The problems of managing spending by companies

According to SAP’s Agile Procurement Insights Research in partnership with Oxford Economics, only 23% of procurement and supply chain managers have a clear, real-time, automated view of overall spending across their organization. Additionally, 49% still manually analyze data to inform decision making.

The research is based on 1,000 interviews with procurement and supply chain managers responsible for direct and indirect spending on goods, services and external workforce in 23 countries, including Italy. The study was designed to help understand the influence of procurement on an organization, the current state of collaboration between a company and its suppliers, and the impact of technology and process digitization in the purchasing function.

A subset of managers interviewed – called the “leaders” – are achieving more consistent business results. Leaders are investing in technology and process digitization to help anticipate contingencies, fueling business agility and resilience, and elevating the strategic value of procurement within the company.

The research is broken down into five reports that examine key areas of spending management and highlight the characteristics of leaders.

Leaders shine

The report «Leaders aim higher: raising the strategic value of purchases for the business» studies the behaviors and choices of leaders who represent about 10% of the managers interviewed. Leaders invest more in the digital transformation of the processes that manage purchases and reap important benefits. To qualify as a leader, companies had to meet certain criteria in four areas: high degree of process automation, frequent use of data to inform decision-making, use of technology to influence business, and fewer challenges in purchasing management than the average of the sample. Leaders perform better than other respondents in terms of operational efficiency, supplier performance, compliance, risk management and cost reduction, but they also see room for improvement.

Procurement digitalization pays off

The ‘Purchasing-Based Performance: How Digital Transformation Is Improving Procurement’ shows that while organizations are reaping major benefits from the digitization of purchasing, some challenges remain. For example, 38% of respondents said that most or all procurement processes are still manual. Only 54% said their company’s procurement technologies allow them to make data-driven decisions. Finally, companies that have used data and analytics, harnessed the power of AI and embraced new technologies are achieving better results.

Progress in supplier risk management, but also ample room for improvement

‘Knowing to See Beyond: Procurement can use advanced analytics to predict and manage supplier risk’ reveals widespread vulnerabilities in supplier risk management, including poor visibility and over-reliance on too few of suppliers. Only 49% of managers said they regularly update risk mitigation plans to address potential disruptions, and only 32% believe their supplier risk management is highly effective. According to the report, organizations make low use of advanced analytical techniques and should take bolder steps to increase visibility into supplier performance. Ultimately, they would need to make greater use of third-party data to help anticipate and mitigate potential disruptions along their supply chain.

Collaboration with suppliers is the key to direct spending

The ‘Close Collaboration Beyond Transactions: Direct Spend Leaders Engage with Important Vendors to Improve Performance’ report shows that direct spend leaders who embrace automation and treat vendors as partners achieve superior business results . For example, 92% of leaders say they use a network to collaborate with suppliers, compared to 69% of other respondents. In addition, 76% of leaders say they share estimates of demand for their products with suppliers, compared to 44% of other respondents.

A significantly poorly managed category of expenditure: the external workforce

The report “Agility is not always on the payroll: Gain full visibility of the external workforce to achieve better business results” shows that only 35% of managers use technology to manage their contingent workforce, while 70% declares to use it for the provision of services. Since the external workforce is a broad category of strategic spend that fuels business agility, a wider adoption of vendor management systems can help organizations work with preferred partners, support different pricing models, apply easily negotiated rates, monitor job quality and equipment usage, and manage access to internal systems securely.

“Business leaders increasingly understand that sourcing value goes beyond cost reduction,” he said John Wookey, president, SAP Intelligent Spend and Business Network. Procurement is critical to productivity and innovation, but its potential is only fully realized by digitizing end-to-end expense management processes on a single platform in the cloud. Today, allowing organizations to align spending decisions with business strategy in the network economy is the goal of intelligent spending management ».

Source: RSS Innovazione by

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