Why CFOs need to view procurement as a value creator

Chris Willcocks, Vice President & Head intelligent spend management at SAP Australia and New Zealand

A need to adapt to changing business processes and create value for stakeholders in procurement led to increased adoption of digital technologies during the pandemic. However, the added expense of tech investments has often plagued CFOs with cost concerns. Economist Impact research surveying 430 global C-suite leaders revealed budget constraints and uncertainty over technological solutions were the two biggest barriers to digital transformation. However, the research indicates that CFOs recognize the benefits of technology adoption on user experience in procurement, so how can we drive the procurement business case as a value-creator to CFOs even further?

Role of digital transformation

Businesses are still experiencing disruption caused by the pandemic. Digital transformation is no longer an option; it is now a necessity. While organisations have benefited from adopting new technologies across business functions over the last number of years, the level of maturity in this adoption varies from organisation to organisation. This indicates the opportunity for digital transformation to be embraced further across critical business functions, such as procurement.

Digital solutions allow procurement teams to identify problems faster and find alternative solutions, thus becoming a critical value-add for any organisation in the long term. Technologies such as predictive and advanced analytics, automation, and collaboration platforms can help businesses make more informed decisions and gain critical insights, explore opportunities for cost reduction, improve supply chain visibility, and discover new value chains.

“Digital transformation is no longer an option; it is now a necessity.”

As businesses realise the benefits of technology adoption, digitisation budgets have begun to increase; however, according to the Economist Impact report, cost concerns and uncertainty about digital solutions continue to act as barriers to digitisation, especially among CFOs. These concerns show the need for a re-alignment of priorities in how CFOs assign budgets based on value across the procurement function.

Aligning priorities in procurement spending

Historically, procurement was largely seen as a function focused on controlling cost. However, a new dynamic business environment caused by supply chain disruptions in recent years has changed the nature of how procurement is viewed and approached within a business. Procurement is now being seen as adding value to the overall business as it plays a huge role in supporting changing business strategies and risk management through the adoption of tech and managing the contingent workforce. This ultimately means that every function of the C-suite will now have a role to play in how procurement can become a value center for the business; therefore, the CFO and the extended C-suite team must be aligned on their priorities regarding spending in supply chain processes.

As established, it is critical to make the adoption of digital technologies a priority. Investment in digitalisation today can provide much-needed relief and assurance for future business success. The value of this investment can be measured through revenue growth, a direct result of efficient business decisions. While this carries with it additional spending, CFOs shouldn’t rely on cost-saving alone as a sole metric as it runs the risk of ineffective savings in the long term.

While every CFO prioritises the organisation’s bottom line, investment in digitalisation shouldn’t be viewed as something with limitations and controls, especially in the procurement space. With the emergence of cutting-edge digital solutions, organisations are now able to expand the value generated through the procurement function, potentially providing a pathway to additional cost savings and future innovation, which should be considered a s priority sooner rather than later.