This blog provides a procurement perspective to the following: A New Government Operating Environment: SAP S/4HANA Cloud for Public Sector.
Analysts see many challenges for governments coming up in 2023. This blog reflects on what these trends and challenges mean to procurement departments and how they can contribute to address them.
Economy and finance
The outlook on global economy is rather difficult: just coming out of the pandemic, political crises and inflation put further pressure on societies. Governments need to increase spending to support local economies and to stabilize social systems. This leads to a lack of funding and further need to control public spend.
Procurement departments can address these challenges by managing spend intelligently:
- They increase competition among suppliers and reduce prices by doing more public tenders
- They direct employees to negotiated contracts with better prices than direct buys at the local shop
- They use intelligent and integrated procurement solutions to streamline and automate internal processes further
Resilience
The global pandemic illustrated the impact of crises on societies and the need for more resilience in governments. Governments want to prepare for the next crises and want to identify risks earlier.
Governments and public organizations heavily depend on external provision of products and services. Procurement departments can increase the resilience of their supply chain:
- They collaborate closely with their suppliers and share demand and transactions via a network. Suppliers give feedback on the status of deliveries and warn in case deliveries are delayed or stopped.
- The exchanged information is made transparent to both sides and allows to react quickly on supply chain issues making the overall supply chain more resilient.
- Networks also support to publish demands and to look for new suppliers, when needed. This allows to broaden the supply base and to switch suppliers, if needed.
Sustainability
Many countries have committed to sustainability goals, e.g. to reduce CO2 emissions and increase social equality and started their journey towards that goal.
Procurement departments can help on that journey:
- They collect information on suppliers and on their contribution to sustainability objectives. That information goes into tender decisions and directs more spend to sustainable suppliers
- They share this information with employees (e.g. carbon dioxide emissions of products) and enable them to take decisions considering sustainability aspects.
- Intelligent analytics provides insights into spend considering sustainability aspects. This helps to identify areas where further improvements can be achieved.
Digital government and transformation
COVID forced governments to extend digitalization, procurement departments can make good use of that:
- Moving procurement processes away from paper allows to simplify and to automate many process steps freeing up buyers’ time for more valuable actions than typing purchase orders.
- Digital procurement processes create valuable data and allow for better insights into spend helping to identify further cost saving options
- Digital procurement processes enforce compliance and documentation regulations and assist people to follow them at the same time, e.g. with an automated budget check that ensures budget compliance without any manual validation steps.
- Digital procurement processes drive integration and collaboration across departments and also across organizations down to suppliers.
See how SAP helps to address these challenges with Intelligent Spend Management solutions and the SAP Business Network:
In summary, the challenges for 2023 are very much real and greatly impacting the public sector. Procurement leaders will need to be agile and continue to adopt digital strategies across their procurement functions. Modernizing procurement capabilities will help governments to address budget constraints, increase resilience and make their supply base more sustainable.
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