PwC study 2021: Germany is Europe’s frontrunner in digitalising purchasing processes
of companies have reconsidered their strategic purchasing priorities as a result of COVID-19.
of purchasing department processes have been digitalised.
€ 1 million
average investment in digital transformation of procurement.
of purchasing departments make optimal and sustained use of digital solutions.
Your expert for questions
Dr. Norbert F. Fischer
EMEA Procurement Practice at PwC Germany
Tel.: +49 69 9585-3898
Against the backdrop of the coronavirus crisis, cost reduction and supplier sourcing are currently of high strategic relevance for purchasing departments throughout Germany and the rest of Europe. However, digitalising procurement processes is also a key task. Companies are particularly focusing on digitalising their procure-to-pay processes, which are already widely used in Germany.
Compared to businesses from other European countries, German companies are planning to spend slightly less on digitalisation in purchasing: on average, they intend to invest around €1 million in digital transformation of their procurement processes over the next two years. This is around 12% less than their counterparts in the rest of Europe.
These are some of the findings of PwC’s Digital Procurement Survey 2021.
Cost reduction and supplier sourcing are currently the main priorities in German purchasing departments. Focusing on these issues is allowing companies to secure external resources and improve their financial performance. The COVID-19 crisis has led to a change of strategy in purchasing departments: more than 60% of companies have reconsidered their priorities in response to the crisis. In the short term, the companies surveyed are focusing on cost reduction and risk management; in the medium term, they are looking to reprioritise supplier sourcing, supplier relationship management and digitalisation of processes to prepare for the future.
Digitalisation of processes in procurement is strategic priority number three – after cost reduction and supplier sourcing. This means that digital transformation has remained a fundamental trend despite the crisis – a trend that is also driving agility and resilience.
The level of digitalisation in procurement among European companies has risen in recent years. Purchasing departments are continuing to intensively pursue digital transformation projects by placing an emphasis on digital technologies in the procurement function. Of the companies surveyed, 33% are currently rolling out a digital solution in procurement, while a further 18% are taking the first steps towards a rollout.
Digital solutions can solve business challenges and bring tangible benefits for both the procurement organisation and for the company as a whole. However, companies still have a long way to go to before they can fully exploit all the advantages of digitalisation in procurement.
“In order to further advance digitalisation in procurement, companies need to invest accordingly and train their workforces now.”
As the take-up of digital technology increases, so do its benefits for purchasing departments.
Among the companies surveyed, 79% of purchasing departments have seen organisational benefits and improvements in business performance as a result of deploying a digital solution. This is especially true in companies where solutions are well received by users and their features are used to the full.
However, only 22% of procurement departments stated that they are making optimal, sustained use of their digital solutions. In order to enable this, it is essential for organisations to integrate digital transformation projects into a long-term strategy. This requires a certain level of investment to realise the full potential of digital solutions and achieve all of the financial benefits that they can create.
German companies are planning to invest heavily in digitalising their procurement processes: on average, they intend to invest €1 million over the next two years.
These ambitious investment plans will help companies to implement their digital roadmaps. They also show the expected return on investment, and how much importance companies attach to digital transformation of the purchasing function.
Purchasing departments also agree that transformation of business processes is crucial to the success of a digital development project. They also firmly believe that the time invested in change management and redesigning processes adds more value to a digital transformation project than the technical aspects of selecting a solution and an integrator.
Certain digital use cases have become the bedrock of digitalisation in procurement, such as procure-to-pay, source-to-contract, data analysis and data management. These use cases are already the most widely used today – especially in Germany – and they are among the most common investment projects in Europe for the next two years.
However, even use cases that are not yet widespread – such as smart sourcing/relocation sourcing, risk management, and virtual procurement assistants – are also expected to gain traction. The number of users of these solutions in procurement departments is forecast to double over the next two years. Use cases such as these will enable companies to respond to the growing demands for agility and resilience.
“Germany is playing a pioneering role in digitalisation of procurement. However, this result does not mean that companies can afford to rest on their laurels.”
Over 400 purchasing departments from companies in various sectors in Europe, Africa and the Middle East participated in this survey. Statistics derived from the participants’ answers are purely descriptive.