The JAGGAER Procurement Performance Excellence Report, created with IPG (a global innovation consultancy), is based on a survey of 290 respondents comprised of CPOs and other leaders across various industries, ranging in size from medium to medium-large and 500 to 10,000 employees.
The report acknowledges the importance of digital transformation within organizations and a shift from cost-focused to strategic value creation as a result of Covid-19.
Despite going on for over a year, the pandemic continues to create a fear of uncertainty amongst businesses such as cost reduction and comfortability. This is where we have seen the need for digital transformation accelerate to aid procurement functions as we become more interconnected, particularly as traditional methods no longer suffice.
4 years since the last JAGGAER Procurement Performance Excellence Report, 2020 results indicate whilst the world continues to move at a rapid pace on digital transformation journeys, the majority of organizations surveyed are still in the early stages, or have barely started. Large companies have access to finance and small enterprises have the flexibility to adapt, whilst companies in the middle struggle to keep up, nor have the agility to be as flexible.
Covid-19 has encouraged companies to digitalise certain functions by facilitating remote working and adopting paper-free document exchanges, yet other business functions remain neglected: survey results revealed procurement suffers from a lack of digital competences and cross-functional collaboration, whilst future procurement areas remain unchanged and forgotten. It appears procurement remains heavily weighted towards operational as opposed to strategic functions, which could be aided by using digital processes.
With an initial belief the pandemic would accelerate the process for radical change and force organizations to work closely and interact with suppliers more, it is surprising to see that progress is slow amongst respondents: fortunately, 55% have digitised key processes and 43% have developed big data applications as a prerequisite, although there is the possibility for more to do the same. 70% have implemented or partially implemented procure-to-pay (P2P) technology, which shows digital procurement may be on the up – this is yet to be reflected amongst many more companies with a wider respondent base – as it remains unclear whether Covid-19 will have a lasting impact on strategic procurement.
Within the survey, respondents’ overall performance ranked as:
The majority ranked as underdeveloped, showing there is still a way to go for some organizations.
Procurement Strategy and Objectives
Some areas within organizations remain neglected, despite encouragement to adapt as a result of Covid-19. Such changes are yet to be sustainably integrated into organizations’ innovation cycles to acquire and implement the technology, products and services that will drive competitiveness and success in the future. More investment is needed for digital procurement to reduce time spent on operational activities and small tasks which can be automated.
Interestingly, 87% of companies in the survey said they see value in digitalisation and have made significant progress: 55% have digitised core processes and 9% have fully digitised their supplier communication, which shows there is still room for others to do the same.
It is fair to expect the use of AI technologies to grow as organizations develop necessary competences and an awareness of its need to help them thrive. However, it is important to note that there is no single technology fix, nor one best way: organizations need to address people, processes and data. Implementing time and digital processes into procurement will provide a basis for continuous improvement. Over time, these investments will prove themselves: organizations can align objectives of the wider business, mitigate risks, make the right build and buy decisions, achieve greater supplier diversity and ensure compliance.