Seven Major Benefits of Procurement Automation

Businesses increasingly view their procurement automation systems as part of their value proposition. If your system is efficient, purchasing goes smoothly. However, as your operation grows, procurement problems become more common. Typical issues include human error, supply chain interruptions, or panic purchases. 

Fortunately, most procurement processes are repetitive, which allows for some level of automation. Contract management, supplier bids, purchase requisitions, and payment processes are just some of the procurement functions your business can automate. 

Read on to find out more about the benefits of automated procurement systems

The Procurement Process

The procurement cycle for most businesses consists of the following steps:

1. Determining your business requirements: Identifying each business unit’s procurement needs is the first step of the purchasing process. Gather and consolidate data from operation units involved and ensure project data is uniform and disseminated . 

2. Creating and submitting the purchase requisition (PR): The purchaser submits a purchase requisition to the procurement or finance department for approval. 

3. Evaluating and selecting vendors: After identifying your business’s needs, the next step is to identify qualified vendors. Factors to consider include pricing, product and service quality, and reputation. Or you can choose to follow the four C's of vendor selection. 

4. Negotiating contracts: Next, negotiate agreement terms with vendors to maximize value. Critical terms to negotiate include pricing, delivery times, discounts, guarantees, and warranty terms. Here's a crash course.

5. Releasing the purchase order (PO): After negotiations, the purchaser creates a PO, issues it to a signing authority, and then sends a PO to the supplier. The PO is a legally binding document requesting products or services. 

6. Expediting and tracking orders: Expedite and track goods and services throughout the life cycle of the PO. This ensures they are delivered within the agreed-to delivery time.

7. Inspecting the products or services: It might be necessary to inspect the products or services at intervals during the life of a PO, including upon receipt. Typically a Quality Assurance specialist does the inspection.   

8. Rejection or rework of goods: This step is only required if the product is deemed to be non-compliant or fails the QA inspection. Goods would either have not been released due to non-conformities, or rejected by the inspector. 

9. Processing the payment: Suppliers typically send an invoice for goods or services at the time of delivery. After ensuring that the invoice and PO match, the procurement team makes the payment. 

Procurement Process Automation

Procurement process automation is when businesses use software to perform repetitive and time-consuming tasks. You can implement this process with the following steps:

1. Outline the existing procurement process
2. Identify tasks for automation
3. Select automation software that fits your business’s needs
4. Design a new procurement flow
5. Implement the new procurement flow
6. Measure the results of the new flow using key performance indicators

Procurement processes your business can automate include:

• Vendor management
• Contract management
• Purchase requisition
• Purchase orders
• Invoice management

The Benefits of Procurement Automation

Business owners often ignore automation because they see it as an unnecessary expense. However, procurement automation can benefit your business in many ways. 

Reduce Costs

Manual tasks, such as data entry, can increase your labour costs. Procurement staff often work overtime to create purchase orders, make payments, or correct errors. Automating repetitive tasks reduces resource requirements for those tasks. Allowing talent to be deployed in other critical areas. 

Automation also allows you to access historical vendor data, compare prices, and select the most affordable offers. Having a bird’s-eye view of your expenses enables you to identify unnecessary costs. The ability to reach more suppliers also boosts your bargaining power during price negotiations. 

Strategic sourcing and building supplier relationships are critical procurement goals. Automating procurement frees up your team’s time, so they can better focus on long-term vendor relationships. 

Accelerate Procurement Workflow

Without automation, business processes are slow. Your business needs speedy procurement to react quickly to market changes. Accelerating the workflow also eliminates waste and improves customer satisfaction. 

Factors slowing down procurement include:

• Manual data entry
• Approval delays
• Accidental orders
• Inflexible suppliers
• Inaccurate data
• Long lead times
• Complex templates that aren’t fit for purpose
• Lack of templates

Automation software has an auto-fill feature to create forms. Automating this task allows staff to create purchase requisitions and orders in minutes without data entry. Team members also don’t have to submit forms manually for approval. 

Automation also speeds up the flow by organizing orders. When there is an issue with a workflow, staff can quickly locate the cause and resolve the product/service pipeline. 

Ensure Compliance

Automation ensures that your entire process is compliant with regulations. High-end software tracks compliance throughout the fulfillment process without missing any details. You can set up alerts at critical junctures and resolve any issues affecting compliance. 

Another benefit of automation is that you can show proof compliance quickly and easily. During a regulatory audit, you can provide accurate, up-to-date data at a moment’s notice. Greatly de-risking the company from liability. 

Prevent Manual Errors

When it comes to manual processing, clerical errors are common. Without automation, your staff has to spend valuable time redoing paperwork and correcting errors. 

If the team doesn’t pick up minor mistakes during the early stages, they can snowball into serious errors. In some cases, an entire supply chain can fail. 

Manual input is usually necessary if buyer and vendor platforms are incompatible. Automation systems with rigorous API allow for seamless integration and can complete processes faster and more accurately than humans. 

Mitigate Risks

Mitigating supply risk is one of the biggest challenges your procurement team faces. Procurement risks include:

• Incorrect requirements analysis
• Lacking supply chain management
• Poor contract management
• Corruption and fraud

With a central document library, you have all contract information at your fingertips. Your legal team can review all contracts, ensuring that you and your vendors meet all terms. Tracking all procurement activities leaves an audit trail, making it difficult for fraudsters to submit fake documents. 

Automating procurement functions greatly reduces business risks and provides you with the transactional data to determine your critical business needs. 

Centralize Procurement Activities

Automation software provides a central location where all stakeholders can access data. Centralizing procurement helps the purchasing team find the best deals with vendors. A central system also prevents order duplication and allows you to take advantage of bulk discounts. 

Other benefits of centralized purchasing include:

• Lower overheads
• Streamlined communication
• Optimal supply chain management
• Uniform guidelines across all forms and contracts

All centralized information updates automatically. Staff members can access data at any time and from anywhere without having to search multiple platforms. 

Improve Efficiency

Smart automation makes procurement more efficient. Your purchasing staff can access accurate and updated data with only a few clicks. Complete, real-time access to data allows for nimble, informed decision making. 

Customer Satisfaction

Procurement automation allows for optimal supply chain management and quality control.  You can provide your customer with live information, creating trust and transparency. 

Outsourcing Procurement

Outsourcing your procurement is a viable option for businesses of all sizes. Advantages include: 

• Optimal spending control
• Compliance with policies and regulations
• Access to specialist knowledge
• Potential for savings

When outsourcing procurement, select a company that has experience with your products. The company should also have a proven track record and handle activities in-house using efficient technology. 

Third-Party Procurement Automation with Current SCM

Businesses offering third-party procurement services often struggle to handle each client’s processes, terms, and templates. Procure-to-pay or point-to-point software is usually not sufficient for third-party project automation.

In most cases, third-party management firms combine different apps and spreadsheets to coordinate processes. However, these systems are complicated and inefficient.

Current SCM offers a revolutionary app for third-party procurement teams. This software centralizes all clients’ procurement tasks, providing the project team with a single source of truth.

If your business offers third-party procurement for clients who pay vendor invoices directly, Current SCM can automate your processes. This project-centric platform allows you to manage multiple custom workflows at the same time.

If you are looking to outsource your procurement operations, consider a team that uses Current SCM. To revolutionize your procurement, try Current SCM today.