Tech Journal Your Outdated Procurement Process Might Be Costing You Thousands
By Jamie Werve / 21 Sep 2020 / Topics: Procurement IT optimization
By Jamie Werve / 21 Sep 2020 / Topics: Procurement IT optimization
Procurement automation isn’t a new concept, but so many companies have maintained an almost entirely manual process when it comes to purchasing IT assets.
As someone who frequently interacts with potential clients who are trying to create more efficiency in their supply chains, I’m always amazed by how little things have changed since the pen and paper days of IT procurement.
It’s understandable. How many organizations prioritize procurement processes, of all things? There are dozens of other, pressing initiatives that seemingly make more of an impact on the business. But while executives are talking about Artificial Intelligence (AI) and the Internet of Things (IoT), there are procurement professionals who still have to physically walk order requisition forms down the hall to get a required signature. And that kind of inefficiency can easily prevent businesses from keeping up in today’s incredibly fast-paced world — especially since COVID-19 hit.
Now is the time for businesses to embrace and refine procurement automation. Every company needs to be ready for another shutdown, another pandemic, another disruption to our “normal” ways of working. And when it comes to procurement, embracing automation is one of the best ways to ensure supply chain continuity.
For starters, there are some common challenges with manual processes that automated procurement practices help alleviate. The first is human error. Slip-ups such as misplaced orders and incorrect shipping schedules are bound to happen when humans are doing the nitty-gritty tasks. The second is bottlenecks. It’s easy for employees to become overwhelmed with the sheer number of purchase requests and orders, invoices, stakeholder requests, etc. Insert a couple mistakes due to human error and suddenly everything grinds to a halt. The third is plain old inefficiency. Humans just can’t keep up with an algorithm that can produce millions of purchase orders in the blink of an eye.
By introducing (or expanding) automation into their procurement practices, companies can take the majority of tedious, task-based work off their employees’ plates, thus giving them time to handle special requests or correct errors while the process continues to run itself.
There are five, core processes every company should focus on automating when it comes to IT procurement: purchase requisition, purchase order, invoice management, vendor management and contract approval.
The purchase requisition process involves the application, approval and tracking of purchase requests. This integral part of procurement serves as the initial step of the purchase process and usually involves gaining approval for the purchase from multiple decision-makers. As a result, an inefficient requisition process can end up causing (or at least limiting the ability to check) rogue employee spending.
When businesses rely completely on outdated tools such as spreadsheets, paper forms and emails, they’re unable to regulate spend effectively. To eliminate maverick purchasing, streamlining this workflow with the proper automation tools is essential.
Purchase orders are how procurement teams keep track of who bought what from which vendor. When organizations are small, they may do just fine with a more manual, paper-based purchase order system. But as the volume and frequency of those purchases increase, that type of system quickly becomes too unwieldly to manage.
Having the right tool not only helps generate and track purchase orders, but also eliminates redundancies from the process. In short, it provides better visibility into company spend and drastically improves purchasing efficiency.
Misplaced or mismanaged purchase orders, missing receipts, late submissions, unorthodox spending and messy spreadsheets all make the task of manually managing invoices the stuff of nightmares. In the end, it usually leads to delayed payments and wasted work hours.
By standardizing and streamlining the previous steps through automation, companies can more easily track invoices. They can then take that goldmine of purchasing data, send it to financing and accounting tools, analyze trends and make more informed purchasing decisions.
The process of analyzing, segmenting and managing suppliers is an integral, but incredibly complex, part of procurement. Unfortunately, most organizations are working with hundreds of third-party companies and the process of managing all those relationships is overwhelmingly time-intensive.
Luckily, there are ways to lessen the manual nature of this work. There are tools that help employees choose the right vendor for their purchase by educating buyers about available vendors. Imagine having pertinent information about partners integrated into the procurement process — employees would certainly make better-informed decisions. And when paired with strategic vendor consolidation initiatives, it’s even more effective.
It’s critical for businesses to keep track of long-term contracts and warranties for their IT assets; however, a manual approach to this process usually results in overlooked opportunities for cost savings.
Having a central repository and automated reminders in the organization’s procurement system will help employees get the most out of hardware and software assets.
When looking to automate these areas of procurement, businesses must choose tools carefully. It’s possible to get separate tools to support each of these different areas, but the key to a truly streamlined process is creating a digital system where all the purchasing data is centralized, secure and easy to analyze. Onboarding one-off tools will only create more challenges in the procurement process. Instead, organizations should look for e-procurement solutions that automate the entire buying process from end-to-end — or at least integrate those tools so they can be accessed from a single dashboard.
Increasing automation within procurement processes doesn’t mean that businesses should slim down their procurement team — far from it. With tedious tasks automated for them, those employees can now take on projects that impact the company on a larger scale.
As automation increases, procurement professionals should shift their focus toward more big-picture thinking. For instance, they can start consolidating the vendor portfolio into a more strategic list of partners or work to find opportunities to holistically cut costs. Imagine having a team of people working to streamline processes, implement smaller budgets and move the business forward — instead of manually inputting purchase orders all day.
If your businesses is gearing up to get back in the game, don’t leave one of your best players on the bench. Automating procurement processes has the potential to kick-start your business and help you come out on top.