Frequently asked questions about the digitalization of procurements
Investing in a digital procurement system is on many companies’ to-do list. As new technologies revolutionize tendering processes, it is important to identify the services and systems that help transform procurement from a support function into a factor essential for the business operations’ profitability.
However, there are many pressing questions related to digital procurement services, their use and implementation. We have compiled the questions our customers ask the most. We hope you can find the necessary answers here, but if you have any other questions, please contact us here!
- What is a digital procurement system?
- What does digital tendering mean?
- Is it lucrative to invest in a digital system? Where does the financial benefit come from?
- Can procurement systems be implemented as cloud services?
- What types of companies would benefit from a digital procurement system?
- Data security in cloud services?
- What if the system crashes?
- Can it be integrated with existing systems?
- What types of interfaces do procurement systems offer?
- How is the flow of information and data between systems established?
- Will the new system make previously-learned processes harder?
- How is the GDPR taken into account in procurement systems?
- How is the source-to-contract process different from the purchase-to-pay process?
- How to get started with digitalizing procurements?
- Are basic IT skills sufficient for using the system?
1. What is a digital procurement system?
A digital procurement system electronically manages the entire procurement process from the creation of the RfQ (request for quotation) to the final contract award. Digital procurement systems are designed to produce cost savings by enhancing the operations of supply chains and to improve the data management and supplier relations related to procurement.
2. What does digital tendering mean?
Digital tendering means that all the procurement documents must be electronically available and that all procurement-related communications are carried out electronically.
3. Is it lucrative to invest in a digital system? Where does the financial benefit come from?
Investing in the digitalization of procurements may seem like a large investment at first, but the benefits it entails 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 tendering, making tendering process management simpler and easier.
The trend of outsourcing has radically increased the amount of procurement in organizations. 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 digitalization of procurement is important not only for clarifying procurement processes but also for improving the operations of the entire company. Functional, strategic procurement has a positive effect on the business operations of a company, improving its ability to respond to the changing market.
However, the immediate financial benefits of digitalized procurement are largely connected to the work efficiency of the procurement team and the resulting time and cost savings, not to mention the savings generated by the development of supplier and stakeholder relations.
In conclusion, digitalized procurement is worth the investment!
4. 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 to physical systems, they also provide more storage space.
5. What types of companies would benefit from a digital procurement system?
Most digital procurement systems can be customized according to the needs of the company, regardless of its industry and size. Whether the company is small or a global medium-sized or large operator, the digitalization of procurement entails various benefits.
6. 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 centers, and their location determines which country’s laws are complied with in storing the data. The General Data Protection Regulation of the EU made the protection of personal data stricter 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 the practical measures and technical implementations 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 will be taken if sensitive data is destroyed or accessed by an outsider?
Generally speaking, the data security of cloud services is usually reliable as it is one of the most important features of such services. Suppliers work constantly to develop and maintain their level of data security, and innovative software and ever-changing technology mean that data security can never fall behind.
7. 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 not prevent users from accessing their data. That is also why the data will not be destroyed if a server is damaged.
8. Can it be integrated with existing systems?
The ability to integrate digital tendering systems with the 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 with case management and ERP systems, for example. When procuring a tendering system, we recommend asking the service provider about the integration of the system and how it supports the company’s existing IT infrastructure.
9. 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 and the 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.
10. 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).
11. Will the new system make previously-learned processes harder?
In order to implement a new system in the company 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. When the system is deployed in the company, the key individuals are already 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 utilize it as diversely as possible in its everyday operations.
12. How is the GDPR taken into account in procurement systems?
Similarly to the integration options of a procurement system, its data security and GDPR-related matters are completely dependent on the service provider.
13. How is the source-to-contract process different from the purchase-to-pay process?
The purchase-to-pay refers to the business processes that cover the search, procurement, reception and payment of goods and services and the related accounting functions.
These systems automate the entire purchase event process, connect procurement and invoicing operations and thus, they automate the process from the identification of needs, planning and budgeting to procurements 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
14. How to get started with digitalizing procurements?
We recommend starting the digitalization of procurements with analyzing the initial situation. Which systems is 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 analyzing the initial situation, your company can move on to finding service providers and examining the sources and types of help available for digitalizing procurements. In addition to the service itself, we recommend asking different service providers about the method of implementing the new system and making the most of the pre-existing systems and resources of your company.
15. 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 to learn the system relatively fast. We recommend contacting your service provider for more information on the usability of the system.