There’s no denying it- Automating isn’t just a trendy buzzword, it’s immensely advantageous. Procurement process is one of the key areas that stand to benefit from automation.
Here, automation can be instrumental in streamlining processes, optimizing spending, and improving vendor relationships without excessive investments. A study found that up to 80% of current procurement work can be optimized by automation and other forms of technology.
That said, change isn’t easy and transitioning to automation comes with its own set of challenges. Having the right tools is thus critical. Let’s take a closer look at how automation improves the procurement process and how to smoothen the transition.
The Need to Automate the Procurement Process
Irrespective of the product being manufactured or the service being offered, almost all organizations need to source certain materials from vendors. Procuring these materials involves multiple processes ranging from vendor selection and approvals to invoice management and payments.
The most common challenge faced is to find a way to lower costs while ensuring reliable supply. For this, they must look into identifying trustworthy suppliers, negotiating the best rates, ensuring quality, reducing the sourcing cycle time, evaluating vendors, managing compliance, and so on.
Keeping track of these details manually on Excel sheets is slow, tedious and linked to a high risk of error.
Procurement automation refers to leveraging technology to manage the various steps of the process from sourcing to managing supplier relationships. It can be used to streamline approvals, accounting, payments and more. In optimizing tasks, automation gives procurement teams control over every step of the procurement process.
It saves time and money to put efficiency first.
Think about it; an iPaaS solution like Marjory allows data to be exchanged seamlessly between all players of the procurement chain ensuring that everyone has access to the same information. This minimizes the need for back-and-forth emails and phone calls significantly.
When a requirement arises, vendors can respond to bids quickly and the procurement can instantly compare quotes before placing an order against the best one. The time saved navigating through emails and creating comparison sheets can be spent on more important tasks thus improving overall productivity.
Key Benefits of Automation in the Procurement Process
As automation technology evolves, 40-50% of tasks performed by mid-level procurement employees could be automated in the near future. This rises to 60-70% of tasks performed by lower-level procurement team members.
Making a case for automation in procurement is easy. The advantages are easy to spot and desirable for all organizations; big and small. Some of the most prominent benefits are:
Improved efficiency and speed in the procurement processes
A boost in productivity and efficiency are the most talked-about benefits of automation. Automation eliminates redundant steps and quickens data flow to accelerate procurement processes.
Unlike the case with manual document management, automation is free from the risk of requests being buried in email inboxes and other such issues.
Centralized data management makes it clearly visible to all involved parties and easy to organize. This helps maintain a steady flow through the approval stage with easy tracking across departments.
Further, it allows purchase orders to be placed faster and shortens the ordering cycle time. The resources saved can then be reappropriated to other strategic tasks of value.
Improved accuracy and reduced manual errors
A small typographical error such as entering 105 instead of 1050 can have significant implications on procurement costs. Such instances of human error are common with manual procurement data processing.
They can create confusion with orders, duplicate payments, result in maverick spending and spoil supplier relationships.
Procurement automation eliminates manual data entry and thus increases accuracy. It creates standardized workflows to keep processes flowing smoothly with minimal risk of error.
Further, contract templates, terms and conditions, etc. can also be standardized to ensure contract compliance. Automation also tackles the risk of errors caused by miscommunication by maintaining consistency and providing centralized access to relevant data.
Spending reduction through optimized resource management
Automation optimizes resource allocation and spending in many ways. At the onset, it ensures data transparency thereby eliminating the risk of guesswork. Records for past purchases, supplier quotes, contracts, etc. can be easily accessed. The procurement team can now make data-driven decisions to place orders at the best rates available.
Procurement automation also reduces dependency on manual labor and the associated wages. The need to expand the procurement department to keep up with the company’s growth is reduced thereby optimizing expenses.
Businesses using automated eProcurement solutions have been able to reduce the average cost of processing a PO from $107 to $32.
Automation also promotes transparent supplier relationships. This can drive long-term savings by reducing the need to constantly look for new vendors and ensure the best quotes.
Easier Contract Compliance
Procurement teams must also ensure compliance with internal policies, vendor contracts and government regulations. To complicate the issue, procurement teams work with multiple vendors with each having different policies. This necessitates error-free documentation, clear business rules and consistent workflow logic.
Automating procurement processes such as supplier onboarding, contract creation, invoice management, and so on standardizes the process. Access to data from a centralized database further ensures consistency across the process and makes compliance easier. In turn, this fosters trust between the company and its suppliers.
iPaaS and Procurement Automation
You’re probably already using a few SaaS (Software as a Service) solutions to digitize operations. While they are helpful, they typically operate as standalone products.
To optimize workflow, you need to synchronize data between such products. This is where an iPaaS (Integration Platform as a Service) comes in.
This cloud-based integration platform acts as a bridge between SaaS solutions, data sources and other cloud applications and provides access through a central hub. iPaaS solutions standardize how applications are added and make it easier for technical and non-technical users to integrate them. This encourages procurement teams to take ownership of automating processes and give their business a competitive edge.
The Role of iPaaS in Modernizing Procurement
For organizations with multiple departments and disparate tech stacks, iPaaS solutions are an easy way to level up automation processes. iPaaS can also be integrated with legacy systems to modernize operations without introducing too much change.
When it comes to procurement, it eliminates the need for manual data entry and empowers suppliers with a standardized workflow for smooth procurement. Invoicing and keeping track of orders also becomes much easier.
iPaaS provides a centralized platform for designing, deploying and managing integrations between on-premise and cloud systems. This plays a critical role in streamlining procurement tasks and decision-making.
Traditionally procurement decisions required hierarchical approvals. Thus, it was quite common for processes to flow in fits and starts. Marjory’s iPaaS solution help overcome this issue by giving all involved parties simultaneous access to data with a user-friendly interface. Customized connections can be established with simple drag-and-drop action through an intuitive graphical interface. As a result, fewer one-to-one requests need to be made for information and redundant steps can be eliminated. This gives procurement teams more control over system architecture and facilitates automation for quicker decision making.
Challenges and Implementation Strategies of Automating the Procurement Process
Given the benefits of automating procurement processes, it’s no surprise to note that a growing number of businesses want to use automation solutions. However, simply establishing rules and consequences for procurement tasks doesn’t guarantee effective automation. Some of the common challenges to be addressed include:
Lack of visibility
While improving productivity to a certain degree stand-alone applications often end up creating data silos in countless spreadsheets, systems and databases. Thus, data fragmentation and communication issues are inevitable. However, procurement teams do not work in isolation.
For example, before placing a new order with a vendor, the procurement team needs to check with the accounts team as to the clearance of past dues. This slows down processing and limits the implementation of process automation initiatives.
To experience the full benefits of automation, all of these systems and applications need to be connected. The iPaaS solution needs to break through silos to harmonize data and improve visibility. Gaps in workflows and processes are thus reduced. The low-code/no-code process automation further weaves through the different parts and systems to create a cohesive, connected workflow.
Change management
Automation can be scary for people uncomfortable with technology. It takes time to adopt new systems and resistance is common. At the same time, apps and systems on the tech stack are continually evolving.
New apps come in and outdated apps are removed. Teams change too as does business strategy and the market. The functioning of the procurement department is especially sensitive to such changes.
The inability to react quickly may have expensive consequences. For example, while the approval process may be automated, a new team member may send additional email requests causing confusion in the process.
The way out relies on simplicity. A good iPaaS solution makes it easy to transform legacy systems. The use of low-code tech allows users to establish connections between applications with straightforward drag-and-drop functions.
The dependency on IT teams is reduced and even non-technical users gain confidence in using automation solutions. Links can also be customized whenever required to keep up with evolving situations and stay agile.
Integration with existing systems
For procurement automation solutions to be successful, they must be integrated with ALL relevant existing systems and databases. Otherwise, decisions will be based on incomplete data.
This can be overcome only when all systems and tools being used by the procurement team source data from a central database. This must include on-premise and cloud databases and solutions as provided by some iPaaS solutions.
Tips for Easier Integration of Automation in Procurement Processes
Here are a few tips to smoothen the transition from manual processing to automation.
- Start by mapping the procurement workflow in detail along with identifying inputs, outputs and dependencies for each step.
- Identify processes that take the most time, are prone to bottlenecks, have a high risk of error and are cost-intensive. Prioritize your automation efforts towards easing these processes.
- Choose no-code data management and automation solutions to build confidence in automation.
- Conduct regular audits to measure output and improve efficiency.
The Future of Procurement with Automation
As supply chains become more complex and interconnected, procurement teams must take on more than just purchasing goods and services. They now play a critical role in cost optimization, establishing sustainable practices, mitigating risks, maintaining supplier relationships and more.
To be resilient and maintain a competitive edge, procurement teams must be able to make informed decisions, work efficiently and adapt to market trends. Embracing automation is the need of the hour.
According to a recent study, 40% of companies are already leveraging automation solutions and 80% of companies are enroute to adopting intelligent automation by 2025. This includes automating routine tasks such as purchase requisitions, scanning invoices and payment processing as well as tactical tasks like vendor selection and negotiation.
Automation is set to define how procurement professionals work and redraw procurement processes to enhance operational efficiency. Simultaneously, this reduces exposure to errors and empowers businesses to use their human resources more strategically.
Combining process automation with AI can take teams a step further by delivering compliance checks, spend analysis and other such complex reports to track performance and encourage data-driven decision-making.
Conclusion
The future of procurement automation has exciting possibilities. Of course, a procurement team’s ability to harness these potential benefits are dependent on ensuring reliable, visible and secure dataflow.
They must be able to consolidate and integrate applications, services and data from multiple systems to create a centralized platform for workflow orchestration. This is where iPaaS solutions can help. By connecting applications and enabling the free flow of data, it streamlines processes for automation.
Marjory iPaaS tools offer data mapping, transformation, API management, and workflow orchestration to facilitate procurement automation. Automated processes can be deployed in just a few clicks to cut down the purchase cycle time and deliver productivity gains.
