Using Intelligent Automation in the Procurement Process

Katherine Manning December 15, 2020 Automation

procurement process

Traditionally, procurement has been viewed as a function of the back-office, but this area is quickly becoming an opportunity goldmine for intelligent automation. In fact, many organizations are expanding procurement into playing the role of a strategic partner for driving enhanced cost savings, efficiency, market resiliency, and business objectives. In addition, intelligent automation can empower this particular transformation.

Invariably, procurement leaders have been challenged with their new expanded roles versus their traditional roles. For instance, many tasks are still managed manually using spreadsheets and even paper tools and heavy human interaction. Unfortunately, time-consuming manual tasks only slow down the process while diminishing the returns on efficiency and productivity. 

In the past, procurement was a back-office function that was difficult to automate because many processes required multiple systems and stakeholders—for example, acquiring new marketing products required processes from several departments, starting with identifying the need to research and selecting the right vendors to create the purchase order to managing the delivery process and monitoring all payments. It’s no wonder why bottlenecks were commonplace.

However, intelligent automation can improve both efficiency and accuracy while helping to reduce procurement costs. And, intelligent automation can assist in providing strategic insights that drive better business partnerships. According to Kearney Consulting, operational procurement will become fully automated through intelligent automation.

Unquestionably, procurement should be focused on improving business process speed so that employees will have more time on their hands to focus on higher-value projects. As such, this is where much of intelligent automation’s value can be found – by dramatically reducing the number of error-ridden repetitive tasks and processes. 

So how can you apply intelligent automation effectively to the procurement process? Read on to learn more.

Key areas of focus for automating the procurement process

We can analyze a core procurement process chain and determine where intelligent automation can make the most relevant impact. The key is to put a spotlight on smart automation opportunity zones. Where can you find automation potential? 

  1. Processes with the most considerable potential for cost savings should be the highest priority on the intelligent automation list.
  2. Processes that demonstrate where benefits can outweigh costs should also secure a spot on the intelligent automation opportunity list.
  3. Processes that would be easy to automate.
  4. Processes that would be difficult and too costly to automate should be left off the intelligent automation priority list.

With the aforementioned in mind, let’s take a more in-depth look at the requisition-to-PO process, which often involves many obstacles, including working with outdated legacy systems and error-prone manual processes. With requisition-to-PO, employees must hand data dealing with RFPs, RFQs, purchase orders, agreements, emails, and more. Consider all of these data types as unstructured and structured. Imagine how much productivity and cost-savings are lost within manual data processing. What happens when vital data gets lost, miscalculated, or misinterpreted?

Next, there is a highly complicated approval hierarchy. Any mistakes could cause delay, bottlenecks, long turnaround times, and an overall bad experience for the customer, procurement team, vendors, and stakeholders.

Further, legacy systems can add to the myriad of issues by way of silos, lack of visibility, ineffective data storage, and the masses of paper files that make everything complicated and cumbersome to manage. Legacy systems are also not equipped to deal with sophisticated cyberattacks or fraudulent activity. Moreover, legacy systems do not provide insightful analytics.

How will intelligent automation help the procurement process?

Image via CodelessPlatforms.com

To become a serious digital procurement organization requires the intelligent automation of repeatable tasks and providing stakeholders with real-time insights and analytics via user-friendly online tools. Intelligent automation can provide data to enhance decision making and daily business processes. Additionally, intelligent automation can provide a platform for improved collaboration between buyers and suppliers.

Intelligent automation uses artificial intelligence (AI) to solve complex problems even when a large amount of data is involved. Some of the areas where intelligent automation can help the procurement process includes: 

  • Better decision making via data-driving insights and real-time analytics.
  • Using data to identify new opportunities.
  • Streamline procurement processes and operations even with a dispersed and remote workforce.
  • Automation of time-consuming, manual, and monthly tasks.
  • Give employees their time back by automating routine tasks so that staff can focus on efforts that drive profitability.
  • Capture relevant sources of data.
  • Improve vendor relationships.
  • Accelerate cycle times.
  • Help to meet customer demands more rapidly.
  • Use data to manage supplier relationships more effectively.

Where can you use intelligent automation in the procurement process?

There are many opportunities to deploy intelligent automation in procurement; one such area is in spend classification. Automating invoices can help facilitate the categorization of spend in varying categories and sub-categories such as different packaging categories. 

Another area would be vendor classification to ensure all procurement processes and align with the right supplier. Further, intelligent automation can be applied in any process that is manual, repetitive, and rule-based. According to Accenture, there are specific elements for creating a digital procurement environment. Move on to the next section to find out what they are.

Five elements that lead to digital procurement success

When you have a digital procurement environment, you can realize skyrocketing improvements in efficiency, agility, and speed. Intelligent automation helps to drive value and enhances risk management, compliance, and transparency. However, making the transition to digital procurement requires the five key elements below:

  • Data
  • Technology
  • Intuitive user experiences
  • Skills and talent 
  • New policies, procedures, and operating model

Data: Data is the guiding source for anything procurement wants to do around predicting end-user needs, to determine which goods and services are equipped to meet the demands, to identify the right suppliers, and figure out what to pay.

However, the data’s largesse is more than any department can handle with only human resources at the helm. There isn’t enough time, or people, to harness relevant and intelligent data points from every source of information, such as contextual pieces of data around purchasing decisions, review, approvals, contracts, RFPs, requisitions, and more. But, wait, there’s more. Procurement should also garner insights from everything it touches — internal, external, and third-party data relevant to procurement. We refer to payments, invoices, purchase orders, data regarding compliance, pricing, processes, and more.

Technology: Data alone can do nothing; technology is the catalyst. Intelligent automation can harness and make sense of relevant data to automate various tasks and processes and extend the support to analytics. Any process that offers structured data such as a commodity code, supplier, or SKU number and rule-based business processing can be automated to improve efficiency.

To illustrate, when all required fields of a requisition are accurately filled and complete, the next step of converting a requisition to a purchase order can and should be automated. Assigning general and category ledger codes can be automated, as well.

Intuitive user experiences: One of the many benefits of digital procurement is an intuitive user experience that attracts end-users. The more stakeholders who use the intelligent automation platform, the more effective they become to save time and extract useful insights. If the user experience is not friendly, employees will not use the media and find other ways to get around. The ideal experience would be a single source of truth or portal that presents real-time data, transparently, to every stakeholder, and for every action.

Skills and talent: There’s more to creating and operating a digital procurement organization than simply collecting more data and applying digital tools. Generating actual value requires another critical element, a cross-functional team of people with distinctly different skills:

Digital procurement involves more than data and technology. It also needs a cross-functional team of collaborators such as:

  • Category business experts who can speak to correlations.
  • Data scientists who understand modeling.
  • IT professionals who understand how to integrate new platforms and how to extract relevant value.

Digital procurement should be designed to boost results and require critical elements to ensure a cohesive journey.

New policies, procedures, and operating model: An intelligent automation platform will provide the procurement team and suppliers a better way to collaborate and access comprehensive and data-driven insights. Nonetheless, all stakeholders should be aware of their updated roles and responsibilities and how they can make data-driven decisions. It will be a new way of working that requires new policies, procedures, and a new operating model.

Final thought

Tying it all together will take more than the flip of a switch to create a digital procurement environment. A robust digital transformation in procurement requires time, resources, a vision, and the steps listed above. While the steps can vary from business to business, it is understood that digital steps must be taken to reflect the business’s evolving needs and the market.

Processmaker has partnered with ParaMatrix that runs a center of excellence bringing together business process management (BPM) and robotics process automation (RPA), with an overlay of artificial intelligence (AI) and machine learning (ML). Contact Processmaker today to learn more about automating procurement.

Solving the ERP Automation Dilemma: Procure-to-Pay

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