BrazilTech trends in procurement and the source-to-contract process
Technology is helping procurement evolve from a transaction-focused function into a strategic driver of business value. A new Capgemini Invent report looks into this evolution across procurement’s end-to-end value chain.
Procurement covers the purchase of everything that is essential to run a business – from back office supplies to raw materials and tools to build a value proposition. Historically, the procurement department has had a focus on buying for the right terms, including aspects such as price, delivery and quality.
Things are changing: many have realised in recent years that a more curated approach to procurement can deliver a strategic boost across business functions. “Procurement sits right in the middle between engineering, production, supply chain management and finance,” explained Sander Gerritse, a senior management consultant for supply chain & procurement at Capgemini Invent in the Netherlands.
“Companies who can master the art of procurement are benefitting from faster order cycle times, higher process efficiencies, larger bottom-line savings and lower overall costs.” Against this backdrop, “optimising procurement means improving margins and competitiveness,” he said.
At the core of these changes is advanced technology, which is being deployed to develop tailored solutions for various stages of the procurement lifecycle. The researchers examined tech’s added value across procurement’s main building blocks – a look into three of those areas: strategic sourcing, supplier management and contracting (together known as the ‘source-to-contract’ functions).
Strategic sourcing
Sourcing is the overarching term that covers everything from selecting the right supplier to negotiating and signing a contract – all the way to monitoring and managing supplier performance. According to Capgemini Invent’s Netherlands-based procurement transformation manager Dico van Dijk, sourcing is “the backbone of any successful procurement function regardless of industry.”
“It is essential to understand supply markets, search and evaluate potential suppliers as well as select the best suppliers after negotiating in alignment with strategic objectives,” he said.
Technology has vast potential here. Tools such as advanced analytics, electronic tendering, automated auctioning and bid evaluations allow businesses to increase competition and reduce prices as a result – all while generating valuable data with minimal effort. Digital platforms also allow for collaboration with suppliers, who can suggest improvements to requested product specifications based on their own expertise – boosting quality while also upping competition and cutting prices.
And lastly, tech can help build a single source of truth for procurement – from intelligence on supplier markets to a detailed overview of internal needs and functionalities. Results include a more efficient sourcing process, lower reporting times, and the ability to transform procurement and adapt to market changes – pandemic disruptions, sustainability, etc.
Supplier management
Once sourced, suppliers need to be monitored and managed – a complex task given that “large supply chains, both globally as domestically oriented, might include thousands of suppliers and third-party organisations,” explained Gerritse.
Managing this complex web requires vetting and qualification, performance checks, development initiatives and risk management – all of which can be managed through many of the tools in the market. Automated systems can select suppliers based on inputed criteria, automated background checks can help with vetting, and unified dashboards can help keep tabs on performance. Some systems even suggest replacements if performance is dwindling.
While pre-selecting risk management criteria is a challenge – given the fast rate of market changes – the researchers highlight advanced tools that can monitor external data such as social media posts to catch risks in real time.
Contracting
Down to brass tacks: contracts hold the entire procurement lifecycle together, and can be crucial in dictating how much freedom a business has to manage its suppliers. Several solutions exist to make this process easier and more beneficial.
Smart contracting technology ensures speed, efficiency, security and timely payments. Digital contract archives can hold vast pools of valuable data for reference, while also making reporting and transparency a seamless affair. Tools also exist to monitor the performance on a contract, and suggest strategic upgrades to match business objectives.
About the research
To compile its report, Capgemini Invent surveyed leaders from 30+ globally-oriented providers of digital procurement solutions, asking them to share their views across seven dimensions within the procurement value chain: Strategic Sourcing, Contracting, Supplier Management, Purchasing, Accounts Payable, Reporting and Analytics, and Pricing.
