Ten reasons why investing in procurement tech is a must

The simplest way to explain procurement is that it is the act of arranging for products or services that are essential to run your business on a day-to-day basis. Large companies have an entire department dedicated to procurement. In MSMEs, it can even be a one-person show, making it all the more difficult to keep up with the challenges this important business function may bring. 

In today’s globalized economy, where supply chain networks, even for MSMEs, may be spread across countries and continents, procurement is the first and most important step to factor in profits - if you are able to cut costs at this stage, you will be in a position to transfer this advantage through your supply chain. However, the COVID-19 pandemic has added another layer of complexity to procurement, says a 2022 report by strategy consulting firm Hackett Group. 

Today, the business looks toward procurement to reduce the risks to the supply chain. In fact, the Hackett Group study mentions that in its global survey, for the first time ever, procurement managers report that managing risk has become more important than keeping costs low. With consumers and governments growing more conscious about sustainability and ethical sourcing, businesses are facing the complex task of recharting their procurement policies so that it ticks off an increasing list of conditions. 

In this scenario, here are ten reasons why investing in tech to drive procurement will make a massive change in the way you operate your business:

1. Reduce risk to your supply chain 

The Hackett Group survey indicates that procurement experts expect the supply chain disruptions, which peaked in December 2021, will continue well into the rest of 2022. Some tech companies also report that such disturbances will be present in the global economy in 2023. 

Even if the threat of COVID-19 is behind us, other factors, such as wars, natural disasters, labor fluctuations, and price changes can drastically affect your supply chain. This is where procurement tech, with its vast network of suppliers that fulfill certain risk criteria, comes in handy. 

2. Decrease spending

The shortest path to profitability is the trimming off of unwanted and unforeseen spending. The COVID-19 pandemic showed us how prices can skyrocket within a short span. In such situations, the procurement team will have to use every trick in the book to reduce cut costs, be it by managing supplier relationships, renegotiating contracts, and even intelligently locking in prices as a sort of insurance against future price rises. Procurement tech can streamline all these processes for you, as per your needs.

3. Transform procurement as a strategic function

As we’ve seen before, procurement is no longer about reducing costs and risk to the supply chain. Increasingly, large businesses are looking at procurement leaders to achieve other business goals, such as meeting environmental, social, and sustainability (ESG) targets. 

Procurement is also having more of a say in deciding how to improve the quality of products (through intelligent supplier selection) and devise ways to reach the market faster. There is no reason why MSMEs should not apply the same principles to their businesses to reap greater benefits from the procurement function.

With technology, several key processes can be automated and you’ll gain insights that you can trust to make strategic decisions. You’ll also have more time at hand to develop relationships with your multiple stakeholders, rather than get caught up in routine tasks and emergencies. 

4. Promote sustainability

When you lead the procurement function, you have a say in deciding what to buy and from where. It’s only natural that this business function acts as a stepping stone for sustainability.

Today, sustainability is not just about changing light bulbs to LED ones or preventing wastage. In some industries that involve the handling of polluting chemicals or cheap labor, sustainability is a legal requirement for trade, where you have to factor in cutting down emissions, reducing and reusing waste, and sourcing your products from ethical suppliers who comply with labor laws. You'll also have to reduce the strain on logistics by intelligently allocating resources as per your demand and maintaining a reserve for emergencies. 

A good procurement technology software can simplify these complex requirements on a single platform, so that you are able to meet several business goals at once. 

5. Implement digital transformation in procurement

Despite the many advantages of automation that present-day procurement tech provides, several market research studies reveal that procurement is essentially a manual process, and it is hardly used as a tool to drive decision-making in the organisation. 

If that is the case with you, you are losing out on several benefits that can change the entire map of your supply chain. Whether it is lean automation or the use of analytics and Artificial Intelligence, transforming procurement through digitization is an added bonus for your business.

6. Develop next-gen capabilities 

Data is at the core that powers next-gen capabilities like analytics, machine learning, and artificial intelligence. Making sense of the vast amount of data you generate, through data visualization tools and data management techniques, whether your own or through third-party, can help you in a number of ways - identify potential suppliers, enable you to craft better contracts, and anticipate supply chain disruptions, among other advantages.

7. Match skills and talent to business needs

Finding the right person to handle the complex tasks that procurement in today’s business world entails, is another task that you as a business owner must undertake. You may have the right strategy in place to execute the demands of your business, but the wrong people, and vice versa. 

When you work with a procurement technology expert, you’ll first be able to evaluate where you stand in your digital journey and whether your procurement team has the capability to simultaneously reduce cost, manage risk, and handle suppliers and vendors while ensuring conformity to global and local norms. If you work with contract workers or freelancers, you can also equip them and train them with the right tools to handle the important functions under procurement. 

8. Modernise the procurement function

As we’ve seen before, procurement is often an area ignored in digitization. When you modernize the procurement function, you will firstly enjoy the distinct advantage of handling sourcing, procurement, and payments on a single platform so that you can comprehend at a glance, the ins and outs of money flow into this function. You'll also be able to track, monitor, and administer tasks and payments to your suppliers, vendors, and any external workforce that you may employ, and ensure your entire business is compliant with the applicable regulations. 

9. Make your business agile

When it is business as usual, you may not notice the critical role played by procurement. However, when there is any disruption to the supply chain, it is procurement that is expected to act as a crisis manager. 

Technology becomes great support here, arming you with the right predictive tools to anticipate any shortfalls in supply and providing you with vetted alternatives. Further, you will gain visibility over your entire inventory in real-time, allowing you to allocate resources efficiently. Agility, or the ability to respond to changes in a fast and efficient manner becomes critical even in non-emergency cases, such as launching a new product into the market or making changes to your pricing, another area where procurement tech helps.

10. Drive better collaboration with stakeholders

To summarise, procurement is the touchpoint of multiple stakeholders. With technology, you can transform this function as an opportunity to bring greater collaboration with all those involved in your business, so that you can eliminate at the beginning itself, and drive better understanding between the parties, so that your business goals and expectations can be met.