4 benefits of implementing automation in procurement
Automating certain procurement tasks can benefit companies, but organizations that start using automation without being fully prepared experience uneven returns. Learn more.
Chief supply chain officers (CSCOs) and chief procurement officers (CPOs) are constantly under pressure to do more with smaller teams in faster cycles, and regulators are increasingly demanding that procurement teams improve documentation and auditing. Automation can potentially help CSCOs and CPOs accomplish all these goals.
For decades, the key technological change for procurement was the gradual digitization of paper-based processes. Now procurement tasks are being automated. However, organizations that begin using automation without adequate preparation often experience uneven returns. CSCOs and CPOs must understand what automation can actually deliver.
Here are four benefits of implementing procurement automation.
1. Spend visibility
Procurement data is often stored in various places. For example, some data might be stored on supplier portals, with users having to export it to enable analysis.
Automation can integrate and categorize expense data across all these sources. The consolidated analysis shows users' information about suppliers and any unusual spending patterns that could be negatively affecting the company's savings goals.
2. Continuous risk monitoring
For many C-suite-level leaders, resilience and security are primary motivations for deploying AI in procurement, even more than efficiency or cost, because annual supply chain analyses are now inadequate.
Automated risk monitoring can analyze relevant information, then highlight potential problems so the procurement team can take action. This continuous monitoring of vulnerabilities can make risk management more proactive.
3. Cost reduction
The economic case for automation is most visible in accounts payable. Organizations that process invoices manually usually pay significantly more per invoice than those that use end-to-end automation for payments. Errors lead to late payment penalties or duplicate payments and can strain supplier relationships.
Automation can improve these issues and could also lead to companies receiving early payment discounts. A company using manual processes might not qualify for an early payment discount because employees cannot submit the payment within that time frame.
Realizing these benefits depends on a factor that automation technology alone cannot supply: organizational readiness.
4. Supply chain resilience
Disruption is inevitable at some point, and today, many CSCOs complain that it occurs more frequently and is more serious than ever. Potential emergencies include shipping disruptions, political crises or supplier failures.
Automated platforms with live data feeds can analyze the scale of a disruption and determine alternative sourcing options by drawing on existing contracts and approved vendor lists.
The ability of procurement system to assess impacts from disruptions and generate responses in hours instead of days enables organizations to recover more quickly. CSCOs presenting the case for automation to their executive boards can note that this capability enables procurement leaders to make better strategic decisions about the supply chain.
Is your organization ready?
Realizing these benefits depends on a factor that automation technology alone cannot supply: organizational readiness. Automation works best when the underlying data is clean and workflows make sense. Automating a dysfunctional process just leads to more dysfunction.
CSCOs must ask themselves honestly whether their organization is ready for automation. Ensuring that their company is prepared will lead to better returns with fewer setbacks.
Donald Farmer is a data strategist with 30-plus years of experience, including as a product team leader at Microsoft and Qlik. He advises global clients on data, analytics, AI and innovation strategy, with expertise spanning from tech giants to startups. He lives in an experimental woodland home near Seattle.
