Procurement professionals today find themselves increasingly overwhelmed by the wide variety of technology tools that are available. Unlike in the past where technological variety was limited, today’s professionals may easily fall hostage to the vendor choices of their IT departments. By tracing the past of procurement technology we are able to gain better insights into its future business benefits. Below is a look at the evolution of procurement technology from its humble beginnings during the internet bubble to today’s increasingly sophisticated offerings.
Technology in the areas of procurement and supply chain quickly developed during the internet bubble, which led to the creation of an offering that was fragmented in the marketplace. However, it’s only recently that available procurement technology has become satisfactory. In the early days, this technology sought to address the issues facing procurement such as placing more efficient orders and raising requisitions. Initially, e-initiatives focused on transactional processing including the automation of the purchasing process for high volume, low value item categories such as office supplies and MRO.
It is here that traditional ERPs and new e-procurement vendors developed their value propositions. However, while there were real benefits, there were also limitations to their applicability as numerous categories could not be addressed through catalogues. Soon, enterprises began to realize the limitations of utilizing technology to achieve purchasing efficiency. Naturally, the next stage of technological investments would focus more on the upstream sourcing processes.
New niche vendors and industry focused marketplaces emerged to serve this developing market, thereby leaving behind most of the existing ERP and e-procurement vendors. E-auctions were the initial functionalities that were marketed as they provided a quick return on investment, as well as a good story to tell business, one that was easily understood. However, the limitations of e-auctions would become evident fast, seeing as they only served to improve the negotiation phase, rather than boost the entire process of strategic sourcing. More importantly, the auctions cannot provide a long-term solution to the main issue of sustainability of savings.
The current state of the economy continues to provide procurement professionals the rare opportunity to increase their sophistication and play a vital role in the navigation of their companies through these dire times. Professionals can go beyond the need for immediate savings and instead achieve competitive advantage for their business. To do this, they will require procurement technology that supports organizations in achieving the next step in procurement excellence.