The digital transformation of the procurement process is moving quickly. As technology advances, it is becoming easier for businesses to see real-time pricing data to gain more control over their spend management. In fact, with the right strategy, your business could automate nearly half of the procurement process tasks that are currently bogging your procurement team down. To maintain a competitive advantage, your procurement team will need to be at the forefront of these emerging technologies. The potential upside to automating your source-to-pay process is quite astonishing. It can help unlock cost savings while freeing up time for your procurement team to hunt down new sources of value for your business. In this article, we will break down:
- Technology that is paving the way for greater business prosperity
- How to start source-to-pay automation from where you are right now
- What it means for your bottom line
Source-to-Pay Automation Tech You Need to Know
The importance of procure-to-pay automation cannot be understated. Your business will quickly lose its competitive advantage if it doesn’t take spend management under tight control. The first step is having clear insight into the emerging technologies that assist with all facets of procurement, such as supply chain management, sourcing, and contract management.
Machine Learning in Procurement
Applications for machine learning in the procurement process have the ability to handle complex rules. To achieve peak performance at uncovering sourcing opportunities, machine learning requires some form of pattern for it to recognize. For example, machine learning tools can handle spend analysis areas that traditionally required human judgment, such as assigning transactions to spend categories.
Automation of this process leads to greater accuracy and wiser decision-making, thanks to providing real-time spend analysis information. Machine learning can help your business with supplier management by enabling you to examine in-depth information about your supplier relationships. In turn, this can give a significant boost to your strategic sourcing strategy.
Cognitive agents are synonymous with artificial intelligence in many ways. Drawing from complex master data, cognitive agents can pull the information necessary to plan your sourcing strategy or determine the best course of action. The best example of the use of cognitive agents would be the process chatbots use. The system searches a database of predetermined answers to the most common questions.
In the procurement process, cognitive agents may soon be beneficial for more complex tasks, such as comparing cost, quality, and more with a database of similar products. Cognitive agents and machine learning tools can handle highly complex areas, such as developing spend category strategies and identifying the most beneficial supplier relationships.
Robotic Process Automation (RPA)
This is a relatively new term in the procurement playing field. In contrast to machine learning, Robotic Process Automation (RPA) can automate simple, repetitive tasks. Using bots, RPA can access software the same way a human would. This eliminates the need to access the software’s underlying code and saves a lot of time and resources in implementation. Robotic Process Automation can easily handle many source-to-pay processes such as invoice processing, ERP, and RFx.
Traditionally, departmental tasks in silos often contributed to wasted time and effort in consolidating supply chain management tasks. Smart workflows link tasks performed by different people using different machines to streamline processes, such as risk management, and organize them around journeys. For example, tasks can be routed between the procurement and finance teams to simplify contract management.
Instead of making incremental gains by applying optimization efforts in each department silo, smart workflow processes produce tangible benefits for the entire organization. They can start closing the black holes created by lag time and lack of coordination between tasks. As a result, businesses experience better forecasting, spend management, and cost savings.
Natural Language Processing (NLP)
NLP (especially when combined with RPA) can streamline the procurement process by organizing unstructured data found in free-form text. It can search through suppliers’ information for specific terms and match the order requirements, such as pricing, to groups of suppliers. After automatically sending out requests for bids, a member of your team receives the bids and makes the final determination. NLP is most useful as a connection between human input and structured data that machines use.
Start From Where You Are
Start by identifying each step in your procurement process and estimate the value of closing the gaps you find. According to McKinsey, 56% of total procurement tasks can be automated. Your business will see a notable boost in productivity in both placing and receiving orders and payment processing, where an astonishing 88% and 93% of tasks, respectively, can be automated. By automating these processes alone, an organization can immediately see a spend reduction of 3.5%. Automation will also give your team increased opportunities to identify more areas for reduction by closing the gaps.
Get your entire C-suite together and appoint a torch-bearer for the project. First, your champion project leader should identify the main pain points and bottlenecks in your processes. Then you can experiment with solutions for those areas. Identifying the best, cheapest, and simplest solutions from the beginning will go a long way toward success. This will help your company avoid the pitfalls of going all in. It will also help you avoid encumbering your IT team on a massively complex solution, only to find it might not achieve the results you had expected.
56% of total procurement tasks can be automated.
Automation Is an Untapped Source of Value
The bottom line of the value of automating your source-to-pay process will be shown by not only reducing the amount of work but also reducing cycle times, improving compliance, creating significant cost savings, and having better supplier management. By finding the right procurement software that can mimic its human equivalent, your company can streamline business processes and contract management with ease.
As the old adage goes, work smarter, not harder, to maintain your competitive advantage. Letting the machines do most of the repetitive legwork in procurement is definitely the smarter way to go. Leave the tedious backlog of tasks to the machines, and free up your team to focus on strategy. There’s an added benefit to procurement automation that is sometimes overlooked: employee happiness.
ZeroCater’s Experience With Source-to-Pay Automation
When your employee says a task is ‘the bane of my existence,’ that is your first clue that there is an issue. Also, if your accounts payable team is frequently asking what website employees are purchasing from, it’s time to seriously investigate solutions to compliance issues. It was this question and sentiment that alerted ZeroCater that they had serious issues within their procurement process. Lack of clarity in their approvals process led to rogue spend and inaccurate spend analysis. This ultimately negatively impacted their cash flow.
After implementing Order, ZeroCater was able to:
- Significantly reduce their cycle times.
- Streamline their pay process.
- Get the entire team on board with a more efficient process.
As a result, ZeroCater cut their invoices from around 200 a month down to three or four. That’s a 50x reduction. In time, this freed up their procurement and finance teams to identify new sources for creating additional value for the business.
Order is focused on providing the best user experience by providing a single platform to streamline every level of your procurement process. We provide an end-to-end purchasing and payment platform with intuitive functionality and solid integrations to help your procurement team onboarding go smoothly and get your spend management under control quickly. We invite you to experience Order with a live demo and a consultation with one of our purchasing and payment specialists.