2022 China Digital Procurement Industry Report

Source:iResearchJune 07,20225:53 PM Overview

The complex procurement process, inefficient supply chain circulation and high cost restrict the development of enterprises. Digital procurement can help companies efficiently build a close relationship between procurement and supply at a low cost, improve inventory turnover, speed up supply chain response, and reduce the occupation of funds.


The market size of enterprises that have purchased digital procurement software is accounted for by the revenue caliber of SRM software. In 2021, the digital procurement market size in China reached 1.6 billion yuan, increasing by 17.9% year-on-year. Considering the increasing awareness of cost reduction, the market size is expected to reach 3.2 billion yuan in 2024, with SaaS revenue being the main driver of market growth.

Compared to CRM, ERP and other enterprise software, digital procurement is still in a very early stage of development. The potential market for SRM software in China is as large as 120 billion yuan. The penetration rate is only around 1%. With maturing digital procurement application, the application of SRM software will begin from giant enterprises, spread to large enterprises and finally enter SMEs.

Digital sourcing vendors can increase revenue sources and competitiveness by the following features: 1) Develop supply chain financial businesses, promote efficient use of funds, and improve management tools' customer stickiness. 2) Build a business collaboration network, gather a large number of buyers and suppliers, and form a network effect through efficient connections between the supply side and the demand side.

Digital Procurement Research Scope



Digital procurement connects buyers and suppliers. It is a new enterprise procurement model using digital means. In a narrow sense, digital procurement is SRM (Supplier Relationship Management) software, which covers the entire life cycle from procurement sourcing to delivery, settlement and supplier evaluation. It can manage main materials and non-main materials at different granularities. Besides SRM software, digital procurement in a broad sense also includes online trading platforms such as procurement e-commerce and bidding platforms, as well as procurement modules in non-professional procurement software such as ERP. This report focuses on digital procurement in a narrow sense.


China Digital Procurement Market Size and Forecast


The market size of enterprises that have purchased digital procurement software is accounted for by the revenue caliber of SRM software. In 2021, the digital procurement market size in China reached 1.6 billion yuan, increasing by 17.9% year-on-year. The demand for Refined procurement management is the basis for the development of the digital procurement market. Influenced by the Covid-19 pandemic, while companies have cut spending, their cost reduction awareness is also rising. The market size is expected to reach 3.2 billion yuan in 2024, with the CAGR from 2022 to 2024 reaching 28.9%. The rise of the SaaS model accelerates the penetration of digital procurement. Revenue from SaaS products will be the main driver of market growth.


China Digital Procurement Industry Chain and Map

The upstream of digital procurement consists of the enterprises' suppliers, including both the enterprises' own suppliers and the massive external suppliers gathered on procurement e-commerce platforms. As technology service providers in the industry chain, digital procurement vendors help companies connect with suppliers and provide procurement management capabilities. They can cooperate with OA, ERP vendors and others to connect data of different business systems. They can also cooperate with third-party service providers in the areas of supply chain finance, logistics and transportation, etc. to jointly empower corporate customers.


Competitive Landscape of the  Digital Procurement Market in China


Digital procurement vendor is a new generation of intelligent collaborative procurement platform for enterprises and it is as useful as the ERP system. Traditional enterprise procurement management software is based on procurement segmentation and focuses on the functions of software. With the increasing demand for one-stop sourcing, innovative digital procurement vendors are increasingly favored. They are different from traditional software procurement in terms of product, sales and ecology. They can integrate e-commerce resources to help enterprises gain advantages in the supplier aspect; they can manage the procurement process to achieve internal collaboration, integrate resources and improve management efficiency; they can connect all procurement processes and provide supply chain financial services. Some vendors choose a specific market segment, such as executive procurement and MRO. Some begin by serving big companies and then turn industry solutions into SaaS products to enter the market for SMEs.


Competitive Landscape of China’s Digital Procurement Market


The concentration rate of China's digital procurement market is low. In particular, due to a lot of system integration and custom development, the locally deployed SRM software market is fragmented. In the aspect of SRM SaaS, the top three vendors, Qiqitong, SAP Ariba and Zhenyun, accounted for 14.2%, 13.1%, and 10.8% of the market, respectively. Relying on complete products, deep industry understanding, and open ecological cooperation, they leave the second-tier vendors far behind. The market concentration will rise thanks to maturing digital procurement market and the increasing proportion of the SaaS model.


Trends in the Digital Procurement Industry


The business logic of supply chain finance is based on the real trade situation from the beginning to the end of the supply chain, with the determinable future cash flow generated from the trade as the direct source of repayment. Since digital procurement vendors provide digital management tools for buyers and suppliers, they have basic conditions for supply chain financial services, that is, supply chain scenarios. Enterprise procurement needs support from payment, credit, insurance and other financial products. Digital procurement vendors cooperate with banks and other financial institutions to provide suppliers, especially small and micro suppliers, with financing methods with simple procedures, reasonable interest and no mortgage. Supply chain financial business can improve capital utilization efficiency on both supply and demand sides, and increase customers' stickiness to management tools through bilateral empowerment. It will be an effective method for digital procurement vendors to increase their competitiveness and revenue sources.


Table of Contents of the Full Report


Abstract

1 Overview of Digital Procurement

1.1 Research Scope of Digital Procurement

1.2 The Development History of Digital Procurement in China

1.3 Analysis of Procurement Segments and Pain Points of Enterprise Demand

1.4 The Core Value of Digital Procurement

1.5 Product Types and Main Functions of Digital Procurement

2 Insights into the Development of China's Digital Procurement Industry

2.1 Drivers of the Digital Procurement Industry in China

2.2 China Digital Procurement Market Size and Forecast

2.3 Business Models of Digital Procurement in China

2.4 Digital Procurement Industry Chain and Map

2.5 Competitive Landscape of the Digital Procurement Market in China

2.6 Core Competencies of Digital Procurement Vendors

2.7 Digital Procurement Development Model in Developed Countries

2.8 Investment Value Reference of US SaaS Vendors

2.9 Investment Value of Digital Procurement


3 Case Study of Typical Vendors
3.1 Qiqitong
3.2 Zhen Yun
3.3 Sunyur

4 Development Trends in China's Digital Procurement Industry

4.1 The Future Development Space of Digital Procurement

4.2 Development Trends in Digital Procurement Industry

4.2.1 Supply Chain Finance

4.2.2 Business Collaboration Network



Contents

With growing requirements for refined procurement management, enterprise digital procurement moves from the ERP era to the SRM era. In a narrow sense, digital procurement is SRM (Supplier Relationship Management) software, which covers the entire life cycle from procurement sourcing to delivery, settlement and supplier evaluation. It can manage main materials and non-main materials at different granularities.

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