How to fully leverage your procurement technology

One of the biggest trends we see, and dive into more deeply in our 2024 state of procurement in manufacturing report, is the surge in procurement technology investment and adoption. With over 20 years experience in procurement under our belts, never have we seen rates at such levels. 

The procurement technology industry is currently valued at approximately $7.2 billion and is experiencing significant growth. It is projected to reach around nearly $14 billion by 2030, with an annual growth rate of almost 10%. 

The message is clear: with leaner teams, shrinking budgets and higher cost saving targets, there is an increasing need for more automated and efficient procurement processes. Solutions such as procure to pay (P2P), source to pay (S2P), e-procurement tools, procurement software, etc. are here to stay. 

However, a significant challenge persists: many organizations fail to fully leverage the capabilities of their procurement technologies. This underutilization not only hampers the potential return on investment (ROI) but also stifles the strategic advantage that these technologies can offer.

Procurement leaders can identify technologies that are not being fully utilized by implementing several key strategies:

• Usage analytics: Utilize software tools that provide analytics on user activity and engagement levels. This data can reveal which features are underused or ignored.
• Feedback mechanisms: Regularly solicit feedback from users through surveys, interviews and informal conversations to understand their experiences and any challenges they face with the technology.
• Performance reviews: Compare the expected outcomes or efficiencies gained from the technology against actual performance. This can help identify gaps in utilization.
• Training and support analysis: Review logs and records from training sessions and support tickets to identify areas where users frequently seek help, indicating possible confusion or difficulty with certain aspects of the technology.

The underutilization of procurement technologies - and how to fix it

Underutilization of procurement technologies can be attributed to several factors:

Resistance to change and inadequate change management: One of the most significant barriers to the full utilization of procurement technologies is resistance to change within the organization. Employees may be accustomed to traditional methods and may view new technologies as disruptive or unnecessary.

Start slow by implementing technology in phases rather than all at once. This allows users to gradually adapt to the changes and provides opportunities to address issues as they arise.

Implement a structured change management process that includes clear communication, stakeholder engagement, and support structures (e.g. help desks, user manuals and on-demand training resources) to help users adapt to the new technology. Identify and empower champions within the organization who can also advocate for the technology and assist their peers in understanding its value.

You may want to also consider developing incentives for using the new tech, such as recognition programs, bonuses, or other rewards for teams or individuals who effectively integrate the technology into their workflows.

Lack of training and skills: The successful adoption of procurement technologies requires adequate training and skills development. A study of UK-based procurement, supply chain, and finance professionals revealed that 86% of UK businesses encountered barriers when attempting to develop digital skills within their procurement teams. 

These include a shortage of digitally savvy talent, a lack of training for both technical and soft skills and a general misunderstanding of the skills required for effective digital procurement. This trend is mirrored globally, and highlights the challenges for procurement leaders in this area. Given the importance of this point, let’s dive into this deeper. How can you tackle this?

• Look at recruitment from a different angle: Procurement organizations should actively recruit individuals with digital skills. This involves not only targeting traditional talent pools but also reaching out to sectors that may not typically be associated with procurement but have the necessary digital expertise. Additionally, showcasing the innovative aspects of procurement roles, such as involvement in digital transformation and strategic decision-making, can make these positions more appealing to digitally savvy candidates.
• Upskill, upskill, upskill: Make structured training programs, workshops, and e-learning platforms that focus on digital skills such as data analytics, AI, and machine learning central to your team’s development. 
• Partner with educational institutions: Forming partnerships with universities and educational institutions can help ensure a steady pipeline of new talent equipped with the latest digital skills. These partnerships can include guest lectures, internships and collaborative projects that allow students to gain practical experience while also providing your organization access to emerging talent.
• It’s a gig economy - take advantage of it: To manage immediate needs and project-based work, procurement organizations can tap into the gig economy. This approach allows access to a broader pool of specialized talent for short-term engagements, which can be particularly useful for specific digital projects or during the transition towards more digital procurement processes.
• Mentorship and career development programs: Mentorship programs can help less experienced employees gain insights and knowledge from seasoned professionals. Additionally, clear career development paths should be established to motivate and retain digitally skilled professionals by showing them how they can progress within the organization.

Integration issues: Procurement technologies must integrate seamlessly with existing systems to be effective. Difficulties in integration can lead to underutilization as employees may find the systems too complex or incompatible with other tools they are using. 

Work hand in glove with IT to ensure that technologies integrate seamlessly with other business systems so you can enhance usability and adoption.

Complexity and user-unfriendliness: If the technology is not user-friendly or is perceived as overly complex, users may be reluctant to fully engage with the system. This can result in underutilization as employees may avoid using the technology or not use it to its full potential.

We recently spoke with a manufacturing procurement leader who told us, “Honestly, it’s a mixed bag when it comes to customer experience across all of our platforms. The lack of ease of use is an ongoing frustration.”

Upskilling on a particular platform or working more closely with your vendor may help solve these challenges. 

Lack of perceived value: Employees and management may not always see the immediate benefits of new procurement tech, leading to lower motivation to adopt and utilize these systems fully. Demonstrating the value and benefits of these technologies is essential for overcoming skepticism and encouraging usage.

As you go on that journey, involve users in the choice, design and improvement of the technology to ensure it meets their needs and is user-friendly.

Financial constraints: Budget limitations can also play a role in underutilization. Organizations may struggle to allocate sufficient funds for the necessary training, support and upgrades that ensure the technology is used effectively. What support can your tech provider offer?

Vendor and supplier challenges: Difficulties in managing relationships with technology vendors and suppliers can also lead to underutilization. If the technology does not meet the specific needs of the organization or if vendor support is lacking, users may be less likely to adopt the technology fully.

As one CPO recently told us, “We narrowed down to two solutions, but they didn’t really cover everything we needed so we were a bit stuck. We bought one but because it doesn’t really do what we need, we aren’t really using it.” 

Supplier relationships are key here. Don’t be afraid to bring your challenges back to the vendor. Collaborate with them to ensure that the software is customized to fit your enterprise’s specific needs. Regular feedback loops with vendors can also help in troubleshooting issues and in deploying new features that add value to the procurement process. 

If they’re anything like DSSI, they have a team of dedicated professionals who not only understand the technology but the procurement industry itself - enabling them to solve issues at speed. 

Data security concerns: With the increasing importance of data security, any perceived risks associated with new procurement technologies can lead to hesitancy in their full adoption. Ensuring robust security measures are in place is crucial to gaining user trust and maximizing utilization.

Ensure you’re keeping your technology up to date with regular updates and upgrades to improve functionality and security. 

Cultural barriers: Organizational culture plays a significant role in the adoption of new technologies. In cultures that are less open to innovation and change, introducing new procurement technologies can be particularly challenging. Given the increasing role of tech within procurement, a cultural shift will be required to win in this new era. 

Creating a culture that embraces digital transformation can encourage both current employees and potential hires to develop and utilize digital skills. This involves leadership promoting and demonstrating the value of digital initiatives and encouraging a mindset of continuous improvement and innovation.

Conclusion

Procurement leaders play a crucial role in ensuring that technology investments are not just expenditures but strategic assets that drive organizational success. With leaner budgets the new normal, you cannot afford to not be maximizing tech investment ROI and driving as much efficiency through your process as possible. 

The journey towards full technology utilization is continuous and requires a proactive, strategic approach from procurement leaders. But by focusing on some of the steps outlined above, organizations can fully leverage their procurement technologies to achieve enhanced efficiency, cost savings and competitive advantage. 

If you’re looking for a source to pay partner that can help you optimize your indirect procurement process, get in touch with us today. You’ll always have support and transparency, starting with a frictionless onboarding process, dedicated business managers and ongoing program management with subject matter experts to turn to for guidance.