Digital Procurement: Your Gateway to Efficient Sourcing and Supplier Management

Procurement teams have access to more data than ever, but it's often underutilized. 

A McKinsey survey of chief procurement officers (CPOs) found that “less than 20 percent of their organizations’ available procurement data was currently used.” This is largely due to legacy tools that create data silos, limit visibility, and force teams to spend hours searching for insights buried under an avalanche of information.

Top-tier finance and procurement teams are funneling resources into solutions that can streamline their processes and help them glean more value from their data. In fact, a recent survey from PwC found data analytics to be a top priority for procurement departments through 2027. By adopting digital procurement, your team can spend less time on admin tasks and more on leveraging data to optimize spend and drive value.

What is digital procurement?

Manual processes and disorganized data hinder the effectiveness of any procurement team. They’re forced to spend the bulk of their time wrestling with spreadsheets and chasing down approvals, limiting their ability to create value.

Digital procurement—the use of technology to automate and enhance procurement-related activities—is the key to breaking free. These tools put the information your team needs in one place, allowing them to say goodbye to the paperwork vortex.

Digital procurement is more than just keeping everything organized. The most effective spend management solutions that automate manual procurement tasks also harness AI and machine learning to surface actionable insights from your data. You’re able to gain a deeper understanding of your spending patterns, precisely track supplier performance, and identify bottlenecks in your procurement processes.

Digital procurement benefits, use cases, and best practices

1. Streamlining administrative work

Finance and procurement are rife with repetitive, manual tasks that drain your teams’ time. Processing purchase orders and matching invoices is vitally important, but they don’t add much strategic value. Plus, the occasional typo is inevitable.

Adopting digital procurement will take these tasks off your team’s plate, ensuring they get done on time and without errors. Along with taking care of tedious work, these platforms can streamline approval workflows. Instead of waiting for an approval to go through, your team can spend their time elsewhere while the platform automatically routes requests to the right decision-makers, who can then use digital procurement data to make more informed approval decisions.

Centralized data management

It’s all too common for critical procurement data to live in scattered spreadsheets. Rather than digging into what the data is saying, your team is forced to spend hours and hours just getting it all together.

Digital procurement should eliminate this challenge by creating a single source of truth for all your procurement data. Everything your team needs—contracts, supplier details, purchase history, etc.—is available in a single platform. Beyond just being more convenient for your employees to access, centralized data management also streamlines audit preparedness. Easy access to contracts and supplier information ensures a smooth and efficient audit process from start to finish.

2. Enhancing efficiency and productivity

Finance and procurement teams have mountains of valuable data at their fingertips. Hidden within that data are countless opportunities to save on costs and make your processes more efficient.

Tools focused on digital procurement unlock the full potential of your data by uncovering insights that are easy for humans to miss. You gain a real-time, 360 degree view of your spending through intuitive dashboards and reports, making it easy to track supplier performance, identify category trends, and uncover areas ripe for consolidation.

Supplier relationship management

A procurement function is only as strong as its suppliers. Many companies rely on a few strong, collaborative supplier relationships for much of their sourcing.

These relationships are built on trust and clear communication, which can both be enhanced with intelligent platforms. By centralizing supplier information and communications, these solutions ensure all relevant stakeholders in your organization have access to the latest information. Moreover, they empower you to take a proactive approach by automatically tracking supplier performance metrics and alerting you when partners aren’t meeting your standards.

3. Optimizing spend and budget management

The monthly budget review has been a staple of finance functions for years. Department heads are asked to explain variances between their actual spending and budget for the month, which finance takes into consideration as it creates the forecast for the rest of the year.

Now, imagine if you could track these variances in real time. Rather than having to wait several weeks to take corrective action, you could do so as soon as they become evident. This capability comes with most leading spend management solutions that emphasize on digital procurement, and more and more finance teams are leveraging it to embrace continuous budget reviews rather than only on a monthly or quarterly cadence.

Tracking current spending in real-time also enables more precise forecasting. Intelligent tools within spend management platforms can use historical data to predict future spending patterns, allowing you to present more accurate projections to management and better manage cash flows.

4. Cost reductions

PwC’s survey found that cost control is a top priority for 65% of procurement departments. But several factors can get in the way of this goal:

Maverick spending

There’s a reason that procurement teams work to get as much of their organization’s spending within their purview as possible—it allows them to realize volume discounts, identify supplier risk, and streamline contract management.

When teams or individuals go around established processes to source the items they need, it’s known as “maverick spending.” These rogue purchases undermine procurement’s ability to generate savings and manage overall risk, and tend to be the result of overly-cumbersome procurement processes. Rather than fighting through red tape, department heads just start making purchases themselves.

Adopting digital procurement combats maverick spend in several ways:

• See where it’s happening: These tools can identify where and when rogue spending is occurring in your organization, helping you regain control and prevent it from eroding your bottom line.
• Empowering stakeholders with a user-friendly experience: An easy-to-use platform gives departments a clear understanding of their available options, the prices of those options, and how they relate to procurement policies. This diminishes the temptation to go around established protocols.
• Building trust through transparency and visibility: Besides being user-friendly, these platforms also promote trust in procurement by providing all stakeholders with real-time visibility into procurement processes.

Disjointed supplier management

Managing supplier networks can be a complex undertaking, especially for multinational companies. Without a centralized system, disjointed supplier information and communication gaps can lead to missed opportunities for consolidation and better negotiating power.

Spend management platforms equip you with a holistic view of supplier details, performance metrics, and contract information. Armed with this data, you can identify areas where supplier consolidation might increase your buying power, or where better deals are likely available.

Lack of insight into cost saving opportunities

Some cost saving opportunities, like halting duplicate purchases, are easy to spot. But others can be trickier to identify. Locating category pricing inconsistencies, for instance, can be nearly impossible with legacy systems that rely on manual analysis.

Spend management platforms that emphasize digital procurement harness AI-powered analytics to highlight spend optimization opportunities that humans alone might overlook. McKinsey explains that, “With high-value analytics powered by AI, procurement can harness available internal and external data to drive superior sourcing decisions…using AI for real-time spend analysis and insights…can enhance decision making and strategic optimization.”

Transform your procurement processes with Tropic

Leading procurement departments have transformed themselves into strategic powerhouses in their organizations by maximizing the value of their data to drive savings and efficiencies across the board. But teams can never reach this level if they’re bogged down by tedious tasks and manual processes.

Spend management solutions like Tropic can free your procurement teams from data wrangling, allowing them to spend more time on the stuff that really drives value. Our comprehensive platform empowers your procurement function across every stage of the procurement lifecycle:

Effortless intake

Manual forms are tedious to complete and leave too much room for error. Tropic’s intelligent intake system guides users through every step of the request process. It captures all necessary details upfront, ensuring smooth processing and preventing delays.

Sourcing intelligence

Tropic provides access to the largest unbiased database of SaaS suppliers on the market, complete with pre-negotiated deals. Your team can be confident that when it’s time to renew a subscription or initiate a new one, they’ll have the information needed to negotiate from a position of strength.

Expert advisory and assisted purchasing

Sourcing the right products and services is only half the battle in procurement. Securing favorable terms and facilitating successful implementation are equally critical. Tropic’s expert advisors can guide your team as they navigate these complexities and maximize savings outcomes.

Step into the new era of procurement with confidence

The new era of procurement is digital. As one technology CPO puts it, “Procurement professionals are going to need to be much more digitally fluent, so that they can learn from the data that is available to them.”

Tropic is the intelligent spend management platform built for this new age in procurement. Schedule your free demo today and see how Tropic can transform the way you source, manage, and optimize spend.