April 16, 2019

The Future of Automation in Procurement

The Future of Automation in Procurement

How Automation and AI are poised to transform the world of procurement

The digital era has brought about a paradigm shift in a plethora of processes across industries globally. Procurement is one such pivotal process. In any organization, procurement as a function has many distributed users across functions while residing on loads of data. Indeed, this is the only function sitting at the confluence of internal and external stakeholders vis-à-vis suppliers, customers, employees, et al.

Whether it is marketing or sales, every function in an organization has been capitalizing on technology in achieving objectives, while procurement has remained a laggard in adopting technology to its advantage.

Pain Points in Procurement

Today, large part of procurement processes is manual and error prone

Manual procurement processes aren’t only holding back procurement organizations from focusing on strategic initiatives, but also costing organizations in ways they don’t even realize. From tracking down contracts and PO in lengthy email chains to reviewing contracts, manual interactions have plagued every procurement process – requisition, discovery, negotiation, comparison and delivery. Consequently, it prevents sourcing and procurement teams becoming agile and responsive to the fast-changing demands of consumers.

As per a report by Hackett Group, 32% of the CPOs have a formal digital strategy in place, but, only 25% say they have necessary internal resources and competencies to support digital initiatives. While procurement sits on gigabytes and terabytes of data, the data intelligence is substandard.

Although procurement organization possesses troves of data, companies are not using data to drive intelligence. There isn’t any centralized information repository about suppliers, pricing, products and other important areas, which forces procurement officials to consult internal and external sources to make their decisions. The problem further aggravates for indirect spend categories, which is typically unplanned and uncontrolled, therefore, it leads to maverick spend for an organization. Apart, most of the organizations use pdf or hard copy files to save contracts, POs and invoices, therefore converting static documents into data becomes a challenge.

As a result, most of the intelligence present within an organization is individual specific and isn’t formalized for use across the company.

Consequently, procurement is unable to deploy technologies to extract insights to achieve their strategic objectives.

Mitigating Measures

Moglix – a B2B commerce company specializing in B2B procurement of industrial supplies and other industry essentials – suggests three recommendations to transform the procurement process via automation:

Digitalization for enhancing user experience

For procurement organizations to be completely digital, capturing meaningful data is foundational. As a result, firstly, organizations need to identify how, where and when can they source high quality data. Currently, a procurement power user faces 2 primary problems:

  1. A user needs to refer to multiple systems while completing their activities e.g. while working on a contract they need to look at ERP, Supplier Collaboration systems, Planning system and may be a few excel sheets.
  2. the interfaces of procurement platforms are non-intuitive, and the user experience is poor.

Cloud-based Collaboration tools to connect distributed stakeholders

With companies going global, the ability to manage associated risk across geographic boundaries and times zones is becoming a priority for every organization. Today networks are more than just connecting people and companies. The real power lies in what goes inside the transaction, collaboration and interactions. Aided by artificial intelligence, Cloud-based system can be used to streamline buying as well as selling of complex services and products by integrating p2p (procure-to-pay) solutions with online marketplaces and online catalogues of external suppliers.

A procurement network is only as useful as the data it brings together in real time. A business network for procurement must not only to “talk” with one ERP system, but carry on multiple “conversations” simultaneously, e.g. while doing demand planning or working on a global contract, multiple users spread across different geographies need to collaborate on same piece of data simultaneously. This collaboration is performed as a combination of email and spreadsheets today. Cloud-based applications can trigger a seamless work-flow solution which in turn will allow teams to collaborate via shared workspaces rather than using siloed means of communication. This will not only enable a faster turnaround, but also track every modification that is made to a data set for a better audit trial.

Data-driven Insights to enhance decision making ability of forward-looking organizations

Data accessibility and consolidation is half the battle won. Analytics will support the team to account spending by processing vast number of large data sets, sources and variables. The organizations should make use of emerging technologies to convert data into information which can provide actionable insights to category and sourcing managers, facilitating decision making. Such data will help gain visibility into critical areas related to enterprise spend, analyzing historical spend, understanding market trends and supplier-demand patterns, tracking non-conformance reports, supplier performance data and resource availability. Data driven decisions will enhance and revolutionize the entire procurement process and help manage supply chains. Advanced data analytics will also help organizations have an in-depth understanding of their customer base to align their supplier decisions with customer’s priorities.

How can we harness and leverage technology for procurement function to become a key-driver for growth?

  • Build unified interfaces over multiple distributed applications to enable so called “UBERization” of enterprise application.
  • Replace email-spreadsheet based collaboration processes with cloud-based collaboration platforms to connect stakeholders. Also look at building “data-lakes” for data consolidation instead of users having to look at multiple systems to get required dataset.
  • Artificial Intelligence should be used in strategic sourcing to predict demand and advanced negotiation techniques to optimize source for supply.
  • Robotic Process Automation and smart contracts should be used for error free transactions and faster procure to pay processes.
  • Natural language processing combined with machine learning should be used to build human intelligence into the system. This will not only be able to classify data but also draw insights and offer suggestions unique to the user as well as the situation the user is in. This would be synonymous with having a virtual category manager.
  • All procure to pay solutions must have virtual assistants and chatbots as one of their standard features. Chatbots should be should in the short term to answer basic questions on pricing and supplier information. While virtual assistants should be deployed for guided buying on a long-term basis.

Clearly, automation and the digital transformation will exert an immense impact on global supply chains and a must go for organizations of all sizes and scale.