Some of the gains brought about by digital transformation will be immediate – including its impact on that all-important bottom line…
Throughout the past few years, many organisations have undertaken a strategy of digital transformation.
These transformations step-change many processes for businesses in order to take advantage of embedding faster, more collaborative and more analytical ways of working to better understand and serve both the business and customers to gain competitive advantage.
By leveraging this, businesses across the globe can enhance their productivity, their agility and in turn, their profitability. Indeed, digital transformation offers the potential to significantly reduce inefficiencies across the entire supply chain.
Let’s take e-commerce as an example. By improving the efficiency of a supply chain beyond brick-and-mortar retailers, wholesalers and manufacturers, it’s possible to collectively obtain a larger profit than each working in silos. By boosting the supply chain at every touchpoint, companies can reduce the overall cost as well as the opportunity loss, and crucially achieve a greater customer satisfaction rate.
On average, 60 per cent of an organisation’s costs are made up of spend on third-party suppliers of materials, goods and services. In turn, these suppliers have suppliers of their own, and so on and so forth. Essentially, everything that an organisation owns or buys is impacted by procurement teams, which means we as a function stand to benefit enormously from digital transformation.
The opportunity for procurement
Far from the persistent fear-mongering that digital transformation will be the death of procurement; this is an incredible opportunity for the function.
Digital transformation is making it easier than ever before for procurement teams to effectively play a significant role in optimising business and its supply chain, while delivering tangible cost savings.
According to The Hackett Group’s recent study, digital transformation reduces strategic sourcing costs and cycle times by 30 per cent and reduces data-collection errors, utimately leading to cost savings.
Automation also helps category managers obtain deeper spend reductions in specific areas and identify fresh opportunities for savings. It helps organisations identify sources of additional value, i.e., through its third-party suppliers, and retain it within the organisation. This translates into further value-add for the business.
Doing more with less
With a better supply chain, determined through strategic procurement technologies, organisations can reap the benefits, from manufacturing to processing.
To return to the e-commerce example; an enhanced supply chain allows for the physical delivery of a product at higher quality and with faster delivery times. This is especially valuable in this instance; as consumer demands continue to increase, businesses are aided through digital platforms that cater to the “right here, right now” mindset — a demand driven supply chain.
Technology enables productivity and this means that technology enables us to do a lot more with less. If technology is at the heart of productivity, then procurement is the lungs of it.
Because of this, there has been a great deal of innovation in procurement technologies that drive value in both public and private sectors.
In particular, these digital innovations increase transparency and productivity while engaging healthy competition; they foster an environment where innovation can propser. Strategic procurement tools provide organisations with an opportunity to streamline processes and increase efficiency that add value to their businesses.
Automation is at the heart of the digital imperative. Digital innovation comes in all shapes and sizes, and those that are proven to impact the bottom-line such as those that increase the productivity of an entire supply chain have the greatest influence in positively contributing towards the growing economy. Forward thinking organisations that make strategic IT investments considerably strengthen their business outlook by opening up the opportunity for greater output at a lower cost.
This article was written by Dan Quinn, SVP Jaggaer MENA.
JAGGAER’s REV International 2018 takes place in Munich on 25th-26th June. You’ll have the chance to listen to a number of industry experts and procurement thought leaders as they share their best practices and the latest in procurement innovation. Register here.