6 benefits of automating procurement

October 2, 2020

Your procurement department has no doubt proved itself invaluable this year as your company has dealt with myriad challenges. Since early as February, the COVID 19 crisis has halted manufacturing, disrupted transport links, and interrupted supply chains. Every procurement team has struggled to wrap their arms around the (hopefully temporary) new normal brought about by the pandemic. But those with an already-robust automation system in place have been able to navigate these difficult past few months more easily.  

Since most procurement motions are repetitive—they are ideal for automation. Spend analysis, supplier bids, contract management, and, of course, the actual purchasing and payment processes, can all be automated to bring considerable benefits to any organization. Here’s how automating the procurement function can help CPOs continue to lead the way into 2021 and beyond.

Greater cost savings

With a greater ability to reach a wider number of suppliers, calculate supply needs, and better manage contracts, an automated procurement function’s immediate benefit is lower costs. Automation provides the procurement team with a consolidated view of its operations, helping the department continuously reduce costs, and identify areas where they seem too high. With an automated system, managers tasked with approving purchases can make sure the proposed expenditure is absolutely necessary. Meanwhile, the procurement team can examine historical data on supplier spend to help them negotiate lower purchasing costs.

Less off-contract/non-catalog spend

An automated procurement system puts all your supplier contracts and information—and all your catalogs—in one place, making it easier for stakeholders within the business to buy the things they need. With everything in an easily accessible online location, there’s less reason for purchasers to try to find items off-contract or from unvetted suppliers.

More spend under management 

Fewer off-contract and non-catalog purchases means less tail spend and more activity managed by the procurement team. There is often more incentive for procurement teams to focus on their organization’s larger, multi-year contracts—where they realize the most significant savings. But this focus can ignore almost 20% of a company’s budget as the tail spend and the unmanaged spend accounts for as much as 80% of all transactions. This can be a massive drain on a company. Automating procurement brings more spend under the management of the procurement team and lessens the likelihood and impact of tail spend.

Greater visibility

With an automated procurement function, supplier and cost information is at your fingertips. Tracking orders becomes much easier when all the information for a purchase is in a single place. Additionally, the data gathered gives you better transparency up and down your supply chain, providing you with both a here-and-now snapshot on the fly and a more in-depth assessment of your supply chain’s overall health. And by sharing data with your suppliers, you can even gain insight into next-tier suppliers and upstream value chains.

Less risk

In the 2020 reality, the list of risks to the supply chain seems to grow day by day—mass health-care events, geopolitical risks, climate change, shocks to the economic system. But with greater visibility comes improved awareness of your procurement environment. An automated procurement function helps you anticipate where the next risk may come from and prepare accordingly. How? For one thing, the data available from an automated supply chain lets you more quickly identify high-risk spend and risky concentration of suppliers. With this insight, you can de-risk the procurement function by providing alternate sources.

Maximized efficiency and resources

The order process accelerates when the procurement function is automated, which means timeframes are shorter, and efficiency is boosted significantly. Automation helps CPOs manage their resources better. Automation allows managers to position team members in the places they’re needed most, rather than assigning them the mundane low-priority tasks easily handled by automation. It also improves communication with both suppliers and internal stakeholders. For instance, the finance department can receive faster and more accurate reports, purchasers in other departments can quickly find out where their order is, and the C-suite can formulate strategic business decisions based on insightful data.

Automating the procurement function brings a host of benefits to any organization. Cost savings are increased while decreasing off-contract and non-catalog spend. More activity can be brought under management—including tail spend—and the procurement team has much greater visibility over all its functions, allowing it to better mitigate risk and maximize efficiency and resources.

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