"The Covid-19 pandemic forced IT buyers to change their focus. Many of the more adventurous digital transformation projects were put on hold as energy was directed towards keeping businesses operational and sourcing the technology needed to enable home working."
"With some semblance of normality now returning, buying teams are turning their attention back to those projects and exploring how digital channels can be used to achieve more effective procurement." - Ian Nethercot, MCIPS, supply chain director, Probrand
Here, Ian looks at three areas where digital solutions can be implemented to reduce manual processes, drive efficiencies and increase transparency.
Digital catalogues will save time and hassle
Static catalogues are one of the biggest causes of inefficiency, because they force buyers to embrace manual methods of purchasing. While they can be used to browse an extensive number of products, buyers still have to pick up the phone or send an email to ascertain price and availability. This is particularly troublesome for the IT market, which is in a constant state of flux and can see as many as 30,000 price changes occuring each day. In the time it takes to pick up the phone, an item could have doubled in price or become unavailable.
The frustrations of this manual approach have been evident for some time. In fact, research we carried out five years ago cited old school sales calls as one of biggest bugbears for B2B buyers – and yet many organisations are still purchasing this way.
Digital marketplaces and ecommerce platforms are helping to prevent buyers from being presented with outdated information. Much like a Skyscanner or Airbnb, these ‘live’ catalogues provide real-time information about stock and price and enable buyers to purchase there and then. Digital catalogues also have additional benefits, including the ability for department heads to customise which products the rest of the team has access to, as well as putting different levels of authorisation in place for bigger, more complex purchases.
Bring order to unstructured data
The ability of buyers to analyse data is also enhanced enormously by digitisation. Many procurement departments still rely on paper-based systems or unstructured Excel sheets to record purchases, which can cause admin headaches on many levels. Not only are these systems liable to human error, but they can lead to the finer details being overlooked. It’s not uncommon for someone to enter a dash or dot for ease, instead of the proper serial number or brand name, for example.
Cutting corners like this may speed things up in the short-term but it means that when organisations come back to analyse spend, they are unable to do so. I regularly come across organisations who have no idea what they’re spending on IT. Without any data in their systems, organisations also lose traceability of price and have no way to compare cost YoY or work out if they’ve overpaid.
Digital procurement solutions, including software-as-a-service models (SaaS), are helping to provide access to previously unavailable data, or bring order to unstructured data sets – helping teams to more accurately analyse past spend, and predict future costs.
Deploy benchmarking tools to achieve best price
Identifying the best price for IT products is notoriously difficult, given the short lifecycle of products and the constant fluctuation of trade costs. Industry best practice, as specified by the Society of IT Managers, states that organisations should not pay more than a 3% margin to suppliers.
Understanding if you’re paying over that has become much harder due to the extremes of demand of the past two years, with some suppliers taking advantage of the panic caused by the pandemic to inflate prices. In fact, Probrand carried out research that showed the margins being paid to IT suppliers soared during that time, with the average margins being paid by organisations rising to more than 50% at one point.
Understandably, today’s procurement managers don’t have endless amounts of time to talk to multiple suppliers to find the best price. What they need is greater transparency from suppliers. I am continuously speaking to organisations who are under the belief that they have fixed cost contracts when the reality is that they are being charged much higher margins. To tackle this, IT buyers can look to benchmarking tools which provides buyers with access to up-to-date and validated trade level information that will identify the exact margins suppliers are charging. This not only speeds up the IT procurement process but empowers negotiators to bring margins down to 3% or less. To eradicate any hint of profiteering, it’s crucial that this level of scrutiny is continuous and that benchmarking is on-going.
Technology will never remove the need for human negotiation and judgement, but it can certainly smooth its path. By embracing digital tools and channels, procurement teams can remove inefficiencies and ensure that they are getting better value, increased transparency and spending their time on more exciting projects that benefit the business.