Invest in procurement to enhance digital transformation

Supply chains operate in an environment where disruptions are almost guaranteed. To address this, procurement organizations must leverage all the tools at their disposal to not only anticipate disruptions but also change how they respond with targeted improvements in processes and investments.

To build a more resilient procurement organization, start by going back to basics: evaluate current processes to ensure they are standardized and documented. Then identify where the organization is investing in terms of both money and staff. Finally, figure out how technology fits in. APQC’s research has found that there is room for improvement in procurement by standardizing processes and developing a cohesive technology strategy.

Procurement processes, investment, and resources

APQC defines procurement as having four processes, ranging from the more strategic to the more tactical.

1. Provide sourcing governance and perform category management.
2. Select suppliers and develop/maintain contracts.
3. Order materials and services.
4. Manage suppliers.

For 2025, organizations have made process standardization a critical strategy across almost all areas of supply chain, including procurement. This is different from what organizations have done in the past, and this shift relates to the fact that organizations are also making supply chain digitization and automation key priorities. Standardization is a way to overcome difficulties with optimizing and scaling technology. Many organizations have determined that standardization is a first step in an effective plan for automating their supply chain processes.

Related infographic

 

Optimize procurement with standardization and technology

The volatile environment for supply chains requires organizations to leverage all the tools at their disposal, including technologies such as AI. Organizations must devote time to standardizing their procurement processes to yield the most benefit from technology adoption.

Click to view full infographic

 

Additional motives for standardization

Technology is not the only driver for organizations seeking to standardize processes—there are several other benefits. Standardized processes will always be more efficient and effective than ad hoc activities. One needs only to look at “maverick” purchasing to understand that ad-hoc activities mean slower, more costly purchases. Standardized processes also create stability for internal and external stakeholders: they can be sure that procurement will operate in a similar manner every time.

Standardization makes processes easier to benchmark over time, leading to faster identification of opportunities for improvement. Organizations are also able to quickly adapt standardized processes across the enterprise to account for changing customer, supplier, or market requirements.

Standardization is an initial step toward the creation of end-to-end processes. These enable visibility into the interdependencies of activities across the organization. It also ensures that any changes to processes do not inadvertently harm internal or external partners up or downstream.

Procurement costs

Leading organizations view procurement as offering a strategic opportunity for process improvement, cost savings, and increased customer satisfaction. From this standpoint, improving the efficiency and effectiveness of procurement can lower costs and lead to better supplier relationships.

Cost measures are often among the first used to evaluate process performance. The total cost of the procurement process group measures the cost of the entire function and includes personnel, systems, outsourcing, allocated overhead, and other costs. To compare costs across organizations of different sizes, APQC uses a common denominator: cost per $1,000 revenue.

APQC pulled from its Open Standards Benchmarking data for procurement. At the median, the total cost to perform the process group “procure materials and services” per $1,000 revenue is $4.99. Figure 1 shows how this breaks down, with personnel costs representing the largest percentage of total costs.

 

Procurement employee time

With so much of the cost of procurement going toward personnel, organizational leaders may wonder where that procurement employee time goes. We find that half of all full-time equivalent employee (FTE) time goes toward ordering materials and services (Figure 2).

The process of ordering materials and services may seem straightforward, but it demands no small amount of time from procurement staff. This is where process standardization can come in handy—if an organization has identified ways to streamline procurement processes, it can reduce the amount of time necessary to order materials and services, and in turn reduce the allocation of employee effort to this task.

 

Automation in procurement

With the current inputs of costs and FTEs for procurement, one way to improve the output (productivity) is through automation. APQC again looked at its benchmarking data to determine the current state of automation among organizations and how they are leveraging it in procurement.

Procurement technology strategy

Many technologies are impacting procurement, including cloud computing, AI, and various applications. APQC researched the technology strategies adopted by 600 organizations. The results showed that there is little strategic integration of technologies.

Only 15% of organizations have an integrated technology strategy across AI, cloud, and application modernization for procurement. More organizations have adopted individual strategies. Specifically, 57% have an individual cloud strategy, 35% have an individual application modernization strategy, and 26% have an individual strategy for AI. Organizations must adopt broader, more integrated strategies so that they can maximize their procurement technologies.

AI adoption in procurement

APQC has also looked at AI trends within the supply chain and in procurement in particular. In the broader supply chain, many organizations have started implementing AI.

• Optimizing: 10%
• Operating: 25%
• Implementing: 40%
• Piloting: 25%

AI adoption is less advanced in procurement. The degree of adoption is spread across multiple levels, with a concentration in the early adoption (considering or evaluating) and middle adoption (piloting or implementing) phases (Figure 3).

 

With adoption still in the early stages, APQC looked at the procurement processes in which organizations are using AI. As shown in Figure 4, over two-thirds of organizations have implemented AI for providing sourcing governance and performing category management. Fewer organizations (15%) have implemented AI across end-to-end procurement processes.

 

As procurement AI adoption increases and matures, we will likely see a jump in productivity gains, especially with regard to the process of ordering materials and services. We will likely also see various types of AI make their way into procurement, including agentic AI: systems and models that can act autonomously to achieve goals without the need for constant human guidance. In the meantime, many of APQC’s research participants see generative AI further impacting procurement when applied to analyzing supplier performance.

As shown in Figure 5, to support their AI strategy, organizations are educating their staff on how to work in collaboration with AI and other emerging technologies. Many are also working to enhance employee understanding of intelligent machines and devices as they further integrate into the business.

 

Think broader for technology strategy

As the last few years have taught us, an organization cannot change an external event or circumstance, only how it anticipates and responds. Standardization is therefore vital for process improvement because an organization cannot improve what it does not control.

Understanding where the organization is investing in procurement processes can help identify areas to target for improvement. That improvement should start with standardized processes across the procurement function. This not only provides visibility into what is happening but also supports the use of automation.

Many organizations are implementing AI in supply chain, although the adoption in procurement has been slower. The lack of integrated technology strategies that consider the full spectrum of what the organization uses is also concerning. Organizations must think broader to fully optimize their technology support within procurement and achieve their best return on investment.

Data in this content was accurate at the time of publication. For the most current data, visit apqc.org.

About APQC

APQC (American Productivity & Quality Center) is the world’s foremost authority in benchmarking, best practices, process and performance improvement, and knowledge management (KM). With more than 1,000 member organizations worldwide, APQC provides the information, data, and insights organizations need to support decision-making and develop internal skills.

This content includes median values sourced from APQC’s Open Standards Benchmarking database. If you’re interested in having access to the 25th and 75th percentiles or additional metrics, including various peer group cuts, they are either available through a benchmark license or the Benchmarks on Demand tool depending on your organization’s membership type.

APQC’s Resource Library content leverages data from multiple sources. The Open Standards Benchmark repository is updated on a nightly cadence, whereas other data sources have differing schedules. To provide as much transparency as possible, APQC will always attempt to provide context for the data included in our content and leverage the most up-to-date data available at the time of publication.

About the author

Marisa Brown is senior principal  research lead, supply chain management, APQC. She can  be reached at [email protected].

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