Have you also fallen victim to the notion that procurement’s sole purpose is to secure products and services at the lowest possible price?

If so, brace yourself for a complete mindset shift.

Procurement, when done correctly and efficiently, brings a plethora of benefits to the table. 

And sure, some may be obvious, but others will definitely surprise you.

Excited to learn more?

Let’s dive right in, starting with everyone’s favorite topic—saving money!

Lower Costs

Cost reduction must be the number one benefit of boosting the efficiency of the procurement function. 

And in today’s economic climate, it’s more than welcome. 

According to a recent survey conducted by Amazon Business, the biggest challenges small businesses face nowadays are high inflation, economic downturns, and disruptions in the supply chain. 

Illustration: Veridion / Data: Amazon Business

And guess what? 

These businesses turn to their procurement departments to fortify their financial resilience against such adversities, with a striking 91% emphasizing the importance of purchasing items within their budgetary constraints for sustained business growth. 

Experienced procurement professionals achieve this without a problem.

How exactly, you may ask? 

In many ways, actually. 

They excel in negotiating favorable contract terms, implementing technology to streamline processes, using procurement data for informed decision-making, and leveraging economies of scale to their advantage. 

The result? Significant cost savings. 

Take the retail giant Walmart, for example. 

In 2023, Walmart diversified its sourcing to include India in response to increasing import costs from China, saving the company quite a bit of money in the process.

Andrea Albright, Walmart’s executive vice president of sourcing, addressed this change in an interview, offering some valuable advice. 

Illustration: Veridion / Quote: Reuters

According to her, the biggest mistake you can make is relying on a single supplier or location to source your product. 

Savvy procurement professionals know that diversification is key. 

At the end of the day, she adds, you can’t control any outside factors like natural disasters or economic fluctuations, but you can control your procurement strategy. 

And if it’s efficient enough, it’ll lead you to the best prices out there, despite any challenges and obstacles that may come your way. 

In other words, there are always opportunities for reducing your expenses, but it’s only through effective procurement you can identify and take full advantage of them. 

Increased Productivity

Who doesn’t want to free up their team from mundane tasks to focus on more critical responsibilities and thus boost their overall output? 

That’s precisely what you can achieve if you decide to boost your efficiency with the right procurement system. 

Forward-thinking procurement experts understand that doing things manually doesn’t cut it anymore. 

Instead, with the help of procurement automation tools, they streamline their processes, such as purchase orders, invoices, supplier management, or data analysis, saving time and preventing costly human error along with other similar challenges.

Take sourcing, for example, a vital element of procurement. 

According to Sabrina Paseman, general partner at Omni Venture Labs, technology has made sourcing easier and quicker than ever before. 

Illustration: Veridion / Quote: Fictiv

Just imagine how much time you save when you don’t have to search through countless suppliers online, at trade shows, or through networking, and then manually compare and evaluate them until you finally find the right fit. 

As it turns out, you don’t have to imagine: McKinsey’s research has already provided us with the numbers. 

And it shows that automating the sourcing process with AI can reduce the time needed to find suppliers by a staggering 90% or more. 

Illustration: Veridion / Data: McKinsey & Company

With all that extra time on your hands, the possibilities are truly endless. 

Still on the fence about how technology can transform your procurement game and raise productivity? 

Let us demonstrate through our own supplier sourcing enabler, Veridion. 

With the power of AI and machine learning, Veridion combs through the internet and converts discovered data into structured datasets, providing thorough and always fresh supplier information. 

Source: Veridion

We’re talking about tens of millions of suppliers analyzed in mere moments. 

But that’s not all.

With our complex search API, you can set your own criteria, whether it’s firmographic data, classifications, or specific product details, and our system provides you with exactly what you need in seconds. 

Source: Veridion

The bottom line is this: with the right procurement tools, you can eliminate unnecessary processes, improve necessary ones, and propel overall output to unprecedented heights. 

And then, once you successfully streamline your workflows, a surge in productivity becomes not just a possibility, but an inevitability.

Better Supplier Relationships

Efficient procurement managers prioritize paying invoices on time, respecting deadlines, soliciting suppliers’ feedback, addressing conflicts promptly and professionally, and maintaining open and transparent communication. 

This, in turn, leads to better relationships with suppliers—a feat not always so easily achieved, according to Pierre Laprée, chief product officer at SpendHQ. 

Illustration: Veridion / Quote: SpendHQ

Nevertheless, nurturing these relationships is still very important as it yields valuable benefits:

• access to higher-quality products or services,
•  improved delivery times, 
• favorable pricing, and 
• the establishment of long-term partnerships. 

It’s a goal definitely worth pursuing. 

Therefore, it may not come as a surprise that, for 70% of procurement professionals, stronger supplier collaboration emerges as the key driver for digitizing their operations. 

Illustration: Veridion / Data: ProcureTech

They seem to recognize that cooperation is their golden ticket to success.

Therefore, they’re doing everything in their power to improve the efficiency of their operations and to bolster these partnerships. 

And they aren’t wrong. 

Jabil, a global manufacturing company based in Florida, USA, provides a compelling example of how fostering good supplier relationships can facilitate business growth. 

As stated on their own website, their partnership with ViTrox, a supplier of testing equipment and inspection technology, has proven invaluable during expansion into new industries and capabilities. 

“Because ViTrox has been a trusted supplier for more than a decade, they’ve seen how our company has grown, spreading into new sectors and investing in cutting-edge technologies, and they’ve been there to help us along the way. This means staying in close communication to analyze the latest market changes and discuss roadmaps for the latest equipment.”

And ViTrox? 

They’re not complaining either. 

Benjamin Lichtwardt, global account manager at ViTrox, points out that working with Jabil is essential for understanding market needs and optimizing their products accordingly. 

“It’s very important for us to stay close with Jabil because we need to understand how [Jabil’s] market is changing to help understand the road maps for our equipment.”

Essentially, a win-win situation. 

So, if you were wondering why even bother with improving the efficiency of supplier performance management within your procurement department, there’s your answer. 

Suppliers hold the keys to success and that’s something you certainly shouldn’t ignore. Instead, work hand in hand with them and, soon enough, you’ll reap the rewards. 

Increased Supply Chain Resiliency

Efficient procurement professionals understand that relying solely on just-in-time thinking won’t get them very far, especially given today’s volatile market. 

That’s why they adopt a just-in-case mentality, diversify their suppliers, establish effective contingency plans, and continuously monitor their performance, in turn enhancing the resilience to supply chain risks.

The Hackett Group’s Nicolas Walden emphasizes that such proactive thinking is simply a must if you want to be able to quickly adapt and survive in challenging times.

Illustration: Veridion / Quote: Procurement Magazine

And he’s right—the supply chain is a complex beast, capable of disrupting your operations in so many different ways. 

Anything from limited stock supplies and economic downturns to labor fluctuations and natural disasters can unexpectedly put a wrench in your plans. 

Procurement experts know this and prepare for it. They always expect the unexpected. 

Just take the recent COVID-19 pandemic as an example. 

Anyone in the world of procurement will agree that this was a stark reminder of the complexity and vulnerability of global supply chains. 

Research from Capgemini highlights that over 80% of companies encountered significant obstacles due to the pandemic, many of which were supply chain-related. 

Illustration: Veridion / Data: Capgemini

These challenges included shortages of critical parts or materials, longer lead times, difficulties in supply planning, and so on. 

Not to mention that 68% of companies needed over three months to rebound from these setbacks. 

But did we learn anything from this? Fortunately, yes. 

COVID-19 taught us that procurement operations efficiency and supply chain resilience truly go hand in hand. 

Insights from Deloitte’s survey even further underscore this point. 

The study reveals that, amidst the COVID-19 crisis, CPOs recalibrated their priorities, with operational efficiency taking precedence over cost reduction for the first time in the report’s 10-year history. 

Illustration: Veridion / Data: Deloitte

CPOs finally realized, it seems, that raising the procurement function’s effectiveness through better processes, risk mitigation strategies, and digitization is the key to resilience and adaptability. 

Everything else, including cost-savings, then naturally follows suit.

Higher Transparency

With efficient procurement practices comes total transparency across all important processes, from supplier management and selection to contract negotiation and order fulfillment. 

In other words, everyone is in the loop, knowing who’s responsible for which tasks, the status of approvals, and the overall progress of your activities. 

This is achieved in a couple of ways:

• by establishing clear policies and procedures that outline step-by-step processes for documenting, evaluating, and managing various procurement processes,
• through procurement software that records and compiles procurement data in a single platform, analyzes it, and generates reports on procurement activities and their efficiency, and
• by conducting regular internal audits and identifying weaknesses and inefficiencies in the procurement processes.

Having such a robust system that offers complete visibility proves invaluable, especially when there are so many stakeholders, steps, and processes involved. 

As a result, this high degree of transparency ensures that all crucial information is easily accessible to everybody, in turn fostering trust and collaboration, as well as enabling more data-driven decision-making.

For example, a case study featured in the IBM Smart Procurement Made Smarter report showcases how transparency in invoice management workflows enabled a global chemical company to improve its cash flow and bottom line:

“Monitoring and more transparency in the management of the invoice workflow resulted in early payments to suppliers,  which improved the company’s working capital and resulted in $50 million in cash flow. As an added bonus, they positioned themselves to receive additional discounts equivalent to a $300,000 increase in income.”

Manual invoicing proved inadequate for their needs, so they adopted data analytics systems to monitor invoice management more effectively and reveal areas for improvement. 

Soon enough, they began paying their suppliers early, significantly improving their working capital and even unlocking discounts from suppliers. 

So, while transparency may not always steal the spotlight in discussions about procurement benefits, its impact is still undeniable. 

In fact, it’s the key to better processes, better communication, better workflows, and, ultimately, better procurement outcomes.

More Room for Innovation

Efficient procurement systems free up resources, time, and yes, even energy, to channel these assets toward innovation. 

So, instead of constantly reactively putting out trivial procurement fires, companies can focus on seizing opportunities to create lasting value.

This will, in turn, propel them to new heights of success, boost their reputation, and ensure they stay ahead of the curve. 

In some cases, such as that of Accor, procurement and innovation can even have a global impact. 

This hospitality giant, comprising over 5,300 properties, is deeply committed to advancing sustainability within the industry.

Caroline Tissot, Accor’s chief procurement officer, highlights the significant role of procurement in this endeavor. 

Illustration: Veridion / Quote: Hospitality Net

As she points out, without an effective procurement department, identifying suppliers who align with their values, sourcing the right products and services, as well as meeting sustainability standards would be like finding a needle in a haystack. 

They’d never be able to do it. 

Another testament to procurement’s impact on fostering innovation comes from tech leader Apple. 

According to their official website, innovation lies at the heart of their operations, and suppliers are instrumental in making all that happen. 

Illustration: Veridion / Quote: Apple

That’s why they devised a meticulous supplier selection strategy from which they never stray. 

Through this efficient and streamlined supplier management system, Apple secures top-quality products within optimal timelines and at competitive prices, enabling them to maintain their leadership position and focus on pushing the envelope. 

All in all, the key takeaway is this: when procurement operates like a well-oiled machine, the company becomes free to push boundaries and drive innovation. 

The examples of Accor and Apple only go to show that procurement isn’t just a support function, but a catalyst for modernization and improvement in its own right. 

However, this transformative power can only be unleashed once all inefficiencies are rooted out and eradicated, allowing businesses to dedicate more time and money to strategic initiatives that drive the company forward.

Conclusion

Hopefully, now you can see that there’s much more to procurement than it first meets the eye. 

In fact, with the right procurement team, strategies, tools, and workflows, you have the potential to unlock immense value for the entire company. 

And let’s be real, if that’s not something worth rolling up your sleeves for, then what is?  

So, make data-driven plans, strategically manage your suppliers, create contingency plans, and don’t let anything catch you off guard. 

Before you know it, you’ll be reaping all these rewards and then some.