A digital procurement transformation expert suggests three steps that CPOs can take to introduce significant cost reductions via automation, to persuade the most sceptical of CEOs that investment in digital solutions makes business sense.
Dave Brittain, senior manager at Amazon Business, cites research from The Hackett Group. It shows that global companies can achieve cost reductions of one quarter by switching to more efficient digital processes. Even small firms stand to benefit.
However, a recent study of CPOs with annual procurement volumes of one million dollars and above, by Amazon Business and WBR Insights, found that, despite plans to ‘go digital’, 50% of respondents reported being hindered by budgetary restraints, insufficient organisational urgency, and obstacles to integrating new technology with existing legacy systems.
Brittain recommends three ‘quick wins’ for persuading management that digital procurement transformation should start without delay:
Digital tail spend management solutions
Keeping track of tail spend – decentralised, distributed informal purchases made by many employees beyond formal procurement processes – is a laborious and difficult process, not least because it accounts for 20% of costs while addressing 80% of suppliers. If 20% is moved to digital procurement solutions, an organisation will see that this disproportionate cost can be recovered while surpluses left in the remaining purchasing portfolio can be transferred to future digital shopping.
Make millennial employees digital champions
This age group – 20-35-year-olds, born in the 80s and 90s – are ‘digital natives’ like no other, having grown up with digital shopping in their personal lives. They easily transfer digital shopping savviness to the B2B world and are already equipped to find solutions for integrating the new technology.
Digital implementation isn’t ‘rocket science’
Brittain writes: “Integrating procurement into the digitisation of purchasing and effectively managing it through a B2B marketplace isn’t complicated.” Integration with existing purchasing systems, he says, is usually quick to implement. It is feasible to set things up relatively fast without enormous expense.