If your procurement team is spending over half their time on transactional activity, what opportunities are they missing? Perhaps, opportunities to drive profitability within your organisation; develop environmental or ethical initiatives; or engage with suppliers to develop stronger business relationships?
This article explores transactional domains that can be impacted by automation and focuses on the benefits that can be achieved through this automation.
Placing more responsibility on the individual who has the requirement for the product or service.
2: Key transactional areas of procurement
The following are the traditional areas associated with Procuring (Source: CIPS). Those marked ‘*’ have the greatest opportunity for automation and specifically moving the transaction processes to the user.
- Need recognition
- Specific Need *
- Source/examine supplier options *
- Price and Terms *
- Purchase Order *
- Delivery *
- Expediting *
- Receipt and Inspection (and Returns if necessary) *
- Invoice approval and Payment *
- Record Keeping *
- Governance and Regulatory factors *
3: Strategic focus areas of Procurement
However, Procurement is also driving or a key player in:
- Environmental impact analysis (risk management)
- Ethical checks and assurances (risk management)
- Identification and risk analysis for Global economic factors (trade wars, Government interventions…)
- Identification and risk analysis for Global event factors (extreme weather, terrorism…)
- Total lifecycle costs / Managing profitability
- Change management
- Organisational transformation
- Identification of disruptive technologies/companies and associated risk mitigation
- Risk mitigation relating to Privacy
- Risk mitigation for Cyber/Information security/IP Theft or Industrial Espionage
- As well as becoming an expert on the plethora of new technologies that impact on Procurement
Most of these require a significant level of Procurement involvement. Though there are elements that can be automated and tools available to provide insightful information, this article is focusing on automation of the traditional areas only.
However, automation of the traditional areas is so essential to enabling Procurement to focus on the second of these lists. As, whilst Procurement professionals are deeply involved in transaction related activities, they do not have time to effectively address this second list.
4: Automation to reduce Transactional Activity
As stated, for the traditional areas, there is significant scope for automation and to significantly reduce the time Procurement spend on transactional activity. Time that can be spent on exploring opportunities associated with our second list above.
The remainder of this article focuses on the specific automation domains and briefly explains these domains and the benefits of automation within these domains.
Automation of the Sales order and purchase order process
Automation of the sales order and purchase order process enables faster and more compliant requisitions. It places the emphasis on the user placing the order and monitoring the progress of the order.
Procurement sets up the controls for raising, issuing and approving purchase orders. As well as the approved suppliers list associated with domains or specific products/services.
Use of Catalogues
One of the most effective areas in automation is the use of a catalogue-based portal for users to make their purchases. An interface that makes it as simple as point, click and buy for the user. The user catalogue experience ensures adoption of the eProcurement process.
It is essential though to allow for non standard purchases within this catalogue environment. Either slight variations on a requirement or a specific tailored product or service requirement. Essentially a catalogue portal with integrated RFx capabilities. Where you can specify variations to an off the shelf product or service or define a totally new requirement.
Once suppliers are set up, the automation provides for flexibility to automatically invite the current supplier base to bid on a requirement. Suppliers can be self-accredited or independently assessed to ensure standards are maintained.
Intelligent reporting provides statistics on variance, quality and delivery and recommendations for performance improvements. Suppliers that are integrated into the system receiving direct feedback and access to their reports.
Automating the process of ensuring that the goods ordered are the goods delivered. Saving significant administration and management costs. Matching orders to deliveries and ensuring that goods receiving have access to the necessary information that covers specifications and quantities.
Visibility of orders raised in real time, so you’ll always know what’s pending. Automatically matching PO to Goods Receipt and Invoice. Reconciling accurately to be able to approve purchase invoices quickly and in many cases automatically. Plus, for large scale processing you can set approval tolerances to allow for automated processing.
You can also monitor sales ledger information to ensure your sales invoices or re-charges are accurate, on-time and complete. With optional or mandatory cost and sale coding, you eliminate the risk of inaccurate billing and improve your cashflow.
Deploying automation into the Cloud allows for localised purchasing that is controlled centrally. Ensuring procurement mandates, guidelines and best practice are setup for all offices, and adhered to as part of the automated process.
Procurement can also use the automation to promote a specific supplier or product/service throughout their organisation. Or to restrict/block a supplier or user on the system.
Reporting and Analysis
Automation delivers on granular visibility of every penny of every transaction, globally and in real time. Enabling you to make better decisions, faster. Enabling users to create, manage and publish powerful management reports for all key management functions.
Monitor demand, gain insights into spend under management, track operational efficiencies and keep a close eye on suppliers and spending. To name just a few areas that reporting and analysis can impact.
Dive deep into the data. For business analysts, slice and dice transactional data to uncover real value and identify opportunities for improvement.
Often overlooked in automaton is the need to have a platform that can readily integrate to other platforms. Allowing exchange of critical data between systems.
Being able to bring in best of breed solutions to the overall automation process is important. Any closed monolithic automation solution should therefore be avoided.
If you would like to learn how automation can impact on transactional activity in any of the above areas, either as a whole or individually (to free up your Procurement resources)...
See Claritum customer case studies