April 25, 2019

Procurement is the key driver for transformation - But nobody knows it

by Procurement Trends, Source-to-Pay, E-procurement

Working in Sales I get to meet a lot of our customers and prospects and it’s really interesting, hearing from different companies and people. One of the key themes seems to be transformation, or should I rather say digital transformation.

Working in Sales I get to meet a lot of our customers and prospects and it’s really interesting, hearing from different companies and people. One of the key themes seems to be transformation, or should I rather say digital transformation. It seems like the topic of digitalization is all encompassing and omni-present. In some shape or form it seems like every business is transforming.

Many companies approach transformation from a strategic angle, they create different streams or strategic initiatives that are looking at ways to change specific parts of the organization. At OpusCapita we are no different and have several of those initiatives on going. But I noticed something really interesting. No matter who I speak with, it turns out that procurement or sourcing is not a key focus in those transformation streams.

Sometimes it’s not even a part of those plans and sometimes it’s there but not as a focus area. And I think this is the point where many companies are clearly missing out on a huge transformative potential. Below are my top three reasons why I think procurement is the secret sauce for digital transformation.


1. Stay competitive in attracting (millennial) work force

Let’s start with the easiest one. Our population is getting older by the minute and soon we will find ourselves in a situation where we need to compete for young talents to join our company. This phenomena is already now a given and McKinsey has even coined the term "War for Talents" And, as we know, all is fair in love and war, but one thing’s for sure, winning with procurement solutions is an obvious choice. Think of it, you are competing to attract new workers to join your company and that very workforce is the one who grew up not knowing a world without the internet. And while there may be many strange things about this generation (what’s with all the food pictures, and duck face?) one thing is for sure, this workforce will demand the tools at work to work in the same seamless and easy way as the tools they grew up with. They will not want to operate a highly complicated ERP system with a design that screams 90s. They want tools that make their buying as easy as shopping on Amazon, Wish and the likes because after all, that’s what they know and understand. Setting your company up with a smart and modern e-procurement solution is one building block in attracting new talents to join your team.


2. It helps to centralize

Many companies are dependent on having customers, (maybe there is no company in the world that isn’t actually) and yet still most companies seem to revolve around themselves in some way, one can almost call this an ‘inside-in-perspective’, yes that’s right put down your business books, you heard it here first. But why? I strongly believe one of the key reasons is that many companies are largely fragmented, be it because of geographic reasons or maybe they have a long history of mergers and acquisitions, in any case, companies often are faced with several different units operating to varying degrees, completely independently from each other. This leads to the fact that the first actions are often to streamline what happens inside the company. It’s impossible to serve the customers when the customer deals with several fragmented entities that more or less seem like a separate company. This is where smart procurement comes into play. Procurement and sourcing are prime functions that help a company set good internal examples by centralizing core business processes to increase efficiency and of course, improve the overall ability to better serve the customer. Think of it, there is a company with different locations all across the country, what if all the locations operate so independently that they buy from different providers and either have to negotiate separate contracts or spend off-contract because nobody can handle all those separate negotiations. The goods or services they offer their customers might even be different depending on where they are sold based on this disparate procurement process. Think of the efficiency gains if all contracts are negotiated centrally. And imagine how much more time this company would have: taking care of their customer needs instead of trying to figure out what its separate entities are up to.

3. Stay competitive

One of the key factors when it comes to procurement is that most of the time, companies think direct procurement first. Often direct procurement is ERP related and of course a basic necessity. Along with that, companies may have things like B2B integrations and maybe some EDI integrations. That part is usually well covered, at least in Finnish companies. But when I talk to my colleagues from other countries, such as Germany, I hear that companies there take procurement further and indirect procurement is really the area that allows companies to gain a competitive edge. In Germany, many companies use indirect procurement in a way to make business critical and strategic purchases. And the borders between direct and indirect are less ridgid. Let’s say there is a large company making, for example, paternosters (you know those elevators that move without doors and that one just somehow jumps into), it is crucial for this company’s business that those paternosters work seamlessly. And this is where a smart system for indirect procurement comes in, a system that allows ordering and having spare-parts available right at the moment when they are needed. Businesses need to stop thinking of procurement in categories such as direct and indirect because in the end, what is really needed is a solution that covers all needs a company might have AND enables them to better serve their customers.

World class companies need to be world class in all their functions

It’s a fact, companies need to attract talent and standardize their processes across often scattered entities in order to improve their business and remain competitive in the years to come. Procurement is the secret sauce to making this transformative journey happen and this is why it needs to be a core part of any company’s transformation journey.

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Janne Tuunannen

Janne Tuunannen
Sales Executive, OpusCapita

Janne has more than five years experience in OpusCapita Sales and is passionate about helping our customers achieve their goals in a strategic and holistic way. Fun fact: He is playing in a band and has hitchhiked all the way to northern Finland.