Procurement teams are under increasing pressure to find new methods for optimizing operations and enhancing financial performance. Inefficiency is one of the biggest difficulties plaguing procurement processes, but this can be addressed by managing spending through e-procurement tools. Digital tools and platforms can help procurement professionals improve cost-saving capabilities and enhance efficiency.
Here, I explore the importance of financial efficiency in procurement, the most significant challenges associated with manual cost efficiency, and how these challenges can be mitigated with e-procurement software.
Founder and CEO of DeepStream Technologies.
The importance of financial efficiency
Cost optimization has become a critical focus for 65 percent of procurement teams in 2024 due to high inflation, with the current rate sitting at three percent.
Global events and changes have created economic uncertainty, which places immense pressure on businesses that must maximize cost savings and optimize resources to build resilience and maintain competitiveness.
Materials, labor, and operational expenses are seeing price inflation which emphasizes the urgency for teams to find innovative ways to cut costs and improve financial performance.
The digitization of the procurement sector has helped to incorporate artificial intelligence and automated systems into day-to-day processes, empowering teams to leverage advanced tools to streamline the procurement function, reduce inefficiencies, and minimize costs.
Furthermore, disruption caused by the pandemic has underscored the importance of building agile and resilient supply chains. Consequently, procurement teams are more focused on financial efficiency to mitigate risks and ensure supply chain continuity in the face of disruption.
Pressure also comes from key stakeholders, including investors, customers, and regulatory bodies, who demand best practice in financial performance and sustainability, pushing procurement teams to demonstrate fiscal responsibility and efficiency to meet ambitious targets.
Challenges of manual procurement cost reduction
Manual financial reductions are becoming increasingly outdated and flawed, which can significantly impact efficiency. A notable problem of manual optimization strategies is their susceptibility to human error, leading to inaccurate data entry, miscalculations, and overlooked cost reduction opportunities. These errors can compromise the reliability of procurement data, resulting in poor decision-making.
Manual processes are inherently time-consuming and require substantial administrative effort that diverts resources from more pivotal strategic activities.
Research indicates that procurement and supply chain professionals spend 31 percent of their time dealing with inefficient manual processes, and this lack of efficiency can slow down processes, causing delays that affect overall business operations.
Tracking and analyzing spending patterns manually can be burdensome, making it difficult to quickly identify and act on trends and discrepancies.
Manual procurement processes also often lack transparency, leading to inconsistencies in vendor selection and contract management, increasing the risk of non-compliance with internal and external policies and regulations. The absence of a centralized system complicates the consolidation of procurement data across multiple departments, hindering effective communication and collaboration.
This can result in missed opportunities for cheaper purchasing and better supplier negotiation terms. Furthermore, time-consuming cost-reduction efforts are typically reactive rather than proactive, addressing issues only after they arise instead of preventing them from the outset.
Problems like these underscore the need for automated procurement solutions that enhance accuracy, efficiency, and strategic decision-making, driving more sustainable cost optimization, which is why procurement departments are aiming for a 70 percent procurement digitization rate by 2027.
Addressing problems with e-procurement
Digital tools can offer solutions to the key challenges posed by manual procurement processes, as one of the most significant functionalities of e-procurement that reduces costs is the automation of data and calculation entry.
This automation can drastically reduce the likelihood of human errors, ensuring decisions are based on accurate and reliable data.
E-procurement tools often feature multi-stage response capabilities, allowing users to request new offers on goods and services at various stages of supplier negotiation.
This flexibility provides more opportunities to negotiate better prices or terms, identifying cost-saving opportunities at every stage of the procurement process.
Automated e-auctions minimize the need for users to waste time negotiating with suppliers, freeing up time for teams to focus on more pressing responsibilities. This automation enables teams to secure the most competitive prices in the shortest amount of time and streamline supplier relationship management.
Procurement software provides efficient and accurate tracking systems, offering better visibility over spending so users can see all savings achieved from multiple contracts and partnerships.
General reporting dashboards provide an overview of request spending and savings analytics, allowing users to monitor data and identify where and how savings are being maximized.
The software’s proactive approach to procurement, with features like customizable workflows and automated reminders, ensures timely and accurate processing of requests for quotations and other procurement activities. By adopting e-procurement tools, procurement teams can transform their operations, achieving greater financial efficiency and positioning their organizations for long-term success.
We feature the best project management software.
This article was produced as part of TechRadarPro’s Expert Insights channel where we feature the best and brightest minds in the technology industry today. The views expressed here are those of the author and are not necessarily those of TechRadarPro or Future plc. If you are interested in contributing find out more here: https://www.techradar.com/news/submit-your-story-to-techradar-pro