Smarter management of spend categories and enhanced insights of overall spend can bring immediate and robust cost savings to businesses, however, many PE firms have yet to fully-leverage these capabilities.
There are three main reasons for this:
- Companies are still unsure of the benefits that digital procurement solutions can offer, therefore, getting buy-in from portfolio companies can be difficult.
- They don’t have access to the right Procurement in Private Equity data so it can be difficult to know where to start.
- Companies lack the resources needed to properly leverage data in a way that will generate significant value.
In this post, we’ll explore the benefits, opportunities, and perceived challenges that digital procurement presents for PE firms and offer solutions and insights to help you get started.
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Benefits of Digital Procurement for Private Equity Firms
For PE firms specifically, the primary benefit of digital procurement lies in its ability to provide a holistic view of spend within their portfolio, across each individual company’s spend over a certain period, and across business units. Properly categorized and analyzed spend data helps find areas where spend is improperly managed and could be reduced or eliminated altogether. Additionally, digital procurement can help identify how cost savings and efficiencies could be gained through enhanced supplier and category management and/or renegotiated contracts. While these benefits can be useful for all companies, they are especially significant for PE firms that are often tasked with quickly turning around a company’s performance and maximizing value within a short time frame.
Other benefits that digital procurement can offer private equity firms include:
- Achieved cost savings through process improvements and automation
- Increased negotiating power with suppliers
- Improved visibility into supply chain and supplier performance.
- Reduced risk of fraud
- Enhanced compliance
- Improved ability to reach goals around ESG (Environmental, Social, and Governance) / CSR (Corporate Social Responsibility)
Implementing New Procurement Technology: The Challenges and Solutions
When it comes to realizing the benefits of digital procurement, many Private Equity firms face three major hurdles: a lack of understanding of the potential benefits, limited access to data, and a lack of proper staffing.
Here are steps that private equity firms can take to overcome these challenges.
- Taking the first step means justifying the investment in new technology. Take an honest look at the solutions across your portcos: Are they often resorting to ad-hoc and manual interventions to resolve issues? Is the procurement function growing in complexity, or is the team overwhelmed? If any of these ring true, your efficiency gains are at least partially unrealized. A worthwhile solution should run at-scale, helping you make better decisions for the future. Firms like Simfoni have deep experience working with Private Equity to address spend visibility challenges and supply the resources and tools to unlock deep insights and significant savings opportunities across the portfolio. By partnering with a firm that understands the goals and challenges that private equity faces, you can show your portcos the opportunities they’re missing and areas where they can increase efficiency. Ideal technology partners, like Simfoni, offer a cloud-based solution that is simple to use, easy to implement, and supplies the data you need in a format that is also easy to understand. Your procurement technology partner should be your guide every step of the way, from implementation to optimizing your experience down the road.
Up-front cost can be a major hurdle, but fortunately it’s one of the easiest to overcome. Procurement technology partners like Simfoni offer composable, supported, niche solutions with an outcome-based self-funded commercial model called Pay-as-You-Save (PAYS). With PAYS, you don’t have to make a large upfront investment or commit to a long-term contract. Instead, you only pay for the solution when it delivers results. In other words, you don’t pay anything until you save money.
- The next step is to focus on the strategy. This is where many firms get overwhelmed due to a lack of internal resources. You can have the best procurement technology available, but without the resources to properly wield it, you won’t be able to extract the insights that are key to creating value. Therefore, it’s imperative to have a procurement technology partner (not just a provider!) that can help. Using the most advanced machine learning and AI (Artificial Intelligence) capabilities available, Simfoni mines the data for you, analyzes and interprets it, so your portco teams don’t have to spend precious time and resources trying to figure it out on their own. We provide your teams with the data and insight they need to act and improve business performance right away.
- Finally, many firms do not properly staff their procurement function. To be successful, you need to have the right team in place with the skills and experience necessary to take advantage of the data and insights generated by your new program. This is another area that truly sets Simfoni apart. As your partner, we don’t just hand you the keys to an out-of-the-box solution and wish you luck. We provide you with a dedicated team of experts with the knowledge and experience necessary to help you drive the most value from your procurement function, helping you to achieve your goals. We work with you to assess your needs, design, and implement a solution tailored to your specific requirements. And as a true extension of your team, we’re there with you every step of the way to ensure success.
Read More:- Procurement With a Purpose – Leverage your spend to advance your organization’s CSR goals and ESG metrics
There’s no doubt that digital procurement solutions can bring significant cost savings to private equity firms. But without the technology, strategy, and team in place, you won’t be able to fully leverage their power. Simfoni has the experience and expertise you need to make your digital transformation a success.