Digital transformation of procurement for business profitability and growth

In a highly competitive and uncertain market, there are myriad challenges that procurement leaders of large and midsize companies face. Procurement challenges can vary depending on the line of business, size of the company and so on but the common challenges procurement managers typically face are in the areas of supply chain risk, vendor management, material cost, compliance and regulation issues, lack of transparency into processes, inaccurate and lack of visibility into data and lagging behind in adoption of technology for profitability and growth.

Procurement challenges and ways to resolve them

Let’s look at some of the top issues faced by procurement managers in organizations across the globe and ways to mitigate these challenges.

Supply chain risk: Supply chain disruption has become the norm since the Covid-19 pandemic and it is important to recognize that suppliers have been, and will continue to be affected by natural disasters, price fluctuations, trade tariffs and shortage of labour.

How to ensure supply continuity: With supplier risk likely to continue, procurement managers need to be aware of, and prepare the organisation with risk mitigation measures. With a robust risk management plan, your organisation’s procurement function can secure itself by avoiding over dependency on certain suppliers; continually evaluating supplier mix, and having a backup arrangement to ensure supply continuity. By adopting digital transformation of procurement and leveraging industry 4.0 technologies, procurement can stay ahead of the curve in supplier risk management by identifying which of them constitute highest risk and anticipate potential disruptions through real-time visibility into multitiered supplier network and risk monitoring.

Digitalization of supply chain management with SAP Ariba solutions, your organisation can gain complete control over supply chain risk anticipation and mitigation by tracking and reporting supplier risks in advance and not letting it impact your business. You can also can integrate your source-to-pay processes with supplier qualification, status and segmentation based on risk.

Spend reduction: In the face of post-pandemic market uncertainty, companies across the globe are facing cost-related issues for raw materials, goods as well as labour, with prices and cost volatility expected to increase. In such a situation, procurement teams look at reducing spend in order not to increase costs to customers.

How to reduce spend: In order to optimize spend reduction, procurement must leverage advanced supply chain management solutions to optimize supplier base, improve supplier negotiations and collaboration, maximise cost savings, tame tail spend, analyse off-contract spends to bring high-impact goods on contract and negotiate pricing. Using SAP Ariba Network, you can select from millions of suppliers across categories and drive down costs. With SAP Ariba guided buying solution, you can simplify and streamline procurement processes. Make better decisions by creating category plans and using data from SAP Ariba Spend Analysis solution.

Lagging behind in digital transformation: Adoption of industry 4.0 technologies is paramount to elevating the role procurement can play in effective supply chain management. Organisations that are facing challenges of data inaccuracy and timely availability of data insights are those that are not taking advantage of supply chain 4.0. There are also organisations who have had limited success with automation and still rely on manual processes affecting efficiency and timely decisions.

How to accelerate digitalization of procurement: Digitalization for supply chain management helps procurement function manage supply chain disruptions and lead the organisation towards success amidst risks and uncertainties. By taking advantage of industry 4.0 technologies for procurement, organisations can make greater use of data, analytics, AI and ML (machine learning), and take informed decisions to avert risk and boost profitability.

Companies that have been slow to adopt digital transformation can compare with their peers and industry leaders, and analyse how automation and supply chain 4.0 are actually revenue drivers benefiting procurement function in areas of efficiency in operations, supplier risk management and performance, spend management and compliance. With SAP Ariba solutions, supply chain management becomes streamlined and you gain flexibility and visibility into supplier operations, enabling its integration into your supply chain planning and execution in real time.

Improved analytics, modeling and reporting: It goes without saying that industry 4.0 technologies that includes automation, AI, ML, robotics and so on have made it possible to access state-of-the-art analytics, modeling and reporting capabilities. Your organisation’s procurement function can benefit from these capabilities by gaining access to stronger data and gleaning valuable insights from it. With SAP Ariba solutions such as SAP Ariba Spend Analysis, you can draw intelligence from your data by classifying it, and derive current information about spend based on supplier, buyer, category and part, and make informed decisions accordingly.

Sustainability with green supply chain management

Your procurement function can play a critical role in meeting your organisation’s sustainability goals by opting for green practices in supply chain management. Deciding where and who you source your materials and goods from, you can positively impact towards complying with sustainability regulations and operate ethically and sustainably. Sustainable supply chain processes not only help to build resilience in business but also increase efficiency and brand reputation.

Take advantage of intelligent procurement with SAP Ariba by leveraging the expertise of industry experts at Exalogic Consulting. Contact us here to know more.