By Rachel McCart, Director of Product Marketing, SAP
A procurement function that evolves in response to macroeconomic trends is a critical linchpin to the health of any growing business. And mid-sized companies are taking note, improving their internal purchasing processes with the latest technologies.
Research by Oxford Economics in midsize businesses shows that about half of procurement leaders surveyed are adopting digital technologies to enhance core capabilities. They include cost analysis, invoice management, contract management, supplier management, purchasing, sourcing and strategic procurement planning.
Integrating procurement and finance solutions can help align strategies to achieve common organizational goals.
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But businesses must do more as disruptions occur faster and more frequently, deeply impacting performance and causing higher lost profits. Procurement processes must undergo structural changes to become resilient enough to secure margins, maintain compliance and increase efficiency.
To build resilient procurement processes, midsize companies must focus on two critical goals in their digital transformation initiatives:
Broaden spending visibility with harmonization
Mid-sized businesses face significant challenges in pursuing aggressive growth goals. According to Oxford Economics, 41% of mid-sized procurement leaders identify macroeconomic issues as their biggest threat. At the same time, their top goals include attracting new customers, increasing revenue and improving profitability.
Integrating procurement and finance solutions can help align strategies to achieve common organizational goals. While procurement may prioritize the efficiency of service delivery, finance may focus on metrics such as earnings per share and earnings before interest and taxes. However, both functions agree on facilitating efficient processes, measuring profitability, optimizing resources, reducing costs and improving financial health.
Differentiate suppliers based on real-time information
To build a resilient procurement strategy, midsize companies must diversify their suppliers and adopt a risk-based approach. However, 30% of procurement leaders see limited supply chain visibility and ineffective supplier relationship management as the top risks.
Procurement leaders can overcome this barrier by using modern analytics for real-time information on risks while strengthening corporate trust and supporting growth goals. With a cloud-based supply chain management solution, they can consolidate data and leverage it to forecast demand and streamline logistics. In addition, more informed decisions can be made faster by analyzing spend history, supplier performance and potential risks such as inventory shortages or regulatory non-compliance.
How to apply technology strategically
The key to achieving these goals is the strategic and comprehensive adoption of the latest technology. Cirque du Soleil is a typical example of a mid-sized company taking this step.
The thriving live entertainment brand streamlined its procurement processes by leveraging digital tools to manage vendor pricing, policy spend and expense reporting for more than 6,000 trips per year and thousands of room reservations per month. And with AI guidance that speeds procurement processes and enhances decision-making, staff and artists now find it simpler to request the goods, services and bookings they need.
Cirque du Soleil’s impressive procurement improvements are based on these principles:
Create a comprehensive digital foundation in the cloud
Adopt a cloud-enabled ERP data flow between procurement, finance and other business departments. This technology supports real-time data sharing and collaboration, which is critical to making informed decisions and responding quickly to disruptions.
Prioritize the use of advanced analytics and artificial intelligence
Advanced analytics and artificial intelligence provide deeper insights into spending patterns, supplier performance and market trends. AI-based tools can help predict potential disruptions, identify cost-saving opportunities, and recommend strategic actions to optimize procurement processes.
Embrace the benefits of the cloud
Cloud-based solutions offer flexibility, scalability and accessibility, helping to ensure procurement teams can access critical data from anywhere, anytime. This facilitates better collaboration with global suppliers and partners and enhances security for sensitive procurement data.
Improving the supplier relationship management system
Supplier relationship management solutions bring together supplier communication, performance tracking and contract management. These solutions automate routine tasks, allowing procurement professionals to focus on strategic activities and building relationships.
Automate routine tasks
Automation boosts efficiency by reducing time spent on repetitive tasks such as invoice processing, order management and compliance checks. This allows procurement teams to focus on strategic decision-making and value-added activities.
Where success in a dynamic economy thrives
Real-time information, AI-based analytics and cloud-based solutions play a key role in increasing the resilience of procurement processes.
However, the impact of these technologies is more important than mitigating risks, optimizing resources and aligning procurement strategies with overall business goals. Most importantly, they enable mid-sized companies to confidently build their brand and grow – regardless of the financial situation.
Find out how mid-sized businesses are shaping their procurement strategies in the SAP-sponsored Oxford Economics study, “Managing Digital Transformation: The growing centrality of procurement in mid-sized organizations.”
