The Digitalization of Procurement: What Opportunities Does It Offer?

For business managers, purchasing is not an easy task. It requires reliable and up-to-date information before placing an order. The digitalization of offerings and their online availability greatly simplifies the procurement function by providing essential elements for decision-making. This article offers some insights into this crucial topic.

Traditionally, procurement departments have often been overshadowed by research and development offices or other strategic areas of the company. However, changes in the global economy over the past fifty years have brought procurement to the forefront. Increased competition among producing countries has led companies to seek new ways to improve their margins. Raising prices was no longer viable due to fierce competition, particularly from countries with lower labor costs. Procurement services became a tool for improving profitability by negotiating better prices with suppliers. The logic is simple: if companies buy at lower costs while maintaining their selling prices, their profits automatically increase. This highlights the critical importance of focusing on procurement, especially when considering that for European companies, supply chain costs account for approximately 50–60% of their total revenue.

It is perhaps unfortunate that buyers have often been reduced to mere "low-price negotiators" with a minor role at the end of the ordering process. The term "cost-killer" has gained global popularity but does not fully reflect the complexity and expertise required in this profession.

The Strategic Role of Procurement

Over time, procurement has regained its rightful place as a strategic function. A good example is the traditional stationery market, which has evolved significantly, creating networks across countries. Procurement departments have capitalized on this by learning to foster competition among suppliers. Business leaders have since recognized the productivity gains that procurement services can deliver.

Procurement now lies at the heart of a diverse network of stakeholders. It would be simplistic to define the buyer’s role solely as negotiating low prices. Today’s challenges require procurement professionals to address a range of demands, ensuring sound decision-making based not just on price but also on quality, innovation, and strategic alignment.

Technological advancements are so rapid that purchases must factor in innovation. Buyers must move beyond reacting to supplier proposals and take an active role in steering supplier engagements. Procurement decisions, therefore, must strike a balance between cost-effectiveness and quality assurance.

Building a Strategic Relationship with Suppliers

Procurement today involves strategic planning with suppliers. In some cases, suppliers set the pace for technological advancements, creating a dependency that is unsustainable in the long term for buyers. Developing a comprehensive procurement strategy is essential. For instance, in consulting services, the procurement team can influence provider selection by assessing genuine business needs and fostering fair competition through multiple bids. This underscores the procurement function’s critical role as a central link in the execution of company projects, ensuring the security and efficiency of the entire process.

Procurement as a Communication Hub

Procurement cannot simply be reduced to order placement; it must serve as a communication hub between a company’s needs and its suppliers. As mentioned earlier, the goal is no longer just to lower purchase prices but to ensure that the right decisions are made for optimal procurement. This requires a shift in corporate culture, moving away from the pervasive mindset of always seeking the lowest price.
 

El Attari Abdelilah
Digital Transformation Expert
E-solution