The mandate of today’s procurement department is evolving, but the core mission remains the same: reduce costs and increase value. Yet not all organizations are equally successful in this regard.
A recent study by the Hackett Group shows that 84% of procurement organizations believe that digital transformation will fundamentally change the way their services are delivered over the next three to five years. Yet only 32% have developed a strategy for getting there.
What differentiates a top-performing procurement organization from its peers? The key is its commitment to leveraging digital transformation. While negotiation, category management, and other long-standing practices continue to be tools in the procurement cost savings arsenal, it is the ability to leverage and effectively use technology that takes procurement to the next level.
How do companies that are adopting a digital strategy do it? Here are a few highlights from the study.
Putting customers first
First, they focus on the user experience, including creating formal service level agreements (SLAs) for internal customers. This not only creates more efficient processes in the back office, it engages users and helps them be more productive.
One way to engage users and deliver better service is using enterprise social networks. This provides an efficient, user-friendly way for people to get information faster than email and phone calls. Automated approval workflows and shared purchasing accounts along with consolidated supplier management can also make it simpler for users to buy for work while also reducing the burden on procurement professionals.
Investing in technology
Top procurement performers also invest more heavily in technology solutions such as process automation and supplier discovery. Not only does this investment help reduce per-order costs by 71%, it leaves more time for procurement staff to focus on professional development and strategic tasks rather than repetitive manual processes. Perhaps that’s why world-class procurement departments enjoy 45% lower turnover than their peers, leading to greater knowledge retention and long-term success. Overall, world-class procurement organizations invest 17% more in technology per full-time employee, but achieve nearly double the ROI compared to peers.
Gaining insights with analytics
The report shows leading procurement organizations direct a higher share of budget toward analytics capabilities, creating opportunities for data-driven decision making and laying the groundwork for advanced automation, deep learning, and artificial intelligence.
Taken together, these trends add up to one clear message: to achieve high performance, procurement organizations should go beyond their traditional strategies to make existing processes more efficient. By using technology in innovative new ways, such as improving the employee and customer experience and using data more effectively, any procurement organization can raise the bar for purchasing.
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