How to Use Automation to Optimize Procurement Processes
Marketing procurement teams are measured on how efficiently and effectively they can drive costs down or out. This is complicated by the fact that while spending must be reduced, the value delivered per dollar must be increased.
Procurement is tasked with not only ensuring reliable and responsibly sourced supply at the lowest possible cost but also with selecting suppliers and building key relationships that contribute to innovation and differentiation.
It's a tall order, for sure, and one that requires a sophisticated, strategic sourcing model that both maximizes the power and increases the agility of people and processes.
To achieve these goals, many companies are looking to procurement automation to increase efficiency. However, identifying how and where to use automation to optimize procurement processes is key to avoiding any spanners in the works that end up doing more harm than good.
Challenges with Automating Procurement
Traditionally, due to its very nature, procurement has always been difficult to automate. Each operation involves multiple users, stakeholders, and systems.
The process of obtaining any new marketing products or services involves numerous steps to be taken from multiple departments. This process ranges from first identifying the need for a new solution to finding the right provider, initiating the order, controlling the delivery process, and ensuring that all invoices are approved, paid, and stored efficiently. It's a complex function indeed, so it's no wonder bottlenecks are not infrequent occurrences.
But digital and AI-enhanced solutions are now commonplace across nearly all industries, including procurement.
Automation is now being used to manage supplier relationships and drive supply chain digitization. AI-based systems can optimize ordering and provide timely transparency on spending. Intelligent use of automation can revolutionize many parts of the procurement process, optimizing efficiency and releasing additional value, all while keeping costs down.
How to Use Automation to Optimize Procurement Processes
To be clear, the goal of procurement automation should be to speed up processes to free employees from repetitive and time-consuming tasks. This allows them to focus on more business-critical operations.
Indeed, this is where much of the true value lies, and the high percentage of such repetitive tasks and processes in procurement make the function ideal for automation.
So how can procurement be automated effectively? Let's consider some key areas of focus.
Purchase Requests and Approvals
The first step will be to understand and document the current challenges that your procurement teams face, and how they can be addressed by automation. The objective will be to identify which areas need to be accelerated, and which administrative tasks are currently the most repetitive and cumbersome.
For example, when new purchases are required to execute a new marketing campaign, procurement shouldn't be where great ideas go to die. In the demand stage of the procurement cycle, the main process is in creating the purchase requisition. This involves gathering information about the details of the request and the supplier and obtaining the necessary approvals.
Your key goals here would be to ensure first that the correct information is gathered and then funneled through the necessary series of approvals with an automated workflow. This will replace traditional time-consuming, email-based, manual processes that are far from seamless and often require numerous follow-up actions.
When the right information is always collected the first time and captured electronically, and when approvals can be made from any device, anywhere, and at any time, efficiency savings can be significant. This is especially true when multiplied over numerous procurement operations over a year.
Sourcing and Evaluating Suppliers
The data that you already have should be your starting point. But one of the greatest benefits of automating procurement is that you will begin combining better and more reliable data as time goes by—data such as order history, supplier profiles, and contracts.
Procurement automation can help you get a clearer picture of many things, including the track records of suppliers. It can help you identify pricing inconsistencies and recognize when volume discounts would be applicable or negotiable.
When automation is done correctly, suppliers can respond to bids more quickly and gain easier access to contracts and other information important to the order. Buyers, in turn, can also track orders more efficiently and accurately within an automated system, as records can be easily accessed and used to evaluate the most effective suppliers.
Invoices and Payments
Keeping good relationships with key suppliers is of course one of the most important responsibilities of any business. As such, having complex internal processes that slow down or delay payments isn't a good practice and can make it more challenging to maintain these relationships.
Automating payments ensures that all suppliers are paid the correct amount on time. As a result, suppliers will remain happy and excited to continue doing work with you.
This works both ways, as well.
It's certainly not unheard-of for a business to pay invoices for goods or services never received, simply due to the lack of a reliable system of approvals and input from everyone involved in the supply chain. Automation can all but eliminate the risk of such occurrences.
Choose the Right Technology
Technology remains the enabler that will allow you to automate your procurement. When considering your options, make sure that the solution you choose is the best fit for your business.
It must encourage a positive uptake from staff, and it must be capable of engendering all the process efficiencies that will lead to more valuable purchases and long-term cost savings.
The solutions that are out there vary significantly. What you should ensure, however, is that you look for one that is user-friendly and cloud-based. Finally, ensure that all stakeholders are invited to evaluate the proposed products so you can identify the most optimal solution.
Procurement automation is set to be a hot topic at this year's ProcureCon Marketing conference, taking place this December 6th to 8th at the Hyatt Regency La Jolla in San Diego, CA.
Be sure to download the agenda for more top insights and challenges facing the industry today.