You know procurement can help maximize your business’s ROI, but there are so many steps in the procurement process. Your team doesn’t have the time to conduct due diligence, strategic sourcing, a needs analysis, and so on.
Fortunately, procurement technology can automate several of these steps and deliver strong results. In fact, companies that use digital procurement tools can decrease their annual expenditures by an average of 5% to 10%, according to a study from BCG.
But how do you know which tools to use? There are so many powerful procurement technology solutions on the market, and it’s hard to know which will deliver the highest ROI for your business.
The right procurement technology solution should help your organization take a more strategic approach to spend, without straining your finance and operations teams. Follow our road map to find the solution that works best for your business’s unique needs.
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Identify why you need procurement technology
Understanding why you need procurement technology comes down to understanding why you need procurement. So what is procurement, exactly?
Procurement is a strategic, multistep process a company follows to obtain supplies and services. It encompasses both sourcing and purchasing and covers an array of processes, from a needs and market analysis to supplier due diligence to spend analytics. This strategic approach to spend reduces a company’s purchasing costs by an average of 8%–12%, according to research by Bain.
Bearing this in mind, consider what obstacles your team faces that deter you from executing on procurement. For example, is the process too cumbersome for your small team? Are you having trouble identifying the most cost-efficient vendor? Are you seeing cash leaks from maverick spend?
These obstacles are the reasons you need a procurement technology and will be your guiding light for finding the best solution.
Consider how well a new software solution would integrate with your existing tech stack
The best procurement technology on the market would still be a burden to you if it couldn’t integrate with your existing tech stack—or worse, if it resulted in a data breach.
Before you begin your search for procurement technology, discuss APIs with your IT team to make sure the technologies you already use will be compatible with new software.
An API, or application programming interface, is a “software intermediary that allows two applications to talk to each other,” according to MuleSoft. If you’re a social media user, for example, an API is what allows you to create a post on Instagram that also populates to your Twitter and Facebook feeds.
Or, in the case of procurement technology, an API might allow you to link your existing vendor accounts to a vendor management system. This would enable you to automatically recreate orders and view your entire purchasing history from a single platform.
Once you’ve discussed APIs with IT, check in with your compliance team to find out whether they have specific guidelines vendors must follow when housing company data.
This step is critical to protecting your business against third-party risk. The average cost of a data breach in 2020 is $3.86 million globally, according to IBM’s Cost of a Data Breach Report. Even worse, a data breach puts your business’s reputation in jeopardy and could prompt even your most loyal customers to leave.
Prepare for sales calls and product demos
Knowing what questions you want to ask before a sales call or product demo will ensure that you walk away with the information you need to make a confident decision.
First, determine your budget. You’ll want to establish pricing at the beginning of any sales call so you don’t waste time learning about procurement technology your team can’t afford.
Then, make a list of everything you think you need from a procurement solution, referring back to obstacles you flagged earlier. This list might include strategic sourcing, centralized purchasing, specific APIs, or integration with accounting. Once your list is complete, rank the items on that list in order of importance to determine what features are of the greatest value to your team.
From here, prepare any specific questions you have about the vendor. Be sure to consider questions about the vendor’s customer support teams as well as their product. For example, you’ll want to know how quickly you can expect to be fully onboarded to the procurement technology and who will support your team as they learn to use the product.
Use this matrix to score each procurement technology and choose the best solution
Your decision may not be clear just from researching and meeting with procurement technology vendors. You may find that you like several solutions, or that you’re simply overwhelmed by the amount of information you obtained.
If that’s the case, use this decision matrix to quantify your decision and select the best solution for your business.
To use the matrix, answer each question on the left using a scale of 1-5, which you’ll note in the right column of the table. A rating of 1 signifies that you strongly disagree, 2 that you disagree, 3 that you sort of agree, 4 that you agree, and 5 that you strongly agree. Tally up your responses for a final score. Do this for each vendor, and then select the vendor with the highest score.
Start practicing procurement—without hiring a whole new department
You don’t need a procurement department to make procurement work for your business. Cut your operating costs and risks with a procurement technology, and start seeing a greater return on your spend.
If you’re ready to start researching procurement technologies today, request a demo with Negotiatus.