What Is Digital Procurement?
Digitalization is no longer the leading edge of procurement innovation — it’s the new industry standard. Businesses of every size and in every industry are using digital procurement to standardize processes, unify systems, and contain costs.
Companies that still rely on manual procurement processes are at a competitive disadvantage. That’s because manual procurement processes tend to be inefficient, fragmented, and error-prone. Fortunately for procurement teams, the shift from manual to digital procurement has never been easier or more cost-effective.
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What is digital procurement?
Digital procurement is the use of technology to optimize and automate procurement processes and workflows. Digital procurement involves the use of apps and systems to capture, consolidate, and manage all of the data and information related to procurement.
Businesses choose digital procurement because it reduces their dependence on spreadsheets and email threads and because it standardizes their processes. Digital procurement means letting go of manual data entry, paperwork, and complex request management and instead opting to use software that streamlines procurement through integration and automation.
Benefits of digital procurement
Businesses embrace digital procurement for many reasons. These include the need for greater efficiency and the desire to build procurement processes with more structure and less fragmentation. Other motives for automating procurement include solving for high error rates, reducing manual work, and adding visibility to the different workflows and processes that fall under the procurement process umbrella.
Regardless of the reason behind the change, digital procurement delivers several key benefits to both procurement teams and the business as a whole. In particular, digital procurement helps businesses stay competitive by:
- Enabling process standardization
- Accelerating integrated procurement
- Containing costs
- Enhancing visibility and control
Enabling process standardization
One of the most frustrating aspects of procurement for many teams stems from the lack of standardized processes. This happens when different teams, departments, business units, or employees use their own unique variations of a process, such as purchasing or sourcing.
Process standardization can also be compromised by the passing of time. For example, when a particular process is revised after a long period of doing it another way, some team members may resist the change, resulting in two different versions of the process.
Whatever the cause, the failure to standardize procurement processes comes at a cost. It’s more difficult to manage, control, and oversee multiple versions of the same process. Results may lack consistency, and IT teams have a harder time enforcing security and governance requirements. Unstandardized processes can also be a bad look for the department in the event of an audit or review.
Digital procurement can solve the problem of process standardization. The tools used to digitalize procurement allow teams to build structured processes using an intuitive visual interface or customizable templates.
Low-code options are popular because they don’t require new code each time a change is needed. In addition to empowering the procurement team, low-code options help the IT team conserve its resources.
Accelerating integrated procurement
Procurement teams rely on a complex array of apps, systems, data, and forms to do their work. They also depend on input and action from people in other departments and teams. That makes an integrated procurement process absolutely essential.
Integrated procurement refers to processes and workflows that resist data silos and barriers to collaboration. It connects the procurement process to both new and legacy components of the existing tech stack, as well as any relevant apps and software tools (for example, an ERP system, SAP, Netsuite, and other finance software).
Digitalization helps teams achieve integrated procurement by eliminating manual work, connecting all subprocesses, and expanding the range of automation capabilities.
Digital procurement helps businesses control costs by eliminating inefficiencies, preventing errors, and reducing manual work. Procurement processes that make it difficult for approvers and requesters to access data or take actions consume more time than is necessary.
Errors can cost companies directly if prices are entered incorrectly or discount deadlines are missed, or indirectly when mistakes have to be corrected. Manual tasks take up time that could be better spent on value-producing activities, such as price negotiations or vendor relationship management.
Digital procurement delivers more efficient processes through system integration and automation by:
- Dissolving the data and collaboration silos that otherwise take time to work around
- Reducing manual work such as data entry, approvals, and sending notifications and status updates
Enhancing visibility and control
Managing procurement is a complex undertaking. It requires oversight of many moving parts as well as action and input from internal and external stakeholders. As a result, procurement teams often struggle to retain visibility and control over requisitions, purchase orders, approvals, and supplier management tasks.
Digitizing procurement brings an end to process opacity in five key ways:
- By creating records of all procurement activities and transactions.
- By automatically updating these records across connected databases and apps.
- By allowing users to enforce rules and conditionals that prevent missing or incomplete information, such as SLAs, due dates, and other essentials.
- By granting internal and external stakeholders the ability to access documents or update information via a secure link.
- By offering customizable views, reports, and dashboards that allow managers and team members to track statuses, measure KPIs, and identify problems or bottlenecks.
How digital procurement leads to procurement transformation
Procurement processes are made up of both tactical and strategic components. On the one hand, procurement processes refer to tasks such as requisitions, purchasing, and invoice payment. But effective procurement goes beyond these tasks to include activities such as planning, strategy, and supply chain management.
As businesses start to view procurement as more than just a transactional center, they undergo what’s known as procurement transformation. The key difference here is that the procurement team becomes more of a strategic partner for the business, and less of a fulfillment center that handles purchase orders and requisitions.
On a practical level, procurement transformation means moving away from a legacy procurement framework toward procurement processes that are characterized by efficiency, automation, and the integration of data, apps, and systems.
Building blocks of a digital procurement strategy
The right tool can go a long way in helping procurement teams move past manual processes, but there’s more to digital procurement than software and apps. Successful procurement is the result of the right people, processes, and technology working together well and strategically. Here are the six essential building blocks of an effective digital procurement strategy:
- Unified tech stack
- Standardized processes
- Collaborative relationships
- Feedback loops
- Low-code automation
- Talented people
1. Unified tech stack
Many of the problems that plague procurement processes stem from fragmented tech stacks, which occur when legacy systems and apps do not work well together. Disunity in the tech stack has many symptoms, including manual data entry, silos, process gaps, and spreadsheet sprawl. By unifying the components of the stack, teams help information flow more easily and get more from their existing apps. This is a feature known as “stack extensibility.”
2. Standardized processes
Process standardization means completing every instance of the process or workflow following the same sequence of steps. Standardizing processes results in more consistent outcomes by avoiding delays and errors and minimizing risk.
While standardization is important for all types of business processes, it is essential for the high-stakes processes and workflows managed by procurement teams.
3. Collaborative relationships
Some processes remain contained within a single department. This is not the case with procurement processes, which typically require input or action from a variety of internal stakeholders, some of whom are not part of the procurement team and who may be part of another department altogether.
External stakeholders are also critical, as vendors, suppliers, and logistics providers also play key roles in the procurement process. This makes it especially important for procurement teams to have the time and tools to build the partnerships that drive an effective procurement strategy.
4. Feedback loops
Because procurement is such a collaborative effort, teams need centralized avenues to receive feedback from all stakeholders. This feedback helps them identify opportunities to improve and optimize their processes and workflows. It also makes the procurement team aware of problematic patterns such as high error rates, consistently broken handoffs, and issues with SLAs or data silos.
5. Low-code automation
If the past few years have taught us anything, it’s that some disruptions cannot be anticipated. Nowhere is this more true than in the challenges to the supply chain. One strategy procurement teams can depend on to insulate themselves from future disruptions is low-code automation.
Low-code automation fuses automation capabilities with a low-code framework. This allows teams to stay nimble and adaptive so that they can respond quickly to changes in their supply chain or their processes.
Procurement teams access features and modify their forms, workflows, and processes using a visual interface, which dispenses with the inconvenience of sending every change request to IT. Similarly, automation can be configured quickly and easily without the need for IT intervention.
To be clear: low-code automation keeps the IT team in control, but it allows procurement teams more flexibility and access than many legacy systems.
6. Talented people
Your procurement team might use the most sophisticated apps and systems available, but you still need the right people to make things happen. For some things, like building relationships with vendors or making complex decisions, there just isn’t a viable substitute for a talented procurement team.
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Digital procurement tools
Businesses ready to move past manual processes have many choices when it comes to digital procurement tools. To simplify the selection process, it’s helpful to begin with some basics.
The first choice will be the software type. On one end of the spectrum, we find software options that are designed specifically for procurement processes. What’s helpful about this type of software is that it is built to address the most common problems and challenges procurement teams face. But these point solutions may also be a liability if what the team really needs is flexibility.
At the other end of the spectrum are low-code tools that, in addition to their uses in procurement, can be easily modified to handle other types of processes and workflows. For teams reluctant to add yet another point solution for a single department, a low-code tool may be the best choice.
The reason? The adaptability of low-code tools means that they can also be used by team members in other departments to optimize their processes and workflows, which creates a unified, integrated system across the enterprise. In this sense, low-code tools are a good choice for businesses that expect to scale processes at some point.
Digital procurement tools, features, and benefits
|Integrations||– Enhances the components of the existing tech stack to avoid data silos|
– Create seamless user experiences for internal and external users
|Automation||– Reduces the amount of manual work in procurement workflows, including data entry, converting incoming requests into records|
– Captures incoming requests from multiple channels, emails, notifications, status updates, and status reports
|Reporting and visibility||– Customizable reports allow teams to instantly track SLAs, statuses, KPIs, and monitor progress for all procurement team activities|
– Managers can see who is responsible for each item in the process flow, and external stakeholders can see the status of their requests
– Simplifies spend management.
|Security||– Includes industry-standard features to protect data|
– Typically includes SSO, 2FA, permission management, and password complexity standards
– Must also be able to meet internal and external compliance and governance requirements
|Forms and portals||– Standardizes incoming purchase requisitions and outgoing purchase orders|
– Organizes forms and documents into a single, self-service portal that internal and external users can access (if they have permission)
|Rules and conditionals||– Applies a customizable layer of control to processes and workflows|
– Prevents missing or incomplete information and routes items to the appropriate reviewer or system based on user-set criteria
|Templates||– Customizable process and workflow models that teams can use out of the box, but which can be easily modified for specific use cases|
|Tracking||– Allows internal and external stakeholders to track the status of their items through automatic notifications or through the use of a secure link|
|Low-code framework||– Allows procurement team members (with permission) to make some changes on their own using a visual interface instead of code|
– Conserves IT bandwidth.
Best digital procurement tools
What determines the best procurement tool for any team depends on the capabilities needed, integrations required, and budget. Below are some of the best (and most popular) digital procurement tools available.
Pipefy is a cloud-based, low-code procurement tool used by businesses in many different industries. The reason for Pipefy’s popularity is its ease of use, fast implementation, and adaptability.
Pipefy balances out-of-the-box accessibility with customization capabilities, so teams can hit the ground running but have plenty of room to modify their processes and workflows as needs evolve.
Businesses use Pipefy to manage a variety of procurement and finance processes, including:
- Accounts payable
- RFI, RFP, RFQ
- Purchase orders
- Purchase requisitions
- Supplier management
- Contract management
- Expense reimbursement
Pipefy includes all of the features mentioned above, as well as an expansive template library for virtually every procurement and finance process imaginable.
Fraxion is procurement software that allows you to automate specific aspects of your procurement workflow. It offers data collection and business intelligence features and integrates with several different enterprise resource management (ERP) systems. Since it is cloud-based, Fraxion is accessible from anywhere, making it a good option for companies with remote workers or decentralized operations.
Fraxion is used to manage processes including:
- Purchase requisition to PO
- Invoice approvals
- Budget Control
- Audit compliance
- Expense management
Tradogram is a procurement tool that offers customization options, analytics tools, and a system for measuring vendor performance against established KPIs. There are also analytics and forecasting tools on this cloud-based platform.
Tradeogram allows teams to integrate some functions with other business software systems. Processes managed with Tradogram include:
- Strategic sourcing
- Supplier management
- Contract management
- Order management
- Spend analysis
Procurify is an all-in-one spend management platform that helps teams track spending, organize purchasing documents, and manage a range of procurement activities, such as requests, approvals, purchases, receiving, and matching.
- Customizable approvals
- Purchasing workflows
- Customizable budgets
- Audit logs and analytics
- Physical and virtual spending cards
Ariba from SAP is an end-to-end procurement process management system that may be a good fit for enterprise-scale businesses. Ariba helps organizations manage an array of procurement functions including supplier management, strategic sourcing, and direct spend.
- Source to pay management
- Unified supplier records
- Supplier qualification and segmentation
- Supplier risk management
Digitize your procurement processes with Pipefy
Pipefy helps procurement teams optimize, automate, and scale all their processes and workflows. An intuitive user interface gives procurement teams easy access to the features and customizations they need to stay agile. IT teams benefit from a low-code framework that conserves developer resources.
Pipefy implements quickly and customizes easily. A deep template library enables teams to get started right away on virtually any procurement workflow or process. When teams are ready to scale, Pipefy is ready to help.