Did you know that, according to a recent survey, 43% of organisations recognise having inadequacies in their purchase order process?
This can easily lead to building excess stock or conversely running low on essential supplies. Not to mention that inconsistencies in the purchase order process can cause miscommunication with suppliers, leading to late deliveries and potential conflicts in business relationships.
And this is exactly where procurement automation steps in.
Procurement automation refers to the integration of technology into the end-to-end procurement process with an aim to maximise its efficiency. Proper automation will reduce the time taken for procurement activities, lessen manual intervention, and ensure tasks are completed swiftly and with fewer errors.
With all that said, the next question is: How can you seamlessly implement automation into your procurement process?
These are the topics we will cover in this article:
- What are the Benefits of Procurement Automation?
- How to Implement Procurement Automation
- Top 6 Procurement Processes You Should Automate
What are the Benefits of Procurement Automation?
Imagine a scenario where a company consistently buys materials at a higher rate due to a lack of price comparison tools, or another where hours are spent rectifying an incorrectly entered invoice.
These situations are far from ideal, but they reflect the real-world inefficiencies and costly mistakes that businesses encounter when relying on outdated methods of traditional procurement.
Here below are the main benefits you and your business will reap by automating your procurement processes:
- Eliminate Manual Errors: Manual handling, particularly in invoice processing, is riddled with pitfalls – from delays in payment, incorrect data entry, duplicate payments, all the way to misplaced paper invoices. Automated systems tackle this by eliminating manual data entry altogether and providing standardised workflows for every purchase.
- Risk Reduction: Safety and security should be among your top priorities, and automation strengthens these aspects. For example, with increased transparency, every supplier is evaluated uniformly. This not only ensures that you can strategically source from known, reliable vendors but also reduces the risk of fraud. Furthermore, procurement automation software consistently tracks vendor performance, making it easier for you to predict and mitigate potential risks.
- Faster Processing: Procurement bottlenecks, often arising from manual approvals or decision-making lags, slow down the entire process. With automation, your stakeholders can quickly compare prices from various vendors, ensuring they receive optimal value. They can also easily track approvals, no matter how many departments are involved.
- Cost Optimization: Efficiency leads to cost savings. Automation reduces manual intervention so, as your company grow, there’s no need to expand your procurement team disproportionately. On top of that, streamlined communication between buyers and suppliers results in better buying decisions, compounding savings.
- Visibility Into Your Spend: Procurement automation offers unparalleled insights into expenditure, ensuring you keep on monitoring, evaluating, and strategising based on real-time spend data. For instance, a company might discover, through automated analytics, that they consistently overspend on certain raw materials during peak seasons. With this data in hand, they can renegotiate contracts or explore alternative suppliers, potentially saving significant amounts annually.
- Central Repository: Imagine having a single, unified place for all your procurement-related information. Automation provides a central hub where all data, from vendor details to purchase histories, is stored. This makes retrieval and analysis straightforward.
- Enhanced Collaboration: A well-oiled machine functions best when all its parts work in harmony. Procurement automation nurtures collaboration, both within internal teams and with external suppliers. Seamless sharing of information, faster communication channels, and transparent workflows mean teams can work together more efficiently, forging stronger relationships and better results.
How to Implement Procurement Automation
So far, we’ve established that procurement automation reshapes outdated and inefficient processes.
Consider a company bogged down by manual vendor interactions, from order placements to discrepancy resolutions. Now, picture another firm where such tasks seamlessly flow through automation. Which one would you rather be?
Recognising these differences, the next challenge is understanding how to bridge the gap from manual to automated.
Here’s a 6-step action plan to guide you:
- Map Your Existing Procurement Workflow: Before introducing automation, you should know the state of your procurement processes through and through. Mapping your existing workflow will shine a light on processes that are consistent and don’t necessarily require a human touch.
- Identify Potential Areas For Automation: Once you have an accurate blueprint of your procurement, the next phase is to spot tasks that are suitable for automation, especially those involving substantial data entry and validation.
You can ask yourself the following questions:
a. Which processes are notably time-consuming?
b. Where do bottlenecks frequently occur?
c. Which tasks often fall prey to errors?
d. Which activities are cost-intensive?
- Choose The Appropriate Automation Software: Having identified areas ripe for automation, the focus then shifts to selecting the ideal automation software tailored to your business needs. The ideal software should be cost-effective to install and fast to deploy. On top of that, user-friendliness is important to ensure that your team can hit the ground running.
- Design New Automation Workflows: Selecting the right software is the tip of the iceberg, the next step involves crafting new and optimised workflows. This means every task, from order placement to approval routing, should be redefined and integrated into the software. For instance, imagine your current manual method involves five steps to approve a vendor’s quote: receiving the quote via email, forwarding it to the department head, waiting for their reply, manually entering the approved quote into a tracking system, and finally emailing the vendor with the approval. With a newly designed automation workflow, as soon as a quote is received, it could be automatically uploaded to the system, instantly notified to the department head for approval, and once approved, the system could auto-update the status and notify the vendor, all in a fraction of the time.
- Implement And Test New Workflow: With your newly designed workflows in place, it’s time to bring them to life. It’s often wise to take a phased approach – automating processes bit by bit rather than diving in headfirst. After implementation, these workflows need rigorous testing to ensure they operate smoothly. Such tests help ascertain the effectiveness of the implementation and point out any areas needing refinement.
- Measure And Improve Output: Automation is not a ‘set it and forget it’ affair. Continuous monitoring and evaluation are key to ensure that your new processes deliver as expected. Schedule periodic assessments to ensure that the process stays aligned with your business objectives and that any necessary tweaks are promptly made to refine the workflow.
Top 6 Procurement Processes You Should Automate
Nowadays, there are not many businesses that can afford delays and errors. Think about a company still tangled in paper trails for one simple approval or another rummaging through desks for an important contract.
End-to-end procurement procurement automation will help streamline these tedious tasks. For a clearer picture, forget the previous example now and imagine a company where the right team member is instantly notified about an approval with just a single click.
With that vision in mind, here is a list of the top 6 processes you can transform through automation:
- Purchase Requisition And Approval: When a team needs to buy something, they must often get it approved first – a process that can be really slow and confusing in many companies. With procurement automation, this approval can happen in hours instead of weeks, making the process faster and smoother for everyone involved.
- Sourcing: With automation, you can swiftly compare multiple vendors, assess quality and price metrics, and make informed decisions. This not only ensures quality but also guarantees value for money. At Droppe, we know this really well. That’s why we have built an industrial catalogue of 150,000+ SKUs from over 100+ vetted European suppliers, and we provide procurement professionals with all the search filters needed for fast and strategic sourcing. This way, you can swiftly source only highly relevant options at the click of a button.
- Invoice Management: Manual handling of invoices can lead to various issues: lost purchase orders, mishandling of goods receipts, submission delays, and a significant lack of transparency. These challenges can culminate in delayed payments and compliance concerns. Automation comes with features like auto-approvals for routine low-value invoices and integrations with established accounting tools, which streamline your invoice management.
- Payments: Timely payments form the backbone of a robust procurement process. Automation ensures that all payments, be it to vendors or stakeholders, are processed promptly and accurately. This not only fosters trust but also results in potential discounts and better negotiation power in future dealings.
- Contract Management And Approval: Imagine having to dig through heaps of paperwork every time you need a specific contract. With procurement automation, all your contracts are stored in one easy-to-find place online. Plus, the system keeps them accurate and consistent, so you don’t have to worry about mistakes or differences between them.
- Vendor Management: In the absence of clarity and transparency, vendor relations can become strained, impacting the overall procurement process. Automating vendor management will help you streamline your vendor selection, ensuring the best candidates are chosen. Plus, it also equips you and your team with tools to swiftly identify and address any issues, strengthening vendor relationships and fostering trust. For instance, an automated system might highlight a vendor’s consistent delivery delays, allowing you to address the issue directly and promptly, thereby reinforcing vendor relationships and building mutual trust.
From tangled paper trails to strained vendor relationships, traditional end-to-end procurement methods can often lead to a multitude of costly inefficiencies and errors.
Procurement automation has the potential to radically streamline your processes, reducing human errors, and bolstering accuracy. More than just a tool, it acts as a bridge, connecting companies with their vendors in more meaningful, transparent, and efficient ways. As a result, relationships are strengthened, trust is re-established, and collaborative efforts are enhanced.
However, as with all transformations, this too demands a structured approach rooted in a deep understanding of current workflows, challenges, and goals. This ensures that the transformation is not just about integrating new software but about truly aligning technology with business objectives.