Turning Procurement Challenges Into Opportunities Through Digital Transformation
This article is authored by Ashwani Narang, Vice President and Country Head, Intelligent Spend Group, SAP Indian Subcontinent, and published in partnership with BloombergQuint Brand Studio.
As the Covid-19 pandemic affected business continuity in 2020, businesses with resilient and digitally mature supply chains were able to react in an agile manner to the sudden and continuing uncertainty that occurred. For businesses who lagged behind, the pandemic highlighted the indispensability of digital transformation in averting future disruptions as well as in unlocking value at scale.
The Indian Institute of Materials Management (IIMM) and SAP recently conducted a survey to understand various pain points for the procurement function, and the opportunities offered through digital transformation. Titled, 'Digital Transformation of Procurement–Turning Procurement Challenges into Opportunities', this survey had respondents (including procurement leaders), from more than 15 industry verticals in India.
Procurement Challenges and Priorities
The industrial spectrum in India is fraught with various procurement challenges even in regular times. Slow-paced digitization, unfavourable government policies, and business uncertainties have traditionally plagued procurement in India. The pandemic worsened the situation and tied the hands of enterprises as various curbs and checks affected the supply chain. Here are some of the most notable procurement challenges that enterprises in India face:
Lack of standardization of procurement processes
Data inaccuracy and lack of transparency
Flawed direct and indirect procurement practices
Inadequate modernization and digitization of procurement functions
Poor supplier management
User adoption, differing processes, poor technology, and talent constraints are further stifling enterprises in India in their pursuit for seamless procurement. There are also pain points around compliance, GST integration, overcharges and payment duplication, invoicing, and reconciliation.
The good news is that Indian enterprises are prioritizing various attributes to build a resilient and future-ready procurement process. The immediate priorities are cost reduction, sustainability, and agility. However, respondents to the survey also pointed out that risk reduction will be more important to them than cost reduction in the next few years. It is here that digitization of procurement has a critical role to play for enterprises. And the investment trends among Indian enterprises are encouraging.
Creating Procurement Opportunities by going Digital
The survey report reveals that most enterprises in India are focusing on digitizing their procurement functions to address these challenges and create fresh opportunities.
Here are some of the key findings of the survey on the IT spends and the pace of digital transformation:
More than 80% of enterprises have allocated up to 10% of their total IT spends on procurement.
Around 77% of enterprises are spending up to 10% of their IT budgets on upgrading their procurement functions.
More than 30% of SAP procurement customers plan to increase their technology budget for procurement in the next year.
More than 43% of enterprises have already automated more than 10% of their procurement functions while another 30% have achieved up to 25% automation.
The Indian government is emphasizing digitization of procurement and public sector organizations are swiftly moving to e-procurement, e-tendering, e-payments, and e-receipts. As a result, even private enterprises need to make a smooth transition to digital procurement. This will help them enhance supplier management, change management, risk-based analysis, tracking, monitoring, and forecasting.
Ushering in the Digital Future of Procurement
So, what are the various technologies that enterprises are investing in to digitize their procurement functions? To begin with, digital transformation demands strategic infrastructure modernization. In that pursuit, cloud-based applications and AI-enabled automation are important contributors. Technological advancements in the fields of AI/ML, Big Data and analytics, RPA, and IoT will enable intelligent procurement. According to the survey report, here are some of most significant technologies that are being used by enterprises to digitize their procurement.
Some of the other emerging innovations that will play critical roles in procurement soon include AR/VR, 3D printing, and blockchain.
The benefits of digital transformation of procurement are clearly visible and are underlined by the findings of the survey report. Respondents have noted that various digital transformation measures have delivered moderate or significant success in supplier performance, risk assessment and management, operational efficiency, and cost savings. Here is a look at the various outcomes of the digital transformation of procurement functions:
Improved operational efficiency
Better supplier performance and collaboration
Better risk management
Automation of routine tasks
Some SAP procurement customers have also noted that implementing SAP software has enabled them to standardize efficient methods of procurement, achieve better spend visibility, and introduce automation across procurement functions.
The future is bright for enterprises that are proactively digitizing their procurement functions. As the scope of new technologies increases, digital transformation will gather pace and help Indian corporations match the procurement excellence of their global counterparts.