Two approaches to digitalising purchasing departments

procurement digitalisation
January 22th, 2019
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All procurement departments agree that digitalising the profession is now both a reality and a necessity. However, many professionals are questioning the best approach to take: A complete overhaul of the processes or a step-by-step digitalisation based on priorities. Beroe surveyed a panel of decision-makers to shed light on the following key question: Which approach should be taken?

What is meant by "procurement digitalisation"?

There is no single definition to explain the digital transformation of procurement.

Let's start with the following general definition provided by Hackett: "[Digital transformation is] the process of transitioning aspects of a traditional business into a digital business, principally by applying technology to innovate.”the process of transitioning aspects of a traditional business into a digital business, principally by applying technology to innovate."

The professionals surveyed by Beroe add to this. For them, the digitalisation of procurement represents the opportunity to redefine the profession and achieve a level of excellence, particularly in three areas:

  • Influencing through creating value, not by processing transactions
  • Engaging stakeholders with fast, simple processes and strong market knowledge from structured or unstructured data
  • Shifting the purpose of technology from an enabling to an advisory role

There are two possible approaches to this type of project:

  1. The "plug-and-play" model: This involves digitalising only the processes that take too much time or effort and have therefore been flagged as ineffective.
  2. A complete overhaul: This constitutes a large-scale project as it is involves reviewing and optimising every process.

Which approach should be taken to digitalise procurement departments?

According to the survey by Beroe, opinions differ when it comes to this question:

  • 55% think that digitalising procurement departments involves selective technology interventions to address the lack of efficiency, in other words, the "plug-and-play" model.
  • 45% think that it involves a complete overhaul of systems and processes.

It is also interesting to look at the results with the respondents' professional level in mind. Those with global visibility over operations (such as C-level respondents) mostly opt for a complete overhaul, while those with less visibility (such as Directors) lean towards the "plug-and-play" model.

When asking procurement professionals about the best way to get started in digitalisation, there is a much clearer trend: 81% believe it must happen as a step-by-step process.

Gradually adopting technologies for specific processes offers multiple benefits. This approach reduces risks, ensures a rapid return on investment and improves customer satisfaction.

The Director of Global Procurement Operations of a renowned life sciences company summarises as follows: “Procurement Digitalisation is not a specific action but more a philosophy to utilise advances in technology to improve effectiveness. The implementation would depend greatly upon resources, severity of technology lags and opportunities for improvements.”