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SAP: Digitisation is changing the face of procurement

The radical digitisation of procurement from finance function into a value maximiser is growing across the globe, research from SAP has revealed. 

More than  430 C-level executives across various organisational functions have given their views in Chain reactions: building value in procurement through digitalisation.

It explores  how businesses and industries are transforming procurement to deal with existing and emerging challenges, such as supply chain disruption, inflation and growing uncertainty and future trends for procurement. 

How approaches to procurement have changed in the short term along with the drivers of the digitalisation of procurement processes were explored along with long-term sustainability strategies.

Digitalisation is being driven by a desire to improve user experience

When it comes to the drivers for digitalisation for organisations, improving user experience, category management and mobility solutions were top of the order. 

“User experience is picked as one of the top three drivers for transformation by 42.6% of respondents, reflecting a shift away from paper-based procurement processes towards real-time, intuitive platforms,” said the report. 

CFOs and COOs surveyed were far likelier (43.7% and 44% respectively) to highly rank user experience as a top driver for digitally transforming procurement. 

More than 40% of procurement professionals say category management is one of the top three drivers. 

Budgets bloat to accommodate digital transformation

While there’s no surprise that the report highlights COVID-19 as creating an uptick in the adoption of digital technologies, enthusiasm for digitisation is being matched by budgetary increases. 

Nearly half (47%) of companies were found to modestly increase their budgets and more than a fifth  (21.9%) reported significant increases.

Companies in healthcare (92.3%), financial services (80.5%) and retail (78.6%) have experienced  modest to significant rises in budgets, the report highlights. 

But despite budgets having grown, cost concerns loom as a top barrier to

digitalisation. More than a third of respondents cite budget constraints (35.1%) and uncertainty over technological solutions (31.2%) as the top two barriers to digital transformation. 

“This is perhaps signalling anxieties as to the trade-offs of adopting digital tools, especially among organisations that are yet to take the first step towards digitalisation,” the report says. 

Procurement as a value creator 

Echoes of procurement “having a greater seat at the table” are raised in the research. 

Procurement, traditionally regarded as a finance-related operation, is riding a wave of a reconsideration of its role to one that creates value and new revenue.

“Volatile prices bring procurement centre stage,” the report says. 

“Cost has decreased as an influencing factor, and it’s not increasing again,” says Marcus Kutzner, partner and sourcing and procurement lead at Deloitte.

“What we are seeing for the first time ever, and increasingly, is that risk management is on top of the list of procurement objectives.”

Is sustainability a “nice to have” for procurement?

The prominence of ESG is raised as one that can create value for businesses “by expanding access to new markets, reducing operational spend on raw materials, easing regulatory pressure and attracting quality employees.” 

The report shows ESG priorities tend to rank differently when viewed from the perspective of specific roles.

CFOs (34.5%), CPOs (38.2%) and CSCOs (36%) prioritise waste reduction, but COOs’ top priority is energy consumption (26.6%). 

Companies should “fight to stay relevant” by enabling ESG and sustainable procurement practices, but also ward off complacency.” the report says.

Topics explored in Chain reactions: building value in procurement through digitalisation include:

  • The engines of procurement’s digital revolution
  • Budgets and uncertainty reveal digitalization anxieties
  • Procurement as a value creator
  • Creating value-first solutions
  • Is sustainability a “nice to have” for procurement?
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