Purchasing processes that rely on manual procurement are incredibly labor-intensive, time-consuming, and paper-intensive. The focus on digitization enables improvements in procurement efficiency and performance measurement that will have a positive impact on a company’s bottom line. At the same time, it encourages innovation while lowering risk. As a result, incorporating digital technologies into the procurement transformation process has the potential to reduce costs, save time, and improve strategy and decision-making. This article discusses the digital technologies that are key to transforming the procurement functions and pave the way for new applications and capabilities across the supply chain.
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Collaborative Sourcing Tool
Collaborative sourcing tools should clearly define the company’s objectives and be able to boost effectiveness, efficiency, and long-term viability. The effectiveness target is to reduce the total cost of ownership (TCO) while increasing revenue. Sustainability means reducing supplier risk, constantly innovating, and displaying a flexible working method. Aside from effectiveness and sustainability, it is critical to enhancing efficiency. Efficiency implies that procurement professionals have insights or actionable intelligence to improve the customer, supplier, and workforce experience and that it should inspire teamwork. The diagram below shows how digital procurement can improve three aspects of procurement. As a result, strategic sourcing will become more predictive, while transactional sourcing will become more automated and proactive regarding supplier relationship management.
Spend Analytics Tool
Spend visibility is an organized and detailed system that records every dollar and cent spent in the same purchase transaction through cash traceability and accountability throughout the purchase process. Spend analysis has catapulted procurement from being an irrelevant purchase activity to at least one of the critical, high-priority functions. Spend visibility can highlight procurement categories where excess funds are assigned relative to the value derived by the organization. It puts the spotlight on those projects where the corporate is bleeding money. Supplier spending analysis can help the corporate spot the most effective deals and costs, leading to a better long-run relationship with efficient suppliers. Procurement managers can plan and maintain optimum inventory levels and get pleasure from economies of scale. Therefore, businesses must train their workers and invest in spend analysis software compatible with various systems and technologies within the firm to perform this efficiently.
Blockchain technology, also known as distributed ledger technology, is a game-changing technology that uses decentralization and cryptographic hashing to create a decentralized distribution chain that allows everyone to access documents simultaneously. It significantly reduces the number of intermediaries and eliminates potential data errors and delivery delays. The transparency ledger of changes also preserves document integrity, which leads to trust and accuracy in the asset. For instance, A retailer can use the blockchain platform to determine whether their products are in good condition or damaged, as well as shipping statuses such as packaging and shipment. Blockchain technology also enables shipment tracking and delivery time estimation.
Artificial Intelligence (Al) Technology
Using intelligent computer algorithms enables procurement organizations to solve complex problems more effectively. It works with various software applications, ranging from spend analysis to contract management and strategic sourcing. It is helpful in guided purchasing, chatbot applications, inventory management, error detection, and manual task automation. AI uses cutting-edge computer technologies that can learn and adapt to human behavior. Typically, it helps to complete complex tasks more quickly than people. AIcanplay an essential role in procurement by providing additional insights based on highly complex and large data sets. AI has the potential to change work practices in even the most complex organizations drastically. In addition, it has aided in developing a more effective and intelligent strategy for streamlining business operations.
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Internet-of-Things (loT) Technology
IoT and smart gadgets are becoming increasingly essential for use in homes, travel and transportation, health and personal care, retail, agriculture, construction, etc. IoT involves using gadgets embedded with software, sensors, network, and other technologies connecting to the internet and exchanging data wirelessly. In addition, IoT gadgets help the industrial monitoring of the Utility and Potable water pumps in the utility area, which is essential to support the gas send out the reliability of the terminal to improve human resources efficiency and better use of data. For example, IoT technology in the Oil and Gas and EPC sectors helps facilitate communication by gathering more data and improving efficiency, safety, and security.
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Wong Kok Fu, ADPSM. (2019). Internet-of-Thing (IoT) Applications for Digital Procurement. SIPMM Publications. Available at SIPMM: https://publication.sipmm.edu.sg/internet-of-thing-iot-applications-digital-procurement. (Accessed 14 June 2022).