Frequently asked questions about the digitalisation of procurement

Investing in a digital procurement system is on the to-do list at many companies. With new technologies revolutionising sourcing as we know it, the challenge is to identify which services and systems can help transform your procurement from a support function into an essential driving factor for business profitability.

However, there are many pressing questions related to digital procurement services, their implementation and use. We have compiled some answers below to the questions our customers ask most. You can find more FAQs here. If you have further questions of your own, please contact us!

1. What is a digital procurement system?
2. What is digital sourcing?
3. What is digital tendering?
4. Is it lucrative to invest in a digital system? Where does the financial benefit come from?
5. Can procurement systems be implemented as cloud services?
6. What types of companies would benefit from a digital procurement system?
7. What is data security in cloud services?
8. What if the system crashes?
9. Can it be integrated with existing systems?
10. What types of interfaces do procurement systems offer?
11. How is the flow of information and data between systems established?
12.Will the new system make previously-learned processes harder? 
13. How is GDPR taken into account in procurement systems?
14. How is the source-to-contract process different from the purchase-to-pay process?
15. How do you get started with digitalising procurement?
16. Are basic IT skills sufficient for using the system?

1. What is a digital procurement system?

Procurement is the whole end-to-end process of acquiring goods and services to fulfil your intended business needs. Everything from identifying a need and allocating suppliers and collecting bids, all the way to negotiating contracts and beyond. Having a digital procurement system in place means you can automate and streamline this process, gaining greater visibility and control and more extensive requisition, quotation, vendor, purchase order, and contract capabilities. Digital procurement systems are designed to produce cost savings by enhancing the operations of supply chains as well as improving data management and supplier relations related to procurement.

2. What is digital sourcing?

Sourcing can be considered a sub-section of the procurement process, and refers to the prework that is typically done before any purchases are made in identifying suitable suppliers, balancing costs and generally laying the supplier foundation. Digital sourcing means carrying out this process and related communications electronically and systematically with real-time digital access to all related documentation.

To learn more about digital sourcing, download our free guide to eSourcing!

3. What is digital tendering?

Tendering refers to the actual process by which you open your business to bidders, who will provide a quote for the goods and services you’re sourcing. Digital tendering means that any required paperwork or supplier evaluation can be carried out electronically throughout the tendering process. The term is typically reserved for suppliers bidding on government projects or projects that must be submitted within a finite deadline.

4. Is it lucrative to invest in a digital system? Where does the financial benefit come from?

Investing in the digitalisation of procurement may seem like a large investment at first, but the benefits are indisputable. Digitally-managed procurement processes enhance procurement work and reduce both the costs and the time related to the processes. Automated functions offer companies real-time information on, for example, the life cycle of sourcing and make management of the tendering process simpler and easier.

The trend of outsourcing has radically increased the amount of procurement in organisations. This has also increased the costs of procurement, which may account for up to 70% of a company’s turnover! A global market, complex logistics and a dispersed body of suppliers bring their own challenges to procurement. Therefore, investing in the digitalisation of procurement is important not only for clarifying procurement processes but also for improving the operations of your entire company. Functional, strategic procurement has a positive effect on business operations, improving your ability to respond to a changing market.

However, the immediate financial benefits of digitalised procurement are largely connected to the enhanced work efficiency of procurement teams and the resulting time and cost savings, not to mention the savings generated by the development of supplier and stakeholder relations.

Digital procurement is worth your investment! Here’s what our customers say about savings.

5. Can procurement systems be implemented as cloud services?

The current procurement systems on the market are mostly cloud-based solutions. Procurement systems implemented as cloud services are both easy to implement and effortless to use without the need for special expertise, training or hardware and software investments. They only require an Internet connection. Your systems will always be up to date as most versions are automatically downloaded from the cloud free of charge. Compared with physical systems, they also provide significantly more safe storage space.

6. What types of companies would benefit from a digital procurement system?

Most digital procurement systems can be customized according to the needs of a company, regardless of its industry or size. Whether the company is small or a global medium-sized or large operator, the digitalization of procurement entails various benefits.

7. What is data security in cloud services?

The technical security of a cloud service relies on technologies, operating models and principles. The information entered by the users in the service is stored in data centres, and their location determines which country’s laws are complied with in storing the data. Introduction of the General Data Protection Regulation (GDPR) of the EU has made the protection of personal data stricter than before across all the EU member states, which is why companies must now be more open and careful when storing the data of a third party.

When selecting a service provider for a procurement system, we recommend learning about potential certifications or third-party audits as well as the service provider’s documentation on practical measures and the technical implementation of the service.

When discussing the data security of cloud services, we recommend asking at least the following questions:

• • Who can access the data in the system?
  • How are user roles and access rights managed?
  • What actions can be taken if sensitive data is destroyed or accessed by an outsider?

Generally speaking, the data security of cloud services is reliable. It is one of the most important features. Suppliers work constantly to develop and maintain their level of data security, so innovative software and ever-changing technology mean that data security can never fall behind.

8. What if the system crashes?

The files of a procurement service implemented as a cloud service are often placed on a number of virtual servers, whereupon a failure in one server will still not prevent users from accessing their data, nor will that data be destroyed if one server is damaged.

9. Can it be integrated with existing systems?

The ability to integrate digital sourcing with your company’s existing information systems largely depends on the service provider and the system’s interface architecture. Generally speaking, however, such systems are relatively simple to integrate, for example, with case management and ERP systems. When procuring a digital sourcing system, we recommend asking the service provider about the integration of the system and how it supports your company’s existing IT infrastructure.

10. What types of interfaces do procurement systems offer?

The most common procurement system interfaces are with ERP systems, case management systems, storage and project management systems as well as other systems of the service provider.

Service providers can also create new interfaces case-specifically, depending on the interface architecture. However, creating and adding new interfaces varies widely among service providers.

11. How is the flow of information and data between systems established?

The primary aim is to transfer information between systems through their general interfaces (Web Service). Web Service enables a limited number of functions and the transfer of data with messages sent in a predetermined format. If a Web Service interface is not available, information can also usually be transferred with export files (CSV, Excel, XML).

12. Will the new system make previously-learned processes harder?

To implement a new system as simply and efficiently as possible, there are some factors to take into consideration before even selecting a service provider. The implementation of a new system always requires commitment and learning, regardless of the type of system.

The purpose, objectives and benefits of the system should be discussed internally in a clear manner. Once the system is deployed in the company, key designated individuals should already be aware of the demands and importance of the project.

A great service provider knows what type of support and user training to offer its customers! Moreover, a great system pays for itself when the company knows how to use it as diversely as possible for maximum results in its everyday operations.

13. How is the GDPR taken into account in procurement systems?

As with the integration options of a procurement system, all data security and GDPR-related matters remain completely dependent on the service provider.

14. How is the source-to-contract process different from the purchase-to-pay process?

Purchase-to-pay refers to the business processes that cover the search, procurement, reception and payment of goods and services, including the related accounting functions.

These systems automate the entire purchase event process, connect procurement and invoicing operations and thus, automate the process from the identification of needs, planning and budgeting to procurement and payments.

A source-to-contract process, in turn, refers to processes that help analyze procured services or their suppliers in order to form a long-term supplier relationship with the supplier in question instead of one separate product or service.

However, these two solutions should not be considered individual processes as they yield the best benefits when they are integrated with each other. An integrated solution helps organizations to, for example:

• • Better comply with their contracts
  • Expedite their procurement processes
  • Enhance the monitoring and transparency of procurement processes
  • Create more savings

15. How do you get started with digitalising procurement?

We recommend starting will a full analysis of your current situation. Which systems are your company already using, can they be integrated with the new systems, what types of employee, time and cost resources does your company possess at the moment? After analysing the initial situation, your company can move on to finding service providers and examining the sources and types of help available for digitalising procurement. In addition to the service itself, we recommend asking different service providers about their method of implementing new systems, including making the most of your company’s pre-existing systems and resources.

 16. Are basic IT skills sufficient for using the system?

As mentioned above, the implementation of a new system always requires commitment and learning. However, if the service provider has invested in the usability of the system, basic IT skills should be enough for you to learn the system relatively fast. We recommend contacting your service provider for more information and training on the system usability.

In FAQ part 2 you find answers to why shift to sustainable procurement, how do digital systems promote risk management, what is the role of AI in driving digital procurement, and much more.

Get your own copy of our free eSourcing guide to learn more or read about Cloudia customer success stories to see the actual benefits of digitalisation.

Need expert advice on digitalising your procurement? Order your complimentary process evaluation that will simply clarify the step-by-step introduction of digital devices in your organisation!