The Italian journal Procurement created a survey on “Digitization: Challenges and Opportunities.”134 The responses received were almost twice the expected amount—a sure signal that interest in the subject is remarkable, a reflection of the ongoing and hastening digital transformation. The latter is impacting all areas and functions of organizations. This appendix shares some interesting results of this survey.
Responses received came from a wide range of industries. This shows that the results are quite general. Respondents were primarily from organizations of a certain size (with an annual turnover of more than €250 million). There was also participation by some smaller organizations.
The employment status of respondents was something of a surprise in some cases, as the positions of respondents corresponded to roughly 50 different denominations. On the one hand, there were also persons not belonging to the procurement function in the strict sense—a multitude of denominations characterizes a lack of standardization. In the English-speaking world, on the other hand, the job description of the person in charge of procurement is pretty well standardized as chief procurement officer (CPO).
The most interesting part of the survey consists of the answers to four questions:
Which areas have been digitized in the organization concerning procurement processes?
Which applications is the organization using?
What are the benefits achieved?
What are the expected digitization plans for procurement processes?
The following pages examine in detail the answers to these questions.
Which Areas Have Been Digitized in the Organization, with Reference to Procurement Processes?
The survey results show that the qualification of partners and their internal management is the most digitized sector, with 63% of responses. A similar percentage of responses (55.8%) is related to the collection and approval of requirements for sourcing of the business areas and invoice checking/ordering processes. The area following these two is that of issuing orders, with 51%.
The impression is that priority has been given to automation of processes of partner selection and approval/control of purchases. This is confirmed by the low percentage (36.4%) of collaborative management of the Procure to Pay process. The latter would be an important aspect for strategic partner management and for critical supplies.
Which Applications Does the Organization Use?
The administrative application (ERP) is by far the most widely used computer application (82.9% of responses). The workflow for the requirements follows this (60.5% of responses).
These answers confirm what is apparent in the previous question: automation priority is assigned to control and accounting processes. It also appears that there has been little focus on specific procurement applications. The automation of this sector has been drowned in a more general context (ERP) and therefore is not responsive to the specific needs of procurement but much more oriented to administrative aspects.
What Are the Benefits Obtained?
This is probably the most interesting part of this survey. It appears that reduction in the duration of the contract-invoice-payment cycle has been reached in most cases. As many as 34% responses show a decrease of more than four days. At the other extreme, 31.6% of the participants in the survey indicate that there have not been any improvements.
The answers to this question highlight the reduction in the cost of maverick sourcing (without control by procurement) as a result of greater spending control; 14.3% of participants in the survey showed a reduction of more than 15% in maverick sourcing, while 31.4% responded that there had been some improvement. The digitization of procurement affects maverick sourcing because there is stricter control of costs. The answer to this hypothesis is probably in the fact that 31.4% of respondents’ organizations do not monitor this KPI. At least that percentage of organizations have no knowledge of the costs of maverick sourcing. It is understandable then why in the selection process for being automated in many cases the organization has chosen control of purchases. The organization probably felt that these purchases were not under its control.
In terms of reduction of administrative costs for each purchase order issued, the survey reports that as many as 68.7% responses reported that there were cost savings of between 5% and 15%. Only 24.3% said they had no reduction in administrative costs per order.
Unfortunately, a question was not included on the digitization benefits associated with the improvement of relationships with partners or on the improvement of relationships with internal customers who require the supply.
What Are the Procurement Processes Planned for Digitization?
Partners in contract management (proactive monitoring of deadlines) is the item that received the highest score in the responses in terms of digitization plans. Anyone who is familiar with procurement knows that this aspect is one of the most neglected, and is often scattered between procurement and the department that requires the supplies. Unfortunately, it determines costs for lack of contract renewals or determines non-compliance with internal and external regulations. The process that follows in terms of digitization priority, with 31.7%, is the qualification of partners and internal management of this aspect. As seen from the answers to the first question, this process has been one of the priorities of digitization in many organizations. Many organizations have already implemented the automation of this process and more will do so.
Workflow management for goods and services and authorization requests for billing and issuing of orders have a low value in the context of digitization plans, based on this survey. The reason is that these processes in many cases have already been automated or are not considered part of procurement but fall under the management of operations.
The timeframe for implementation of automation priorities, as indicated by the majority of respondents to the survey, is in many cases longer than nine months (65.6%). Only in 31.3% of cases is this time shown as between three and nine months. In short, in many organizations procurement is not part of the digitization priority. This situation affects (and debases) the contrasts through the fact that in many cases the purchases represented between 40% and 80% of operational costs.135 So in times of spending review, better digitization of procurement processes should be a priority for many organizations. It is striking that even when people are talking about industry 4.0, thinking to achieve it without advanced procurement digitization is quite surprising.
The results of the survey confirm the model presented in this book. Implementation of the components of procurement 4.0, at least in the Italian organizations, advances—although slowly. It will be good if organizations start accelerating in dealing with an environment, both Italian and global, that is increasingly challenging.