A look at corporate procurement: Industry shifts, challenges and tips for success

Corporate procurement can be one of the most difficult processes a business undertakes. Businesses must ensure that they are able to get the resources they need in order to deliver their own products and services to customers. The face of corporate procurement has changed recently, particularly with the evolution of business-to-business strategies and the use of technological systems. While these elements can present new challenges for procurement officers, there are a few strategies decision-makers can leverage to ensure success.

Study shows shift in corporate procurement

According to Acquity Group’s 2014 State of B2B Procurement study, processes have shifted when one business attempts to negotiate the purchase of products and services from another organization.

The study found that technology had a considerable role in this shift, creating new purchasing options as well as challenges for businesses on both sides of the corporate procurement transaction. Research shows that 68 percent of B2B buyers now make the majority of their procurement purchases online. This is a significant increase from the 57 percent of purchasing officers who engaged in online procurement in 2013. The study also showed that respondents leveraged 90 percent or more of their procurement budget online, increasing two-fold from the amount spent on procurement ecommerce in 2013.

In addition to a shift in the way items are procured, companies are now leveraging technology to do the bulk of their procurement research as well. The study found that buyers investigate 90 percent of procurement products online before buying, and 44 percent of participants utilized a mobile device for this research. This is an abundant change of pace for the procurement process, especially considering that buyers researched only 22 percent of items online in 2013.

“B2B buyers in the United States are more active online than ever before, spending more time and company dollars in the digital space,” the report stated. “In the face of an increasingly competitive omni-channel environment, the B2B supplier industry must adapt to attract and engage today’s savvy B2B buyers, increase revenue and capitalize on ripe digital growth opportunities.”

Top challenges seen with corporate procurement
Corporate procurement no doubt comes with its share of unique challenges. Some, including the following pointed out by Spend Matters Network, are more prevalent and impactful than others:

• Increased spending and cost containment: One of the biggest issues procurement officers deal with are ever-increasing costs and maintaining cost containment. Spending must be carried out in an organized manner to ensure that expenses remain on-budget. Decision-makers need solutions that can help them track spending so that costs are noted and an overspend lag doesn’t occur.
• Proof of savings: Another issue managers have to deal with is providing proof where money was saved by the organization.”Success for the CPO is to deliver benefits that are aligned to business outcomes, such as earnings per share, working capital and operating profit,” Spend Matters Network stated. “Achieving this whilst maintaining the budget holder’s flexibility to deliver against their own business objectives requires strong tracking and measurement tools alongside a strong, professional working relationship.”
• Use of technology: As noted by study results, B2B buyers are now using more technological tools for their corporate procurement. However, this does not mean there aren’t challenges associated with these systems. The most impactful issue here is that platforms are constantly changing and being upgraded, making it easier for companies to fall behind.

Company leaders have a number of considerations to make with their corporate procurement.

Tips for successful corporate procurement
Despite these challenges, there are businesses that have experienced success with their corporate procurement strategies. These effective habits include:

• Keeping an eye on industry trends: Taking note of trends specific to corporate procurement can help managers keep their fingers on the pulse of the industry, particularly when it comes to technology.
• Form strong relationships: Supply Management noted that prosperous corporate procurement managers form strong working relationships with the individuals representing the companies they make their purchases from. Leveraging a strategy like this can ensure that current needs, as well as the organization’s future requirements, are met.
• Fully understand what is being purchased: In addition, CPOs also gain a full, all-encompassing understanding of what it is they are buying before going forward with the transaction. This can prevent counter-intuitive surprises that can impact productivity later on down the line.
• Leverage transparent communications: Supply Management also pointed out that open and transparent communications are paramount when it comes to corporate procurement.”Procurement should recognize that for a supplier to be able to produce a real value for money proposal, especially in the services arena, they need to have as much information as possible,” Supply Management stated.
• Be fair in demands: No doubt CPOs must ensure that their business’s needs are met. However, they must be realistic in their demands so that the product and service providers they work with are able to deliver.

Overall, corporate procurement can present both challenges and opportunities for businesses. Having effective solutions in place, such as those available from iT1 Source can help streamline the process, reduce complexity and ensure success.