The wave of the technological revolution is sweeping companies who have been increasingly turning to digitalisation along with it. The procurement function has joined the movement. E-procurement in Europe continues to grow, as confirmed by the fourth Digital Procurement survey carried out by PwC in 2022. But let’s go into more detail about the online sourcing situation. What place does procurement digitalisation have in Europe? What are the prospects for the years to come? And what are the priorities for the digitalisation of procurement?
How far has e-procurement advanced in Europe?
Also called ‘online procurement’ or ‘procurement digitalisation’, e-procurement is increasingly developing in the B2B world. Where does Europe stand in this transition? What are the objectives of European companies?
E-procurement in Europe: the state of play
Every continent has begun its transition towards digitalised procurement. Europe stands on the third step of the podium with 41% of its processes digitalised, just behind the Middle East and Africa.
While the recent health and military crises have highlighted the importance of digitalisation, the consequences have also inspired the need for immediate action so that companies can respond quickly to challenges posed by the global economy.
Procurement departments have therefore focused more on short-term risk management (procurement, suppliers) at the cost of long-term digital transformation initiatives.
But will the transition to e-procurement accelerate in the years to come?
Forecasts for B2B e-procurement
As mentioned above, the health crisis has underlined the need for digitalising procurement. Once the immediate risks are under control, we can focus on the main objectives of e-procurement. European companies aim to switch from 41% digitalisation of current processes to 72% in 2025.
To achieve this, paperless transactions have increased in 3 main areas:
- Product selection;
- Order dispatch;
- Billing and payment management.
In addition to the automation of processes, digitalisation is becoming a real lever thanks to the possibility of managing the quality of the data harvested.
European companies have set sustainable development as a major factor in their digital objectives. Thanks to e-procurement, companies can better assess suppliers’ carbon footprint, which is of significant interest to procurement departments working on energy transition.
The digitalisation of procurement in Europe: major priorities
Procurement departments prefer to temporarily put aside innovation and talent management in favour of short-term strategic priorities. Here is an overview of the four main motivations causing European companies to switch to procurement digitalisation.
1 - Cost reduction
As Europe faces rising commodity prices, the desire to cut costs seems an obvious move. It is therefore not a surprise to see that this objective has been and is still the number 1 priority since 2019.
In addition to the difficulties caused by the rise in prices, there are the issues posed by shortages, inflation, and the decline in activity in certain sectors. So, there are plenty of additional arguments for why companies should favour a cost-reduction strategy.
2 - Digital transformation
While digital transformation used to mostly apply to large companies, small and medium-sized companies are now accelerating their transition and planning on much greater investment to complete their conversion to digital. They also see positive ROI emerging in the short, medium, and long-term.
To initiate this transformation in a sustainable way and to appreciate its immediate effectiveness, it is best to focus on the least complex procurement processes.
3 - Sourcing suppliers
Supplier sourcing represents only 15% of the main priorities for European companies but is still in third place behind cost reduction and digital transformation.
Observers have noticed a sharp rise in sourcing over the last years. With a desire to move towards sustainable development, transparency and to stand out from the crowd, procurement departments take great care in selecting quality suppliers that share their commitments. The choice of suppliers is one of the main foundations of the procurement function, enabling it to increase the margins achieved and reduce risks, among other things.
4 - Risk management
The fourth main priority is an essential part of the procurement function and that is risk management.
Online procurement, which centralises management of a company’s supply chain through an online platform, is very much aimed at risk reduction. This is because the process is simplified, the number of stakeholders is reduced, as are manual interventions and errors, all thanks to automation.
In order for the procurement process to become 100% digital, Procure-to-Pay (P2P) and Source-to-Pay (S2P) solutions have now become essential factors in a company’s array of next-gen procurement tools.
The online purchasing and procurement process
The future of procurement will be entirely digital, which is a source of multiple benefits for buyers.
Why should you digitalise your procurement?
By digitalising procurement, the key players in the procurement function can invest their expertise on more strategic areas. Over and above this benefit, e-procurement has many other advantages: expenditure control;
- Cost reduction;
- Delivery time reduction;
- Elimination of low value-added tasks.
Furthermore, thanks to electronic catalogues, companies have instant access to the available products. The descriptions are up to date as well as the quantities in stock.
What does tomorrow’s buyer look like?
The procurement function has been constantly evolving since 1850. How will it continue to transform?
The buyer of tomorrow leaves the repetitive tasks and all the work related to ordering supplies and materials to e-procurement solutions so that they can focus more on procurement and supply strategy. This means they can improve performance by creating value. This is how they become a real asset to the company.
Thanks to the data reported to them via data analysis tools, they can be predictive and proactive, which gives them a head start on the competition and means they stay at the forefront of innovation.