How vital is a digital procurement strategy?

Posted on 2 Aug 2017 by Jonny Williamson

Procurement heads from manufacturing companies across Europe have identified the biggest benefits of implementing a digital procurement strategy.

Large modern storehouse with some goods - digital procurement
The main benefit of digital procurement was risk migration, which includes transparency and cyber security – image courtesy of iStock.

Procurement in companies across the world – regardless of sector – is rapidly maturing and modernising. At the same time, the momentum behind the digitalisation of manufacturing is creating additional challenges for organisations.

More 100 European procurement leaders were recently asked to define the challenges that digital transformation imposes on organisations, and the main benefits of implementing a digital procurement strategy.

A third (33%) of those polled, by ProcureCon Europe and WBR Digital, said the main benefit of  digital procurement was risk migration, which includes transparency and cyber security.

According to Gordon Tytler, director of purchasing at Rolls Royce, any tool which allows manufacturers greater visibility of where risks exist, especially in the supply chain, is an exciting innovation.

He added: “[It] offers the opportunity to carry out additional scenario planning and collect more data from around the world to more rapidly identify, mitigate issues as they arise. But there is a risk here too, and that is cyber security.

“You don’t have to look very far back to see how devastating a cyber security breach can be. So there really are two aspects, how can you mitigate your supply chain risk using data, and how can you protect your digital cloud-based data and applications from becoming a risk in itself.”

Rolls-Royce is reportedly currently working with its supply base to firstly assess their level of risk and then, if required, provide guidance on how Rolls-Royce can support them in mitigating any potential risk areas.

The other benefits of a digital procurement strategy were identified as: cost reduction and increasing efficiency (28%), improved procurement intelligence (28%), innovation (27%), corporate social responsibility (20%), improve control (20%), integrated analytics (17%), enable growth (14%), and time-to-market (13%).

Discussing the success factors of a digital procurement strategy, a third of procurement leaders noted that although good data was vital, human factors, such as internal buy-in and advocacy, were equally as important.

The survey also revealed the extend that companies are already using specific technologies to improve their procurement performance. Unsurprisingly, cloud technology is already having a significant impact in respondents’ organisations with 75% already having invested heavily and the remaining 25% currently exploring the business case.

Regarding other technologies, social media was seen by almost a quarter (24%) as something of little to no interest, with more than a third (37%) possibly interested in the future. Almost half (44%) are currently exploring the Internet of Things, with a further 30% anticipating to do so in the near future.

Tytler commented: “For [Rolls-Royce], bringing in any new piece of technology is very much around enabling us to be more effective in how we do business with our suppliers. Many organisations today are horizontally integrated and the ability to be quicker, more innovative, and more cost effective in our supply chains is critical.

“It is a major competitive advantage. So, anything that can enable us to have our people spending more time working with our suppliers, rather than on transactions and processes is a priority.”