How to Add Enterprise Value with Better Procurement Practices?
Organizations often resort to various cost-cutting measures to keep their profitability in check. The most common cost-cutting method is trimming a workforce without rethinking if a strategic move in the procurement function could help realize better cost savings plus a competitive advantage for the organization over the rest.
An organization that realizes the above and has invested in upgrading its technologies enjoys an upper hand both in terms of negotiation ability and operational efficiency owing to a massive amount of data they are able to churn for strategic insights through automated processes.
In this article, we’ll focus on the Middle East that has been historically dependent on its oil money highly subjected to the vagaries of crude oil pricing across the globe.
The Approach of the Middle East
Many organizations still haven’t fully embraced the first wave of procurement transformation which happened in the 1990s with the advent of the internet and enterprise resource planning (ERP) coined by Gartner that led Netsuite to come up with the first internet based ERP system. Companies like Zycus took the trend forward and came up with specialized Source-to-Pay software suite that easily integrates with a company’s existing ERP system thereby enabling a company’s procurement function add substantial value to the bottom line.
But in the Middle East, the story has been different for a while. When countries like the United States and other developed economies by being early adopters of advanced procurement solutions, showed us how a robust Source-to-Pay suite could be beneficial to the Middle East organizations, they were still indifferent to it basking in the comfort of their oil resource. They have been mostly reluctant about fortifying their procurement function with a digital procurement tool that could impact the ROI even more strongly.
Current Scenario in the Middle East
In recent time, however, the Middle East has realized the need for better procurement technology. ME-based companies like Etihad Airways, ADNOC, SABIC, Emirates Flight Kitchen, Motherson Sumi, TECOM, and the Department of Culture and Tourism, Abu Dhabi, realize that they can no longer treat procurement just as a cost center but one that is essentially a profit center as well.
In addition to implementing best-in-class technology solution, ME companies are training employees on best procurement practices and ways in which they can harness the solution in their day to day operations so that they can shift their efforts from being merely transactional to more strategic. With Procurement 4.0, Artificial Intelligence (AI), Machine Learning (ML), and Robotic Process Automation (RPA), the workforce is headed to upgrade their skills to avoid a run over by the efficiency of the robotic technologies.
Advantages of a Robust S2P Tool
The procurement trends in the Middle East have also shown bifurcation based on the size of the organization. Large organizations like ADNOC have tried to leverage full functionalities of a cloud-based Source-to-Pay solution that enables group companies to be on the same dashboard leveraging the benefits of a massive synergy in terms of real time data analysis, establishing identical processes & terminologies, optimizing inventory management through inventory sharing, creating common supplier database & market intelligence reports, tracking of KPIs and supplier performance comparisons, etc.
SMEs typically go for individual suites like Supplier Performance Management, Contract Management, etc. instead of a full Source-to-Pay suite based on their objectives, procurement maturity, and skill sets of the available talent. However, organizations are still facing the challenges in identifying the right vendors and their ability to provide proper integration with existing ERP legacy systems.
Road Map to a Strong Bottom Line
If organizations are eager to help their procurement function achieve the ultimate nirvana, then the need of the hour is to transition to a best-in-class Source-to-Pay suite with capabilities such as AI, ML, and RPA. This will not only help them structure procurement workflow as per policies and procedures, be legally compliant through all times, but also help them move the manual to the automated through customizable bots.
To learn more about how your organization can maintain pace with the changing procurement scenario, observe best in class procurement practices and emerge as a winner, tune in to this latest podcast “Adding Enterprise Value with Better Procurement Practices in the Middle East.”