You know manual procurement processes are time-consuming if your company uses them. Many procurement experts underestimate how expensive and hazardous they are and how much automation alters the game.
Procurement automation benefits and processes are discussed today. When considering automated purchasing, this page answers typical questions like:
- What’s procurement automation?
- Why use procurement automation in your company?
- The benefits of procurement automation?
- Technology improves procurement automation how?
What’s procurement automation?
Digitalizing and automating procurement, purchasing, and payment for products and services is procurement automation. Many procurement software tools automate processes to track every purchase an organisation makes.
Why automate procurement?
Companies arrange purchases using procurement tactics to reduce risk and save money. Spreadsheets and manual processes cannot achieve these aims, especially as firms grow. Orders are haphazard, accounts payable workers do repetitious activities, and inaccurate data entry or missed payments raise supplier costs.
Correct processes using procurement automation software help firms avoid many of these costs.
Automation streamlines the purchase-to-pay process and routes requests to optimise the procurement cycle, reducing costs. Allows accounting to:
- Route orders swiftly
- Review and approve automatically
- Quickly and accurately record purchases
- Centralise buying data for easy access.
Procurement involves risk. Important orders are lost, supplies are late, and suppliers don’t comply. Adding a complicated web of suppliers and room for error increases cost inefficiencies and fraud enormously.
By developing a secure, repeatable process with high vendor confidence, procurement automation eliminates these risks.
- Purchases come from pre-approved, vetted, and onboarded vendors.
- The buying process uses an automated system to triple-check order and invoice accuracy.
- Automatic general ledger (GL) coding tracks purchases.
- Automated payments ensure the proper vendor is paid on time and avoid duplicate payments
7 Procurement automation benefits
Many procurement strategy components are automated by technology, boosting its success. Here are seven ways procurement automation cuts costs and risks.
Vendor cost comparison
One of the easiest ways to improve procurement strategy cost-efficiency is to choose the cheapest vendors. The manual method takes days or weeks.
Thank goodness vendor management systems automate most of the research. This helps your company find the finest deals without straining team resources.
Order.co’s sourcing engines automatically find cheaper vendor and product replacements. This service found over 10% cost-cutting options for global legal firm Cozen O’Connor. Without altering favourite brands or goods, the firm saved $5,000–$6,000 per month.
This sourcing technology also reduces risk. Airport security rules presented a unique procurement hurdle for health and beauty company XpresSpa. Order.co helped XpresSpa find compliant providers. On-catalog compliance increased from 70% to 100% and cost savings of about 9.6%, or $68,000, each year.
Bundle orders in procurement automation
Supplier consolidation might also save costs. Automation groups orders across a business’s sites for bulk supply discounts. This eliminates compliance paperwork and enhances large order savings.
Businesses with tight supplier certifications benefit most from this strategy. Multiple vendor compliance checks and paperwork are eliminated when ordering from one source. Automating order bundling saves operational and material expenses and noncompliance.
Keeps data organised
One of the biggest procurement risks is disorganisation. Employees spend time searching for scattered information, increasing human error.
The correct procurement system centralises the process, automating vendor and contract administration.
Centralising the buying process using a procurement system saves you from visiting hundreds of websites and managing logins. Ordering and approving orders is easy, saving everyone time. Reducing these tasks to one platform decreases data risk.
Saves time buying
Automation centralises product orders and purchase order processes, saving finance and operations time. This lowers bottlenecks and allows simultaneous vendor orders.
Orders with constant demand can be automated. Repeat purchase requests are put up as subscriptions, reducing stakeholder and procurement department workload.
This function expedites ordering. Faster cycle times accelerate delivery, reducing shipment delays for enterprises.
Eliminates erratic spending
Although usually done without malice, unapproved or maverick spending hurts businesses. Breaks budget and raises risk.
Stakeholders that believe they can save time or money by avoiding procurement processes often counteract them. Manual or clumsy systems may hinder stakeholders’ goals.
Employees buy using easy, regulated methods and spending automation technology. These techniques reduce tail spend and enforce budget constraints to prevent overspending.
Simplifies billing
Finance departments record and pay receipts and invoices to manually track vendor expenditure. Automating invoice data reduction, tracking, and centralization streamlines this procedure.
This simplification saves finance teams time and avoids reporting and tax filing errors.
ZeroCater has monthly invoicing and inefficiencies. Automation simplified invoice payment. “For Amazon alone, we went from 200 invoices a month to maybe 3 or 4,” Order.co client Keith Bowles of ZeroCater said.
Data for success measurement
Successful business strategies should contain a success measurement plan. Spend data is crucial for procurement teams.
Recovering and organising spend data takes time. Automation makes it easier. Centralised vendor management systems track spend data automatically. This lets finance and operations teams run spending reports and examine data faster than manually.
These reports help finance teams track their procurement strategy’s progress and identify challenges that may impede their firms from meeting their procurement targets.
Process for procurement automation
To start your automation project successfully, follow these simple steps:
1. Establish buying rules
Solid process underpins automation. Create and record a procurement policy with spending limits, vendor due diligence, legal and security evaluations, and approval protocols. Well-designed business procedures ensure your automation project functions as planned.
2. Gather vendor data in one place
Gather all vendor data from your supply chain. Accounting data, contract management, and ordering department leaders may provide this information. Gather the data on a spreadsheet for now.
3. Digitise everything
Procurement automation conflicts with paper systems. Digitise contracts and invoices for quicker access. OCR-scan paper documents and explore procurement automation software partners.
4. Identify consolidation areas in procurement automation
One-stop procurement data visibility helps uncover overlap and redundancy. Reduce your vendor count, combine orders across locations, and use economies of scale.
