How does procurement digitization boost business efficiency

Share this article

The procurement organization has considerably lagged in the digital revolution, especially for companies in developing countries. With the increasing need for efficiency, transparency, and cost-savings, automating the entire procurement processes will help organizations meet those demands.

Automation goes beyond spreadsheets and software that don’t deliver real-time business insights and collaboration across supply chain stakeholders. A truly digital procurement uses artificial intelligence (AI), blockchain, data analytics, and an intuitive dashboard to generate real-time insights critical to make smart decisions. Further, technology automates manual and repeatable tasks and freeing up time for more strategic activities—delivering optimal value to the business.

So how does digital procurement contribute to business efficiency?

Visibility and transparency

Technology enables traceability through shared data across several stakeholders such as buyers, suppliers, finance, production, etc. It allows you to structure spend to all vendors and track information in real-time in a central dashboard location. The online dashboard provides spend analytics making cost reduction opportunities easy to find. Besides, tracking suppliers’ performance becomes handy which helps increase productivity and savings.

In the traditional approach, it is difficult to get total visibility of the real-time data you need for informed analysis and decision. The manual processes involved in the traditional approach do not provide any competitive advantage for your business in today’s digital age.

Increased speed

Automating the procurement process reduces the order cycle time significantly because it eliminates manual documentation, data gathering, and analysis. Also, using technology gives alerts to approving officers allowing them to act timely before the required deadline of the request.

There are still many companies today practicing paper-based purchase orders that are sent to approving officers and then to the next stage. The time it takes to go through this routine process creates inefficiencies.

Cost minimization

Cost reduction is a primary performance indicator across sourcing activities. With greater visibility of information and data analytics, it is easy to determine cost-savings opportunities by analyzing cost trends, spend categories, or reviewing contract terms.

Having all your transactions in one database makes reporting easy on requisitions, purchases, orders, and invoice payments. You can easily see which departments throughout the business are purchasing and receiving the most products, whether they are staying within the established spend limits, and so on.

Reverse auction procurement

The reverse auction is the latest trend disrupting how procurement is done today. It allows buyers to place their orders on the platform and suppliers to offer their prices. Everything is automated and transparent from documentation to placing a purchase order to invoice payment.

Using reverse procurement goes beyond efficiency and cost savings. It helps advance supplier relationships since pricing and negotiations can be done in the context of historical experience and additionally identified opportunities for adding value. Both buyers and vendors benefit from a complete visibility to run a successful and equitable auction. Suppliers have a clear insight into the requirements, and buyers can undertake due diligence on the auctions, seamlessly connecting the dots for all parties involved.

There is a platform set up for this. Dealogikal is known for revolutionizing the procurement space in the Philippines through its online commodity marketplace. Dealogikal reported that businesses that are using a reverse auction strategy save up to 25 percent per transaction.

The rapid emergence of shared data platforms and emerging technologies created an opportunity for procurement to speed innovation. It is high time for companies to evolve from manual to automated procurement processes to boost efficiency and profitability.

Marvin Bunyag, CPIM provides analysis and insights into the most trending news in the supply chain management space in the Philippines and across Asia. He is an APICS-CPIM professional and brings over 7 years of international experience in the supply chain. He holds MS in Operations and Supply Management from the University of Wisconsin in USA and a BS in Commerce at the University of the Immaculate Conception in the Philippines. You can reach him at marvinbunyag@explorescm.com.

Get the latest supply chain insights straight in your inbox

join the supply chain community

Get the supply chain insights straight in your inbox

You agree to our privacy policy when you sign up