The Extent of Procurement Process Automation within the UK

At the end of last week, global source-to-pay cloud solution provider, Ivalua, released the findings of its report into the extent of process digitalisation within the UK. Ivalua commissioned a study of 200 procurement, supply chain and finance professionals in firms with over 1000 employees. The top-line result is that two-thirds of them are still reliant on manual and paper-based procurement processes, estimated to be costing UK businesses about £2m a year. (For clarity, this sum was arrived at by asking the firms to estimate how much they spend annually on procurement and supplier management staff. On average, this came to £5.84m per year. Given that on average they feel they waste 31% of their time dealing with paper-based or manual processes, against total spend this means organisations are spending £1.94m per year in staffing costs that could be spent more efficiently.)

A large majority of respondents feel the procurement department is less digitally mature than some other departments, and that this lack of digitalisation is holding them back in terms of working on more strategic tasks, and limiting their ability to gain insights into spend and supplier management. Having said that, the findings also show that a very high 97% said they are investing in technology to automate procurement, with priority given to data analytics and cloud-based platforms.

Given how we much we talk about the growth in procurement’s profile within organisations, the ever expanding role of the CPO or head of procurement, the widening array of tasks procurement is responsible for and the genuine desire to add more value to the business, it is surprising that 71% believe that the rate of digitisation in procurement is low. Of those that have moved towards automating process, still only 45% of procurement processes are digitised.

Why is this when it is clear that easy access to supplier and spend data can add so much value in terms of strategic decision making?

The report suggests that the top obstacle is inability to onboard suppliers. The process is not made simple, often requires the supplier to pay fees, accept vendor-imposed terms or limits on their activity, so they aren’t incentivised to sign up. With user adoption seen as critical to successful digital transformation, “without suppliers being effectively onboarded, users can’t find the products or information they are looking for. It’s vital that organisations factor in supplier onboarding to digital transformation, otherwise they risk projects never leaving the ground, with never-ending efforts to coax suppliers into onboarding,” it says. In fact, the report also finds that alongside supplier onboarding, sourcing and contract management are the three least digitised processes.

Alex Saric, smart procurement expert at Ivalua said: “Against the backdrop of an increasingly dynamic market, featuring Brexit and growing trade friction between the US and China, the role of procurement is becoming increasingly important. Procurement is perfectly placed to help manage this growing risk landscape, support innovation and create sustainable cost savings. However, the lack of digitisation is holding procurement teams back. Whilst functions such as accounting and marketing have embraced digitisation and made great strides over time, procurement at most organisations has remained a digital laggard, leaving many businesses unprepared to face today’s rapidly shifting business landscape.”

To see the findings in full, you can download ‘Procurement – The next great digital transformation frontier?’ here.

Ivalua is used by over 300 companies across the globe to manage more than $500 billion in direct and indirect spend, and boasts a retention rate of over 98%. According to Spend Matters analysts it has seen a rapid rise to fame over the past two years. To find out what has accounted for this transformation, and to see how the firm really stands up against the competition, its product strengths and weaknesses, and for a detailed company analysis, read Spend Matters Ivalua Vendor Snapshot, available through our PRO subscription, published in seven parts. A good overview of these can be found (for free) here and an introduction to the firm here.

 

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