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As more companies use technology and automation to run their operations, the procurement department is also becoming increasingly streamlined and simplified as a result. The use of technology to streamline and optimize the procurement process, procurement automation is being used for sourcing, supplier management, contract management, invoice processing and myriad other tasks.
The automation not only helps organizations save time and money, improve efficiency and reduce risk, but it also frees up valued employees to focus on more important, strategic projects. Manual data-entry, for example, can be time-consuming and is often error-prone. Using procurement automation, manual data-entry can be eliminated in favor of a system that automatically captures data from invoices, purchase orders and other documents.
“Manual procurement processing is ridden with delays and bottlenecks that result in a long and cumbersome procure-to-pay cycle,” Cflow points out in “7 Ways Procurement Automation Can Improve Your Process.” “Repetitive admin tasks eat away the productive work time of employees, which results in dissatisfied employees and lowers productivity levels.”
By automating some or all of these paper- and manual-intensive processes, companies can take the burden off of their procurement teams while also reducing errors. “Manual procurement processes are characterized by excessive paperwork for every task,” Cflow says. “Managing huge volumes of paperwork can be a challenge for the procurement team. There is a high incidence of displacement and damage to paper-based invoices when handled manually.”
Taking a Load Off
Being able to automatically onboard new suppliers, manage contracts and/or track supplier performance takes yet another load off of the procurement department’s shoulders. In addition, automatically receiving invoices, matching those invoices to payments and then having those payments approved effectively frees up procurement professionals to instead focus on strategic planning, risk management, compliance and continuous improvement.
In its recent 2023 Research Insights for CFOs report, Globality says its time for companies to transform their “outdated buying processes.” Based on surveys of global procurement leaders and suppliers across various industries, the research found 82% of procurement leaders say their indirect spend is not well managed during the sourcing process, leaving substantial cost savings on the table.
“Indirect spend is estimated to equal 20% to 40% of revenue, and is usually recorded under Selling, General and Administrative expenses (SG&A),” Globality reports. “In a typical Global 2000 company, this translates into costs amounting to billions of dollars. Despite this, many organizations mistakenly assume that they have their indirect spend under control, whereas the actual situation is often very different.”
80% Still Use Spreadsheets and Email
Globality also says that 82% of procurement leaders feel that their companies need help managing their indirect spend, and that 80% of requests for proposals (RFPs) are still conducted via spreadsheets and email. And, the majority of procurement leaders say their legacy sourcing technology is outdated, hard to use and siloed. For example:
- 96% lack connections across teams and suppliers
- 94% say the technology is not intuitive
- 93% says it’s not impactful
- 89% say their technology doesn’t provide intelligent insights
- And, 87% say their current solutions don’t support good collaboration
A type of procurement automation that uses artificial intelligence (AI) and machine learning (ML) to automate the sourcing process, autonomous sourcing technology manages tasks like identifying potential suppliers, evaluating bids and awarding contracts. According to the survey, procurement leaders see autonomous sourcing technology as a way to:
- Make the sourcing process easier for business users (according to 83% of respondents)
- Drive efficiencies and cost savings (77%)
- Drive greater compliance and mitigate risk (71%)
Getting Started with Procurement Automation
In “5 Procurement Processes Every Company Must Automate and How,” Mark Saltarelli discusses the benefits of procurement automation, with a focus on the cost and time savings associated with the technology. Procurement automation also helps increase accuracy, reduce risk and speed up processing times.
Using automation, procurement professionals can also quickly and accurately compare prices from different vendors for the best value; track approvals across multiple departments; and automate the backend processes of ordering, reconciliation, payment and spend management reporting. “This streamlines the entire process to save time and reduce cycle times and burden on accounts payable,” Saltarelli adds.
