As the global economy adapts to a period of long-term uncertainty, procurement teams are being tasked with diversifying the supplier base of the organization in order to maintain business continuity and avoid risks, all while delivering quality outcomes.
Challenges on the global stage include tariffs, uncertainty surrounding Brexit and the Euro-zone, developing economies in Asia, Africa and the Middle East, as well as coping with regulations within each market in which the organization operates.
Earlier this year, WBR Research and Icertis partnered for a survey of 100 procurement leaders to better understand their goals and challenges in this business environment.
The results help contextualize the performance and alignment of procurement departments both within the larger organizations they serve and amid their place in the global economy.
Key findings of the report include:
- Qualifying and sourcing new suppliers is the most concerning risk factor for today’s procurement organizations
- 75% of procurement organizations are engaged upstream in the sourcing process
- 41% of companies are behind schedule on their digital transformation efforts
Each of these findings speaks to the need for sophisticated contract management software that allows procurement departments to digitize their contracting processes and design superior category strategies.
Here are the findings:
1. Within the global procurement environment, the most concerning challenge facing one third (33%) of teams remains the qualification and sourcing of new suppliers
Today’s sourcing organizations are being asked to move faster than ever to source the materials needed by their companies. It’s a difficult position to be in.
Under the traditional sourcing paradigm, the multi-step process of securing the right vendor is time-consuming and can still expose a company to risk and leakage. A different approach with sophisticated and business-centric contract management can help. Through a new paradigm we call “contract-centric sourcing,” companies can accelerate the source-to-contract process. This means companies can spend more time evaluating capabilities and fitment for picking the right supplier, instead of worrying about a drawn-out contracting process.
This approach can also save millions in leakage while also improving relationships with vendors and optimizing supply chain performance.
2. Procurement organizations are leveraging their strategic influence to combat risk
The data clearly shows the movement procurement organizations have made towards category management. Over 75% of respondents to the survey said they are now engaged upstream in the sourcing process as they work to implement procurement strategies that can control costs and improve supply chain resilience.
One challenge that is emerging with this approach, however, is difficulty in ensuring compliance with the strategies that are put in place. But again, what we are starting to see is that modern procurement professionals are reimagining the sourcing process by putting contracts at the center of their sourcing processes and digitizing them.
It is surprising that this was not done earlier as contracts are the only concrete output of a very diligent and intense sourcing process. By making contracts digital and managing them on an enterprise contract management platform, companies turn them into living assets that can leverage contract data to execute effective contract strategies for revenue maximization, cost minimization, plugging cost and revenue leakages and safeguarding against business continuity risks.
3. 41% of companies are behind schedule on their digital transformation journeys
The report calls out that many companies are falling behind in their digital transformation projects.
The most common reason we see companies struggle to realize the promise of digital transformation is that they tackle derivative projects rather than core business processes. Procurement organizations may digitally transform their sourcing process but realize after the fact that promised gains can’t be achieved because of a broken contract management process. Or they may find that their procurement redesign is hampered by a slow down when data must be manually re-entered into other systems.
By thinking holistically about their commercial foundation—including contract management, sourcing, procurement and other related processes—they can avoid pitfalls that come from only addressing derivative projects. The objectives of digital procurement transformation have to change from incremental gains through productivity, cycle time gains and become more strategic in nature like revenue maximization, cost optimization and harnessing industry-wide innovation.
Since every dollar in and every dollar out of a business is governed by a contract of some sort, it is imperative that organizations think holistically about their commercial foundation. Contracts are the ultimate source of commercial truth of what commitments and entitlements a company holds with its customers, supplier and other partners. It is essential that any digital transformation project involving the commercial foundation of sourcing, procurement, supply-chain and other related processes puts contracts at the core to avoid pitfalls that come from only addressing derivative projects.
If you’re interested in learning more about contract management software and how it can help your sourcing organization, please reach out to one of our platform specialists.
You can download the full report, “Supplier Management in a Turbulent Economy,” here.