Digital procurement today
In today’s society, everybody is talking about digitalization. It is said that digitalization can bring many benefits to organizations such as streamlined processes, standardized ways of working, and accessible overviews. Procurement is no exception to this, and there are several digital procurement tools that companies can use within their organization to streamline their work and enable the departments full potential. Despite this, many people still fail to grasp the true meaning of digitalization, what different options there are, and what benefits they can bring to an organization.
Research dating from 2009* and all the way up to 2019** show that digitalization within procurement has been on the rise for a long time but is far from a common occurrence. Three Ps own research from 2022 complements this and confirms that the usage of these types of tools are still at a low degree.
But first of all, let us quickly give an explanation to what digitalization really means. The phenomenon can best be explained as the usage of new digital technology with the purpose to innovate and create value by streamlining processes. It is simply a matter of replacing old methods and technology with new ones, whether it is moving from physical calculations to Excel, or from Excel to let’s say adedicated Spend Analysis program. Both are a type of digitalization!
Within procurement there are as earlier mentioned several different types of digital tools available. A few that is highly relevant in today’s day and age are Spend Analysis, E-Sourcing, Contract Management and Supply Base Management. These four tools are topical in the research that Three P performed in 2022, in which the actual usage of these programs was studied amongst a selection of companies. The results from the study can be seen in the diagram below.
On average, there is a whopping 58% of the investigated companies that haven’t even initiated an implementation of any of the tools.
Out of these, 22% are not even aware of the tool’s existence, or what they could contribute with. It stands clear that the development of the procurement department is as of today not ata desirable level. Thus, it is of interest to investigate the reasons to this and try to figure out what companies should do to increase their level of digitalization.
*Biffi, A.& Sacco, F. (2009). ‘Why digitalprocurement does not work in small and medium enterprises (SMEs): some insightsfrom an italian case’
**Handfield, R., Jeong, S., & Choi,T. (2019). ‘Emerging procurementtechnology: data analytics and cognitive analytics’