Digital transformation through
procurement software

Euro-Funding

WHAT IS THE ROLE OF OUR PURCHASING DEPARTMENT?

The primary objective of a Purchasing Department will continue to be to secure the supply of all the company’s materials/services at the best price in the market. But the transformation of purchasing into a more strategic function is inevitable if the company is to continue to sustain itself in such an unpredictable, changing and competitive market.

It is no longer enough to have a purchasing department that passes orders according to production needs, a department without involvement in R&D, without being part of the management committee….

Now more than ever, the purchasing department must have a voice and a vote in the strategy of organisations. If we do not have a purchasing department aligned with the company’s strategy, we will not be able to achieve success.

This is why one of the most important tools for optimising any purchasing department comes into play: DIGITALISATION.

A purchasing software will allow the purchasing department to focus on what is really important, on the tasks that generate value for the company and not on the merely administrative tasks of passing orders, reviewing inventories, reviewing invoices, economic reports, etc.

WHAT WILL DIGITALISATION BRING TO THE PURCHASING DEPARTMENT?

A very significant increase in productivity and efficiency in the department. In some cases, savings of 40% of buyers’ time have been recorded, time that can be invested in other tasks that generate value for the company.

It improves the image and reputation of the department not only externally but also internally. A buyer will be much more motivated if he/she performs tasks that generate value for the company and not only administrative tasks.

Improved communication with suppliers through continuous evaluation.

It will bring with it the ability to adapt to changes in the industry and the supplier market. It is about being informed of what is happening in the outside world in order to have the maximum amount of information that affects our company.

It will enrich decision making. The agility in the processing of large amounts of data will help us to detect deviations and react to them in the shortest possible time.

Digitalisation will provide traceability of information not only to the purchasing department but also to the rest of the organisation.

WHERE SHOULD DIGITALISATION START?

Nowadays there are many platforms on the market that can help us to carry out a good digitisation in purchasing, but we must be very careful with the choice of platform.

In any case, the choice of platform will depend on the degree of professionalisation in procurement and the scope that you define for it. If your degree of professionalism in the function is low, a tool that offers you too many variables to parameterise will bring you more disadvantages than advantages. This is why it is very important to assess the risks and opportunities related to digitalisation before starting to work on it.

RISK ANALYSIS IN A DIGITALISATION PROCESS

One example is what happened to the German company Lidl, which had to cancel its contract with SAP after having spent €500 million over seven years. What caused this digitalisation to fail? The reason reported in the press is that Lidl cancelled this contract because of its complexity and long duration.

It would be necessary to analyse each case in detail to identify what might have been the problems of not succeeding in a digitalisation. In general, the most common problems tend to be:

  • Opting for an ad hoc version of digitisation. In other words, companies can usually choose between a standard version or an adhoc version. The adhoc version is nothing more than adapting the standard version to the customer’s requirements. These adaptations involve a considerable investment in time by all the members of the team; definition meetings, versions, tests, validation processes… Depending on the complexity of each evolution and the number of evolutions requested, we can go far beyond the timing initially established for the project.
  • Undefined requirements. If the members of the user company’s team are not clear about where they want to go, this will produce many stops along the way, and in some cases a return to the beginning if they are not satisfied with the final result.
  • Risks of resistance to change. Many employees see digitalisation as a threat of losing their jobs.

The most recurrent problem tends to be precisely the problems of lack of definition. To alleviate this, our recommendation is without a doubt to select one person as the sole interlocutor in each of the company’s departments. In the case of Purchasing, an interlocutor should be chosen who is perfectly familiar with the purchasing strategy, normally the Purchasing Director or his or her second-in-command. This interlocutor must have decision-making power to ensure not only the achievement of results but also compliance with the established planning.

In many cases, companies appoint the IT manager as the person most responsible for the definition of the project, and this is a serious mistake.

As a next step, it is necessary to carry out an in-depth analysis of the entire department in each of its processes (demand management, purchase management, contract management, P2P, supplier evaluation, SRM and market analysis), establishing the situation in each of them, their C/P, M/P and L/P needs, the objectives to be achieved and the priorities to be executed.

Written in this way, it seems very easy, but it is a very complicated task that requires a lot of dedication and professionals to accompany you in this tough battle. What is clear and proven is that the benefits that a good digitalisation will bring you are incalculable.

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