch with real needs from being taken into account. Another example is unifying the information system across the entire company, which encourages project groups from different departments, including buyers, to get involved. Together, these project groups can define purchase specifications for new ideas, even remotely.
Closely controlling the procurement budget and the supplier base, combined with connecting the procurement department to other business departments, promotes strategic purchase planning. Procurement departments are both aware of and involved in the organisation's approaches, and as such are able to anticipate purchase requests. The buying team can therefore identify, with maximum quality assurance, future partners who can best meet new requests.
To go a step further, digitalising the supplier relationship and automating the search for innovative solutions with technologies such as artificial intelligence give procurement departments the opportunity to become fully involved in the proposal and even the decision-making processes in project launch scenarios.
In conclusion, the decision to digitalise allows procurement officers to free up their departments so they can dedicate more time and thought to maximising their contribution to the performance of the organisation as a whole. Digitalisation means that procurement departments can move from a quantitative approach to a much more qualitative approach.
Using purchasing data that is collected over the whole cycle, stored in a single database and processed using a standard method, is an incredibly helpful lever for understanding, improving and anticipating. This is why a digital solution must offer a high-quality work tool that groups together several performance indicators, while also being compatible with other management solutions already being used within the organisation.
Lastly, digitalisation is one of Manutan's six identified levers for optimising tail spend. Before choosing your procurement management solution, take a look at the following article on this topic.