How Close Are We to Digital Transformation in Procurement?
- All Industries
Key Findings from the JAGGAER 2019 Digital Procurement Survey
Despite all the talk of digital transformation in procurement, the JAGGAER 2019 Digital Procurement Report reveals little change since 2017. The report identifies the lack of budget and requisite IT skills, and lack of progress with data integration as well as lack of digital knowledge among procurement professionals themselves, as some of the most important obstacles to more rapid progress.
Key findings of the report include:
- 50% of procurement professionals rate their digital knowledge as up-to-date or excellent – unchanged since 2017
- 54% of organizations have now at least started the process of digitizing and automating standard procurement processes. But only 2% claim to have fully automated their procurement processes. More than a fifth still rely on fax and paper
- As one might expect, larger organizations are more advanced both in terms of awareness and level of technology and personnel
- A substantial number (40%) of organizations have already automated procure-to-pay (P2P) processes
- As far as the priorities for investment are concerned, predictive analytics, the internet of things (IoT) and robotic process automation (RPA) top the list
- Interest in predictive analytics is focused on risk management and spend management processes
- RPA is a priority for investment for the automation of procure-to-pay processes
- The level of integration has not progressed over the past two years: 30% of organizations do not integrate data from upstream / downstream processes, 54% do so manually, and only 16% have automated the integration of data from end to end
- Organizations most commonly cite lack of budget and lack of the requisite IT skills as reasons for any lack of progress
Digital transformation promises great potential for the procurement function and although only a small minority of companies have made really significant progress, JAGGAER believes that new cloud-based technologies and end-to-end data platforms, such as JAGGAER ONE, will accelerate adoption.
The report entitled “Digital Transformation in Procurement: How Close Are We?“ Is based on a survey conducted between January 15 and April 15, 2019, that enabled us to collect responses from 321 participants worldwide, across all industries and a wide variety of company sizes. In a series of upcoming posts, we will cover various findings from our survey, focusing on:
- The things we learned from our digital procurement survey
- Data and data integration and why these are key to digital transformation
- Why data is key for next steps in digital transformation
- How is data being used (digitized or paper? Where is the data coming from? What data is being integrated into which processes and how; is this manual or automated? And what are the problems presented by data silos?)
- How would companies like to use their data? (analytics, AI, RPA, etc.)
- What are the next steps for procurement?
- How should you set up a digitalization roadmap / implementation process?
- What are the technologies that are shaping the future of digital procurement?
- What will be the future role of the procurement professional?
Digitalization in procurement: Process efficiency seen as the main benefit
Process efficiency is regarded as the main benefit of digitalization, ahead of cost optimization. According to our survey respondents, the technologies that have the highest potential in this regard are supplier management, eProcurement, and eSourcing. All three are at the core of procurement activities and set the ground for the most critical activities like category management and supplier development.
But when it comes to more advanced technologies, such as blockchain, robotic process automation, and digital assistants / chatbots in particular, the results show little change from 2017. There is some willingness to invest in predictive analytics, but the majority of organizations have no plans to invest in the above-named technologies. There is still a “wait and see” attitude.
These findings reflect similar ones in the recent Hackett Group key issues study.
Slight shift in awareness of digital technologies
Our study reveals that the procurement profession is evenly split – almost 50-50 – between those who claim to be up to date on digital technology trends and those who think their knowledge falls short of what is required. Compared with our last survey in 2017, the main change has been in the number who say they are not merely up to date, but whose knowledge is “excellent” – up from 3% to 10%. The percentage who said they were simply up to date showed a corresponding fall. This suggests that there is a significant minority of technology “first movers” and “fast followers” but many are lagging behind.
However, as we state in the report, the evolution of cloud-based technologies mean that in-house digital awareness and IT-savvy make this a less significant barrier to change. Also, there is a strong correlation between size of organization and digital awareness and capability.
Data integration is critically important
A mere 2% of respondents stated that their organizations had fully integrated standard processes and were using advanced technologies – similar to 2017. Nevertheless, our 2019 survey indicates that the majority (54%) of organizations are on the road to digitalization, with standard processes established and automation started. A further 23% are at the next level, with standard processes automated and mostly integrated. But more than a fifth rely on paper and manual processes, and fax machines.
For the majority, therefore, the challenge is to integrate data and processes on a common platform for procurement. Again, there was a correlation between size of organization and progress with automation.
84% of respondents stated that they have either achieved no digital integration (30%) or only limited manual integration (so-called “pull” technologies, 54%). A more than 16% stated that they had automated data integration across processes (“push” technologies). Our report goes into considerable detail about where current integration efforts are focused, including which data points are being factored into various procurement activities (category management, supplier management, sourcing decisions, supplier evaluations and supplier collaboration.
We can conclude from these results that digital procurement has made some, but very limited, progress since we first reported in 2017. Budget is still a major issue, and it appears that, other than in the largest enterprises, the message has not penetrated through to senior management that the deployment of new digital technologies in procurement can bring benefits that go far beyond process improvement. But how can procurement professionals communicate these benefits effectively and demonstrate their value?
The first step is to arm yourself with information.
Coming up next
In the next article we will look in greater depth into the issues surrounding data and data integration, identified in the report as posing a significant obstacle to digital transformation in procurement, so stay tuned!