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A recent study has found that two-thirds of UK procurement, supply chain, and finance professionals still rely on manual and paper-based procurement processes. This costs businesses, on average, £1.94m annually and limits professionals’ ability to deliver more strategic value.
Considering that procurement teams are evaluated based on their ability to drive costs down while bringing the value up, it’s crucial to ensure reliable supply at the lowest cost possible.
To do this, you need a strategic sourcing model that increases the agility of people and processes. And the solution to this is procurement process automation.
What is procurement process automation?
Procurement processes that occur using manual methods (i.e., either paper-based or via the “traditional” spreadsheets, emails, and phone approach) are inefficient and time-consuming.
Which is precisely why they’re perfect candidates for automation.
Procurement process automation is a strategy you can use to contain costs, improve productivity, and enhance efficiency. This strategy involves the use of technology (via procurement software) to manage the entire procurement process, from sourcing to supplier relationship management.
The benefits of procurement automation
Procurement teams are balancing their energy between making good purchases and maintaining good relationships with suppliers. Among the benefits of procurement automation, we have:
1. Faster approval process
Due to the hierarchical structure of organizations, purchase requests often get stuck in the approval process. By automating the flow, you can place purchase orders faster, and the ordering cycle time is reduced.
Any redundant processes are also eliminated, so your team becomes more efficient and can focus on other tasks that bring value to your organization.
2. Improved spend visibility
Procurement automation improves the quality of your data. Procurement software can depict accurate descriptions of purchases, contracts, order history, and supplier quotes. This enables you to make data-driven decisions for new purchases.
Improved visibility over spend also helps you identify gaps, streamline spend management, and ultimately reduce costs.
3. Improved supplier relationships
Transparency is essential for healthy long-term relationships with your suppliers. Automation makes it easier for both parties to communicate in real-time. The process is visible to everyone involved, and thus provides an effective evaluation of suppliers, cost savings, and fosters buyer-supplier trust.
4. Easier contract management
Organizations collaborate with multiple suppliers. Where procurement software can help is to provide standard contract templates to reduce errors and ensure consistency across all documents.
Having an easily accessible contract database also makes it easier to onboard new suppliers and ensure contract compliance.
5. Increased productivity
Overall, automating your procurement processes frees up time for your team to focus on strategic work. It empowers decision-making, increases efficiency, and eliminates time-consuming processes and errors.
Procurement processes that can be automated
A few challenges procurement professionals face are:
large numbers of RFPs and RFQs;
a large number of demands from internal stakeholders;
increasing costs;
profitability challenges.
Most of the time, these problems derive from not using the appropriate tools. Procurement process automation can easily eliminate these challenges for you. Here are a few examples of processes that can be automated right away:
1. Purchase requests: automation can cut down approval times and remove any unnecessary steps.
2. Invoice approval: manual procurement drags the payment cycle, so you miss timely payments or early payment discount opportunities; automation enables you to pay invoices with little to no manual intervention.
3. Contract approval: instead of searching for contracts in file cabinets, procurement tools allow you to organize them in a central repository that can be accessed with just one click.
4. Vendor sourcing: procurement software can also streamline the supplier selection process.
How to get started with procurement process automation
Most procurement processes are repetitive, which makes them really easy to automate. But how can you automate procurement effectively? Here are 5 things you may want to focus on:
1. Know-how
To automate procurement, first, you need to understand what your internal needs are. To identify these needs, ask yourself these key questions:
What issues does the procurement department face and how can they be fixed using automation;
How does the current process look like? What can be streamlined?
How does the procurement department communicate with suppliers?
How do they track the status of orders?
2. Process
Once you map out your procurement process, the next step is identifying the areas that can be accelerated or where administrative tasks take up lots of time. To automate a process, you need to make sure it is consistent and repeatable.
3. Data
Your current data allows you to measure where you are. This makes it easier to track the improvements achieved by procurement automation.
Data is not always easy to obtain, but the insights you can gather are worth the struggle. A few common problems data can reveal include:
inconsistent track of records;
inconsistent pricing lists;
maverick spending;
noncompliance.
4. Suppliers
Procurement automation doesn’t just benefit you; it also benefits your suppliers. Through automation, you can ensure real-time communication, timely payments, and reduced manual work for both parties. At the same time, suppliers will be able to respond to bids more quickly and have easy access to important information.
But for things to run smoothly, you first need to make sure they’re on board.
Choosing the right software
Probably the most important thing you should focus on is choosing the right tools. A poor choice will keep your organization stuck with an inefficient process.
Here’s what you should look for in procurement software:
easy setup process: this will help you to more easily overcome the resistance to change from your employees;
intuitive, easy-to-use interface: this is important not only for you but for your suppliers as well, as they can also be prone to resistance to change;
accessibility: your platform should be easy to access by anyone, from anywhere in the world;
customizability: each organization is unique, so your procurement processes are unique as well; you should make sure you can customize your tools to your needs and not necessarily try to adapt your processes to the software.
Fortunately, Prokuria checks all of these boxes. So if you’re still using Excel spreadsheets, emails, and paper, this is a great opportunity to start automating your procurement processes.
The future of procurement
Traditional, manual procurement processes are time-consuming, inefficient, and plagued by bottlenecks and inaccuracies. E-procurement solutions are solving all these issues, digitalize procurement functions, and bring them to more modern times.
But this doesn’t stop here. The procurement process can further be automated with the use of AI and robotic process automation (RPA).
RPA can fully automate processes with no human intervention, which can be leveraged to fully automate low-value and repetitive tasks for absolute accuracy and greater speed. These are exciting times we live in!