Chris Beck

Companies losing almost £2m per year due to inefficient procurement

News
2 mins read

UK supply chain and finance professionals are spending almost a third (31%) of their time dealing with inefficient paper-based or manual procurement processes, which is costing businesses on average £1.94 m annually and limiting procurement teams’ ability to deliver more strategic value.

That is the key finding from a survey conducted by global spend management solution provider, Ivalua. Two-thirds (66%) of businesses admitted they were still reliant on such processes as part of their procurement or supplier management function

The research, conducted by Vanson Bourne on behalf of Ivalua, found that 71% of respondents believed the rate of digitisation in procurement is low. Nearly two-thirds (64%) said this lack of digitisation is holding them back from doing their jobs. Overall, 85% of respondents view the procurement and supplier management function as less digitally mature compared to other departments, such as marketing, human resources or accounting.

Within the manufacturing sector, the procurement problem is not as severe as the rest of the economy; however, inefficient procurement still cost businesses £1.45 million every year.

“Against the backdrop of an increasingly dynamic market, featuring Brexit and growing trade friction between the US and China, the role of procurement is becoming increasingly important,” comments Alex Saric, smart procurement expert, Ivalua. “Procurement is perfectly placed to help manage this growing risk landscape, support innovation and create sustainable cost savings. However, the lack of digitisation is holding procurement teams back. Whilst functions such as accounting and marketing have embraced digitisation and made great strides over time, procurement at most organisations has remained a digital laggard, leaving many businesses unprepared to face today’s rapidly shifting business landscape.”

Technology investment failing to drive digitisation

Encouragingly, the majority (97%) of businesses are investing in technology to digitise procurement, with data analytics (67%), cloud-based platforms (62%), artificial intelligence (40%) and digital assistants (40%) the areas seeing the most focus. Despite this investment, businesses have so far digitised less than half (45%) of procurement processes. Purchasing (45%), invoicing (41%) and budget management (39%) are the most digitised processes to date. Full digital transformation remains a long way off for most procurement and supply chain organisations.

The findings also revealed that the lack of digitisation is having a wider impact:

  • 77% of respondents say it is limiting the time spent on strategic tasks
  • 70% of respondents say it is limiting their ability to automate low-value tasks
  • 67% of respondents say it is limiting their ability to gain insights into spend and supplier management

“The lack of digitisation is creating serious problems for UK businesses, preventing teams from focusing efforts on more strategic activities and maximising the value of their spend and supply chains. For businesses serious about creating a competitive advantage and unlocking the strategic benefits procurement holds, much more needs to be done to invest in the right technology to enable digitalisation. This will ultimately make procurement smarter and more flexible, something that’s vital to thrive in today’s fierce global market,” concludes Alex Saric.