The automation of procurement processes is now a reality in many businesses, mainly driven by this age of data and by instability – which can be health, social, economic or political instability.
In such an unpredictable and fierce market, the procurement teams must quickly leave the operational field, so they can be able to act strategically and achieve their so much desired resilience.
For such purpose, you must consider the automation of procurement processes – which transforms manual steps into more agile, economical, safe and even sustainable operations.
It’s important to remember that automating procurement processes doesn’t mean replacing human activity, but increasing the area’s productivity, freeing professionals to create and putting relevant strategies into practice for the business.
In this post, we listed the benefits of technology and everything you must know to automate your business’ procurement processes with peace of mind!
What is the automation of procurement processes?
In the recent past, negotiations with suppliers were carried out via telephone; with the advent of digitization, they were carried out via e-mail as well. However, while the Internet age has accelerated the response time of some processes, it hasn’t settled security, compliance and more strategic decision-making issues. On the contrary, it created even more data, which must be very well managed.
The automation of procurement processes is the solution to most issues in the area. Processes that usually took days, or even months, can be now carried out on a single on-line platform, accessed at any time and from anywhere by its users.
In this way, procurement professionals, who were known for putting out company fires, gained intelligence to make more strategic decisions – which contribute also to the innovation of the whole company.
Additionally, such professionals helped also to build stronger, longer-term relationships with the supply chain.
Benefits of automating procurement processes
1. Productivity increase
With automated procurement processes, the time required to carry out a task is reduced dramatically.
Quotations with suppliers, for instance, are much faster when all data are consolidated in a single procurement solution.
One of the biggest benefits of process automation is the considerable increase in the productivity of procurement professionals.
With an on-line procurement management solution, you can control how you send/receive orders to/from suppliers. Eventually, this can mean greater profitability for the company.
2. Cost reduction
With the automation of procurement processes, the full procurement cycle becomes faster, more economical and more profitable for your business.
Automated processes increase also the chances of winning the best purchase negotiations, even reducing the expenses associated with this whole process.
Another positive point with regard to savings in procurement is that professionals are freed from operational activities, so they can work focused on growth and higher profitability of their businesses.
3. Higher data reliability
The more manual a process, the higher will be the difficulty to ensure that information is correct and secure.
Having strictly manual data can mean missing good buying opportunities, considering that prices are very dynamic in nature.
With process automation, on the other hand, there are more guarantees that it won’t happen, as the parameters are always within the expected range.
Additionally, automating procurement processes means reducing the need for rework significantly, thus favoring the productivity of buyers.
4. Standardization of processes
The automation of procurement processes tends to reduce deviations considerably, with regard to the procurement operation.
This occurs because, once processes are standardized, they will happen in the same way and on a continuous basis, thus contributing to improve the expected results.
Besides, the procurement professional will achieve full visibility of processes, and will be able to assure higher quality and control.
Automation allows also the identification of new opportunities, for more assertive purchases and acquisitions.
5. Consolidation of data and control.
Using a procurement automation solution is crucial to keep the collected information in a consolidated format.
This allows managers to monitor the evolution of processes in real time. It allows also integration with other areas of your business.
With automated procurement processes, you can ensure integration between the different areas involved, such as inventory and sales.
Depending on the level of sold and stocked products, you will be able to check the need of making new purchases or not.
Additionally, a procurement solution often provides purchase and pricing history, last month’s total cost, and other data that are relevant to new purchases.
6. More transparency
Having corporate transparency means acting with clarity and ethics in all your business relationships – that is, with employees, customers and suppliers.
With the automation of processes and the required parameterization, human interference is reduced and, consequently, there is lower probability of undesired results.
When procurement managers use a procurement automation solution, they will be able to have baseline and justification for their choices and decisions.
7. Improved decision making.
Process automation contributes to a faster and more assertive decision-making process, based on indicators (KPIs).
Having a procurement automation solution will enable you to accurately predict the moment to take advantage of a given offer, or to renegotiate with current suppliers, for instance.
When managers make decisions based on data and not on assumptions, there are more chances of finding great opportunities at the right time.
8. Increased competitiveness
All the factors mentioned above contribute to make your business more competitive with regard to competitors.
From the viewpoint of corporate procurement, all such features will also help to avoid shortages, as well as materials stranded in stock.
In this way, your company will capture more resources and can be better positioned in the market.
How to deploy the automation of procurement processes
To achieve the expected results with the automation of procurement processes, it must be implemented in a structured way and in accordance with the company’s goals.
As it’s a considerable change in the way buyers carry out their activities, everything must be very well planned. Steps to automate the procurement area include:
Step 1: Understand your business goals
The first step is a diagnosis of the current scenario. What are my company’s needs? What are the points to be considered in this change?
These and other questions and answers are vital for a successful migration. It’s no use running over the phase of understanding your business needs.
Starting from this in-depth analysis, you can to define what kind of features the automation solution should have, in order to increase your chances of success.
Ideally, the solution should automate the full procurement cycle, from request to payment, thus allowing the buyers to direct their focus to strategies and negotiations.
In this way, you can achieve all the expected benefits for the success of your operation and to avoid wasting resources.
Step 2: Map all procurement processes
After delving into the goals, you have to map all current processes in your procurement area. You must understand which ones can be automated and how they can be accomplished.
Understanding the procurement flow is crucial at this stage, as it will show which the productivity bottlenecks are and which the steps that will particularly impact the results are.
Another benefit of process mapping is that it allows understanding the sequential steps for procurement automation.
In a procurement process, for instance, you must take into account several steps – such as quotation, negotiation with suppliers, purchase closure and payment.
Step 3: Choose the most suitable solution for your business
After you got to know your company’s priorities and mapped all procurement processes, you must know and choose the solution that can support your department.
Before opting for a solution, you must identify if the company you want to hire has a good performance in the market.
Therefore, before investing in a procurement automation solution, a good option is to talk to customers who are already using the service.
Step 4: Train all involved people
After making the best decision, the next step is to deploy the solution and start training all involved people.
This step is particularly important, because if those involved in the processes aren’t properly trained, the solution can’t be used to its fullest potential.
The idea is to offer full usage training, including all instructions and good practices for the professionals who will use it.
At this point, it’s even indispensable a good communication, as it’s a change in operational processes.
Without a gradual and proper transition, with clarity about the deployment of automated processes, it will be much more difficult to ensure that everything goes according to what have been planned.
Ideally, procurement professionals should carry out tests and simulations of all new processes.
Step 5: Monitor results constantly
The automation of procurement processes must occur gradually, and must be constantly monitored, as some adaptations and changes may be required.
In order to identify important adaptations, it’s essential to monitor the results that are being achieved with automation.
For this reason, you must define and track the most relevant parameters with regard to this change and then make the changes.
This helps assuring that automation will be always relevant and will always provide the expected results.
Tips for a successful automation of procurement processes
Even if process automation can be very beneficial, it’s vital to consider that it must be done carefully for a successful outcome.
A lapse can mean lower-than-expected results – which have nothing to do with the automation solution itself, but with its execution.
Here are 5 tips to ensure that your business fully benefits from this type of solution:
1. Create a support team
The support team must be composed by professionals who will be responsible for mentoring others about the automation solution.
Within a procurement area, the manager will be able to select some people who will provide guidance and dispel doubts from other professionals, to achieve the best possible use.
Depending on the case, the management can choose an external support team, such as support from the solution provider, for instance.
Note that this option isn’t always available and this means, in most cases, an extra expense to purchase the solution.
2. Document all changes
Process automation can be quite complex, depending on the characteristics of each company.
A business that purchases goods based on tons, for instance, cannot afford to make a mistake and lose a large amount of money.
Therefore, automation must meet the company’s criteria as much as possible, and some unforeseen adjustments may still arise.
While this is part of the process, you must keep in mind that the documentation of any changes is important for management appraisal.
Just imagine that the procurement area decides to purchase an automation solution, but must make some changes, so it will work perfectly and in a customized way.
A few months later, the parameters will be changed and the company must modify the automation process.
However, factory instructions won’t fit in this process, because it was originally modified.
Without a proper documentation, you will probably have to undo all changes – which will lead to wasted time and, consequently, even more expenses.
Therefore, assure that the whole transition is properly documented, such as failures, changes and points that deserve attention. This will make its use much more convenient, and will make the deployment of future improvements easier.
3. Start with the simplest processes
Even if automation is robust enough to guarantee the functionality of more complex processes, it will be more complicated if you start the transition from the hardest steps.
Therefore, it’s better to start automating the simplest processes, such as registering and searching for suppliers.
After that, move on to the automation of proposal selection or order management.
Finally, go to the more complex steps, such as integration with management systems, the so-called ERPs.
4. Establish responsibility to deploy the solution
As with any important business process, automation must have specific responsibilities for its successful deployment.
This type of definition assures an adequate and assertive control of the whole change management, avoiding points that generate complications.
Managers, for instance, can be responsible for ensuring that their respective teams start using the solution correctly.
The support team has the responsibility of helping in this process, while the area manager is responsible for the change as a whole.
Communication is crucial at this step, as only then will everyone become truly aware of how to use the tools, in order to improve their activities.
Consequently, determine the correct indicators and control tools, so those in charge can monitor the process; and always provide guidance on the need for documentation
With the integrated results, the hard-to-solve points will be more visible – such as what still requires attention, what didn’t work and what should be modified.
Without this delegation of responsibility, it will be more difficult to reach all hierarchical levels involved in the change.
5. Avoid the rush
Even if one of the benefits of a procurement automation solution is just to save time, avoid any anxiety in the process related to this change.
In fact, if you’re in a hurry to choose a solution, chances are it won’t be fully adapted to the needs of your procurement sector.
Therefore, plan with plenty of time and keep in mind that the more complex the solution, the longer will be its deployment time.
What you can do about this is look for a solution that can be integrated more easily and is also more intuitive to use.
Even so, it’s important to keep in mind that you must dedicate some time to this whole process, so it can be considered a success in the end.
And remember that results won’t appear immediately, and you must have a vision of the future to understand that the solution will pay for itself over time.
Has this post been useful to you? Leave a comment on your experience with procurement process automation. 😉