Procurement Digitalization Efforts Now Beginning to Bear Financial Fruit

Digital Technology and Tools.jpgAccording to a recent Hackett Group research study, a $10 billion in revenue company, capable of attaining world-class performance in procurement, can drive as much as $6 million in potential annual functional cost savings. Such procurement organizations also generate more than twice the ROI of typical procurement organizations, creating more than $10 in savings for every $1 of procurement operating cost.

The new study, entitled “Raising the World-Class Bar in Procurement Through Digital Transformation”, also reveals that in addition to reduced cost and fewer staff, world-class procurement organizations are significantly more effective than their peers in how they operate and deliver services. Transactions require discrepancy resolution two to three times less often. Annual procurement staff turnover is also 45 percent lower, a sign that staff are being given opportunities for professional growth.

The Hackett Group’s research details six digital accelerators for improving procurement’s performance and supporting business strategy over the long term. These include:

  • Digital tools to enhance customer engagement
  • Robotic process automation to perform rules-based activities
  • The use of big data and advanced analytics to drive insight and bolster decision making
  • Cloud-based applications
  • Digital workforce enablement to maximize productivity
  • Cognitive computing to simulate human thought and augment the ability of procurement to run models, make predictions, and analyze large data sets.

Christopher S. Sawchuk, a principal & global procurement advisory practice leader for The Hackett Group states that “Technology has always played an important role in enabling performance, but procurement has reached an inflection point. World-class can continue to reduce costs by embracing digital technology, and typical procurement organizations can leverage the same technology to catch up faster at less cost.

Digital transformation acts as key enabler

Today, digital business tools are converging with employees and consumers who are increasingly comfortable with new mobile technologies and business models,” said Sawchuk. “This has created tremendous opportunities for procurement organizations to transform service delivery, reduce errors, make information easier to access, and even deliver a whole new class of services.”

According to Robert Derocher, a principal at The Hackett Group, “Cloud-based software tools in particular are emerging as strong enablers of procurement activities. Supplier discover software, for example, can reduce the time it takes to find and qualify suppliers by over 30 percent. E-sourcing software can cut overall cycle time by 30 percent, with standard templates reducing data collection errors. Contract lifecycle management software can also cut the time required to find a contract nearly in half, and trim the number of lapsed contracts by nearly 40 percent.

The Hackett Group’s world-class procurement research is based on an annually updated analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of large global companies. To access a complimentary copy of the complete report, register at the following link:

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