The 4 Procurement Processes You're Not Automating

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Insights for ProfessionalsThe latest thought leadership for Management pros

Thursday, December 12, 2019

Automating these vital processes could have a hugely positive impact on the performance of the procurement department and the business as a whole.

Article 3 Minutes

Automation is a concept that seems to be having a greater impact on companies and how they operate with each passing year.

Research has highlighted the potential consequences that this and other, related trends could have for business and the world of work in the coming years. While it's likely to be some time before the full impact of automation, robotics and AI becomes clear, forward-thinking organizations are already giving a lot of thought to how they can make the most of these phenomena.

As far as specific business functions are concerned, one area where automation could prove particularly significant is procurement. Using technology to execute routine tasks that were once the responsibility of employees can:

Here are four examples of fundamental procurement processes that are ripe for automation:

1. The purchase order cycle

Designing and implementing an efficient purchase order cycle is a fundamental function of the procurement department. By ensuring this process runs smoothly, with minimal risk of delays and other inefficiencies, the department can make a valuable contribution to the overall business performance.

Unfortunately, there are several points in the purchase order cycle where problems can occur. For instance, sending purchase requests to key decision-makers, gaining approval from the finance team and getting the go-ahead to complete the order can become a long and complicated process, particularly where high-value purchases are concerned.

There’s a lot to be gained - most notably time and money - from automating this entire process, rather than asking human staff to dedicate a lot of their time and energy to managing it.

2. Sourcing

Sourcing the right products and services for the company's needs is one of the most important parts of the procurement department's remit.

In many cases, identifying and selecting the most appropriate purchases for the organization demands human skills and judgment. However, there are also parts of the sourcing process that can be entrusted to automated systems, such as sifting through large amounts of information to rule out unsuitable options, or ranking available products using factors like price and supplier location.

Furthermore, process automation can optimize your sourcing through its ability to monitor inventory and provide early alerts when stock is running low. This can help ensure sufficient time is allocated to sourcing, reducing the risk of delays or insufficient supply.

3. Supplier evaluation

Before entering into a relationship with a supplier, you want to have maximum confidence that they’ll be a reliable and productive partner.

Automated systems can help you make these decisions by conducting thorough, well-informed evaluations of prospective suppliers. The ability to analyze key pieces of data such as order history, past contracts and inconsistencies in pricing puts you in a stronger position to make the right call.

Another benefit of automation is that it can help you maintain relationships with your suppliers. Potential problems or grievances can be identified and resolved more quickly, communication can happen in real time and payments can be made more promptly.

4. Invoice management

Manual invoice management raises the risk of various problems that can be damaging for a business, such as ineffective handling of purchase orders, lost receipts and lack of transparency where spending is concerned. It can also result in late payments to suppliers, which can jeopardize valuable relationships.

Automation can substantially reduce the likelihood of these problems occurring by removing the probability of human error from the equation.

Your suppliers will be happier because they’re being paid promptly and accurately, while your employees will be able to focus on more valuable, less laborious tasks, like maintaining relationships and looking for new suppliers that can help the business move forward.

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