Smaller, mid-size businesses now looking to digital procurement solutions to cut costs, bolster strategy and growth, report says

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Business leaders in the supply chain procurement space are continually seeking out ways to streamline procurement methods and cut costs. As the possibility of a looming recession remains on the minds of decision makers, procurement-minded industry members are considering how electronic procurement software — aka digital procurement or eProcurement — can ease these efforts.

Levvel Research recently launched its “2019 Procurement Insight Report,” which evaluates current industry trends and spend management strategies following a market-wide survey conducted in April 2019. The report, sponsored by Coupa, examines the ways in which procurement automation software is being implemented as procurement teams continue to shift.

“When organizations move from manual to automated procurement, they more fully become what they often seek to be for the company — a highly strategic and cost-saving operation,” representatives noted in the report.

In years past, the report notes, companies may have foregone implementing automation into their procurement processes. Business leaders frequently considered a company’s volume of goods or the amount of services offered as a primary factor in the decision as to whether implementing automation and other technological updates was worth the effort in proportion to the companies’ scale.

“This difference is also related to the constrained resources of organizations in small- and medium-enterprise (SME) and middle-market segments for eProcurement technology adoption paired with the limited affordable options available,” the report states.

(“Levvel Research defines organizations with revenue greater than $1 billion as enterprises, organizations with revenue between $501 million and $1 billion as upper middle market (UMM), organizations with revenue between $51 million and $500 million as lower middle market (LMM), and organizations with revenue between $1 million and $50 million as SMEs,” the report says.)

As companies’ procurement goals are evolving, their outlook on eProcurement integration also seems to be shifting. Further implementation of technology at all levels of business is allowing for new trends to emerge in terms of the way procurement teams operate, and who adopts and uses eProcurement technology, the report suggests.

Procurement teams are more often becoming required to procure “intangible” business products, including contingent labor for IT operations, legal services and investment-focused technology systems. The report states that procurement leaders’ have become increasingly interested in carrying out procurement functions that uphold their business’s financial and operational decisions, in addition to minimizing risks to the company’s competitive advantage, rather than solely focusing on controlling spend.

The trend appears to be influenced by supply chains’ growth in international, competitive markets that face challenges due to economic conditions, trade laws and an evolving emphasis on sustainability and ethical sourcing, according to the research.

The survey also states that the procurement technology environment is becoming more diverse and innovative than it has been in the past.

“eProcurement technology providers are offering tools that enable more strategy, risk control and supply-chain-centric management to align with the shifting values of procurement leaders,” the report states.

Technology providers are also more likely to adopt digital transformation strategies, such as enabling a more technical environment by fostering a digital procure-to-pay process through multi-network business platforms, representatives note as one example in the report. The availability of eCommerce-style marketplaces for procuring goods and services is also indicative of this trend, the report notes, as well as the growing use of emerging technologies like artificial intelligence to detect possible fraudulent spending.

A rise in collaboration between traditional procurement providers and solutions providers such as supplier risk management services has also led to a growth in procurement options available to clients, the research states.

“Levvel Research expects increased adoption of eProcurement among smaller markets in the near term, enabled in part by the changes in providers’ offerings and delivery models,” the report states. “Overall, eProcurement adoption is being planned sooner by segments that have traditionally delayed adoption until they had the growth and resources to justify the need.”

The report states that one in four lower middle market organizations plan to adopt eProcurement software in the next 12 months, according to the April market-wide survey, and 33% of such organizations expect to implement eProcurement software in the next year or two.

Within the next five-plus years, the survey found enterprises to be the most likely revenue segment to plan for adoption of eProcurement software. Among SMEs, 40% aim to purchase an eProcurement solution within the next year or two.

“These adoption plans by smaller organizations indicate the eProcurement tool is increasingly being implemented proactively rather than reactively, and is being viewed as a vital instrument to support growth,” the report said.

In the next article about the report, we’ll look at its findings that show how industry leaders have begun to use the technology to target new methods of cost reduction and to yield growth amid evolving industry standards.

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