Digital procurement: optimizing the purchasing process to create value
Purchasers never had the easiest job, and in an increasingly competitive market, the pressure to buy the right product, at the right time, for the right price is enormous. In many cases, purchasers are at the mercy of multiple suppliers at once, each of which have their own way of working. Add to this an increasing focus on efficiency and sustainability, and the need for optimization is immediately obvious. Experts Bart Coppieters and Christophe Popelier explain where we are today and where we’re (hopefully) headed.
“Even if you’re the most cost-conscious and efficient purchaser in your company, your overall success is still highly dependent on your suppliers,” Bart explains. “It’s not enough to improve internal processes: they need to be integrated with your suppliers’ processes too. So, to optimize the purchasing process, we have to look beyond the borders of your company.”
Building the ‘supplier-purchaser network’
He illustrates with an example: “Many companies are already handling invoices via tools like SAP VIM or EDI. However, as long as both firms use different systems, sales orders and invoices still have to be put in manually. The goal for digital procurement is thus to integrate both systems and build one big ‘supplier-purchaser network’.”
“In an ideal world, suppliers and purchasers will connect to a single standard or datahub on which everyone can input data in their own way,” Christophe elaborates. “The key is that the hub always delivers the right output. This data source would offer virtually limitless possibilities in terms of insights in historical trends and predictive analytics. For example, it would become much easier to predict when a supplier won’t be able to come through with a certain order. Another possibility is to look for alternative suppliers in case one can’t deliver in time.”
SAP Ariba: the world’s largest B2B marketplace
The digital procurement solution that comes closest to this ideal is undoubtedly SAP Ariba. The digital B2B marketplace currently has 2.5 million users, making it the largest supplier-purchaser network in the world. Together, they exchange over 250 million documents annually.
Christophe: “SAP Ariba allows users to collaborate in a more efficient and safe way, anytime and anywhere. It also enables purchasers to source more strategically by comparing different vendors, assuring you get the most competitive deals. And it’s a great way to optimize your supply chain by connecting all data on people, partners and processes.”
While the ‘supplier-purchaser network’ is mainly aimed at direct procurement, indirect procurement – the ordering of, say, office supplies – has its own set of challenges. Bart points out: “In our personal lives, we’re used to ordering things from services that are incredibly user-friendly: Amazon, Zalando, Deliveroo, … Then we go to the office and are faced with clunky interfaces and a process that feels incredibly outdated. This divide is becoming less and less justifiable.”
What’s the reason the procurement side of the business is trailing so far behind in terms of usability? Christophe: “The main reason, from a business perspective, is that there’s more immediate, obvious value to optimizing the sales process instead. This is even reflected in how the sales and purchasing environments differ in most well-known ERPs: the difference is striking.”
Less purchasing is more value
Christophe and Bart argue that there is a lot of value in making the procurement process more akin to ordering things from Amazon. “Not only would it cost a lot less time to purchase something, the right data input would enable loads of optimization possibilities,” Christophe explains. “Like showing users only those items they are authorized to buy or that fit the budget, keeping track of the purchase history and making time-based recommendations, … There are numerous possibilities.”
Like in other ‘self-driven’ efforts, the goal is to significantly decrease the time employees spend on repetitive tasks, freeing them up for more valuable activities. For purchasers, this means more time to set up strong partnerships with suppliers, to explore the market and negotiate better deals, etc.
How to get started
Now that the advantages of digital procurement are made clear, the question remains: how do you get started? Bart: “The first step is to really know what you want. Do you want managers to waste less time approving trivial purchases? Do you want your purchasers to spend more time negotiating good deals and fostering good relationships with suppliers? Jot it all down: together we will paint a picture of your ideal procurement process in various situations.”
He continues: “One of the most important challenges is finding a partner with the experience and the technical knowledge to advise you on which technologies can help you achieve those goals. That’s what we’re good at: we’ll help you bridge the gap between dream and reality by means of a step-by-step approach.”
How would you optimize your procurement process in the digital age? Let’s see how we can help!