Why digital procurement is a game-changer for SMEs in Africa
- March 22, 2023
- Posted by: Kefa Nyakundi
- Category: Procure to pay
In today’s fast-paced business environment, organizations are constantly searching for ways to improve their operations and gain a competitive edge.
One area that has seen significant advancements in recent years is procurement, with digital procurement emerging as a game-changer for many businesses. Digital procurement involves the use of technology and software to manage and automate the procurement process, from requisition to purchase order to payment.
According to a recent report by Grand View Research, the global digital procurement market is expected to reach $6.1 billion by 2027, growing at a CAGR of 9.6% from 2020 to 2027. This growth is being driven by the increasing adoption of cloud-based procurement solutions, the need for better supply chain visibility and control, and the demand for real-time data analytics and insights. In Africa, the digital procurement market is also growing, with countries like Kenya making significant strides in the adoption of digital procurement solutions.
Some of the key drivers of digital procurement include, but are not limited to:-
The need for efficiency and cost savings: By automating procurement processes, businesses can eliminate manual tasks such as data entry, paperwork, and phone calls, which can be time-consuming and error-prone.
Expenditure control: Enterprises are looking for ways and means to reduce the risk of maverick spending, where employees make purchases outside of the procurement process. A centralized platform for managing procurement activities goes a long way to aid this objective.
Need for enhanced transparency and visibility: With a digital procurement platform, businesses are able to track every aspect of the procurement process, from requisition to payment, in real-time. This transparency has helped businesses identify bottlenecks and inefficiencies in their procurement processes and make data-driven decisions to improve them. It also helps businesses ensure compliance with regulatory requirements and mitigate the risk of fraud and corruption.
Risk management: With a digital procurement platform, businesses have succeeded to identify and mitigate risks across their supply chain, from supplier performance to geopolitical risks. This has helped businesses avoid disruptions to their operations and protect their brand reputation. Digital procurement has also helped businesses ensure compliance with ethical and sustainability standards, which are increasingly important to consumers and investors.
By adopting digital procurement, businesses are witnessing the following benefits:
- African SMEs adopting digital procurement can now compete with larger businesses unlike in the past when they struggled to compete due to the high cost and complexity of manual procurement processes. With digital procurement, SMEs can now access the same procurement technologies and tools as larger companies, enabling them to compete more effectively in the market.
- Digital procurement is also helping to improve supplier relationships. By using digital tools to manage procurement, businesses improve the visibility of their supply chain, making it easier to track supplier performance and ensure that they are meeting their contractual obligations. This helps to build trust and collaboration between businesses and their suppliers, leading to stronger, more productive relationships.
- A plethora of manual procurement processes that are costly and time-consuming for SMEs can now be digitized. For example, many businesses that still rely on manual time-consuming processes that involves multiple rounds of negotiations and contract revisions e.g supplier selection, negotiation, and contracting now have the opportunity to digitize and streamline supplier selection and contract management, reducing the time and resources required to complete these tasks.
- Another example is the purchase order management process. Many SMEs in Africa still rely on manual processes for purchase order management, such as email or paper-based systems. This often leads to errors and delays, as well as difficulties in tracking and managing purchase orders. By digitizing purchase order management, businesses now automate the process, reducing the risk of errors and improving visibility and control over the procurement process.
The benefits of digital procurement are clear, but there are still challenges to be overcome. One of the biggest challenges is the resistance to change from employees and suppliers who are accustomed to traditional procurement processes. Businesses need to invest in change management and provide training and support to help employees and suppliers adapt to digital procurement. They also need to ensure that their digital procurement platforms are secure and compliant with data privacy regulations.
In conclusion, digital procurement is the future of business, and it has the potential to transform the procurement landscape in Africa. By digitizing procurement processes, SMEs can compete more effectively with larger businesses, improve supplier relationships, and reduce the time and resources required to complete procurement tasks. Examples of manual procurement processes that are costly to SMEs in Africa, such as supplier selection, negotiation, and contract management, as well as purchase order management, can be digitized to achieve these benefits. As businesses in Africa continue to adopt digital technologies, digital procurement will become an increasingly important tool for driving efficiency, productivity, innovation and growth