Incremental to exponential: 5 overlooked benefits of procurement automation
The most obvious benefits of AI-powered procurement automation are speed and efficiency. But a more holistic and compelling business case for investing in automation requires consideration of ancillary benefits. These advantages are often more important than speed and efficiency and they can crystalize the case for senior executives that automation can lead to a step change in procurement performance.
Across the source-to-pay procurement solution landscape, automation solutions powered by robotic process automation (RPA), natural language processing (NLP) and artificial intelligence (AI)/machine learning (ML) are emerging to help teams improve performance like never before. The problem: many procurement leaders still struggle to articulate the business case clearly.
With emerging tech, like AI, there is more than what meets the eye. When evaluating automation solutions and conducting a cost-benefit analysis, it’s crucial to understand the opportunity to drive something larger, something that initiates a domino effect with exponential impact to the business.
Here are five overlooked benefits of procurement and sourcing automation that should be front and center of your initiative.
1. Digitization and Traceability: A complete data picture
Speed is only as powerful as the data it transports. One key value point for automation – and digitization in general – is in its ability to create data records in a consistent, consumable format that can be shared within seconds.
For example, document-reading technology can work to ingest different digital formats that come in from external sources to scan and convert the information (think invoices, order forms, etc.) into a standardized view inserted into a searchable repository.
In the area of sourcing automation, one customer explained that it enables them to capture all the bidding negotiations they previously handled in ad hoc ways, via phone calls and emails to suppliers when off-contract spot bidding was needed. That data once lived in the silos of people’s inboxes or, in cases of verbal communication, didn’t exist at all. With hundreds or even thousands of spot bidding negotiations happening annually for many large sourcing teams, that adds up to a lot of untraced data in the absence of digitization through automation.
Automation also can ensure that when final rates and other key terms are decided and the winning supplier notified, that information becomes automatically transparent and accessible downstream for contract fulfillment.
By having automation capture this data in a consistent, predictable way and centralize and route it for those who need access, traceability and visibility improve. Inter-related or dependent functions benefit from a complete data picture. And it increases the accuracy of reporting, which in turn improves forecasting and strategic planning as well.
2. Quality: Consistency meets speed
Even where data is already being captured and stored, ensuring quality standards can be difficult to achieve. Humans are indeed error-prone, particularly when tasks are highly repetitive, tedious and frankly better suited for machine automation.
When it comes to managing all the data associated with a sourcing event, a buyer may invite dozens or even 100-plus suppliers to submit bids. Even if the bids are collected quickly through an e-sourcing tool versus manually in a spreadsheet, automation features can immediately quality check the bid data for completeness, outliers, inter-lot consistency, intra-lot consistency, accuracy and formatting.
Higher-quality data and insights inform better decision making, so it’s crucial not to sacrifice quality for speed. When aspects of manufacturing processes are automated, the machinery makes it possible to build with predictability and consistency. After all, what good is speed without the differentiators that make your product reliable? The right automation platform gives you speed and excellence in execution.
3. Process Compliance: A lever for risk resiliency
Automation solutions also present opportunities to strengthen compliance and best practice adherence. Let’s face it: leaders can spend hours defining excellent processes and rules, but if that process doesn’t capture a meaningful-enough percentage of activity, outcomes will be sub-optimal. Having a trusted and complete data picture leads to stronger process compliance.
For example, it’s common that a company prefers, or even requires, that categories of suppliers have certifications or initiatives in place around sustainability, security or CSR-related verifications. Humans may apply those qualification considerations inconsistently and the resulting risks can damage reputation, customer relationships and overall revenue. Automation can ensure such data is not only captured but weighted or required before decisions are made quickly.
Another vexing challenge is auditability. A contemporary example here may be an urgent and reactive need to secure a few shipping containers to deliver additional PPE supplies. Intelligent automation can and should make it easier to bring those activities through a consistent, defined process and manage the application of configured rules, such as collecting a minimum number of competing bids, conducting supplier performance weighting and monitoring rate benchmarking thresholds.
4. Scaling your way to savings
Automation enables greater efficiency, which means it can handle greater workload and volume. Where humans may have set limits based on bandwidth or time restrictions, automation should remove many of those obstacles.
Take a time-sensitive sourcing event for example, where a company needs to conduct spot negotiations to secure a carrier to address the movement of goods urgently. A human, pressed for time, may select only a few carriers to submit bids — carriers they can contact in a pinch, which doesn’t always result in the most competitive rate available. Sourcing automation can, within seconds, identify a wider net of eligible carriers and handle the messaging to invite, collect and analyse the bids, thereby increasing the competitive tension. Multiply this over hundreds or thousands of spot-bidding events annually, and such automation scalability can result in very measurable financial savings.
5. Employees to Enterprise: Talent retention and empowerment
The right automation solution extends beyond productivity. It should improve quality and decision making and increase visibility and process adherence.
Finally, automation must also enhance your human talent — essentially giving them a “promotion” from the tedious, often monotonous tasks better suited to machines. There is much work to be done that requires empathy, creativity and strategic thinking that humans are clearly better at than machines. Unfortunately, most personnel working in procurement are deprived of the time required to engage in strategic activities. By automating tactical activities, executives can free their team to think creatively, innovate and forge strong relationships with key partners.
Advocacy for automation may start with speed and productivity, but that’s only the tip of the iceberg. Whichever form of automation your procurement team is considering, it’s imperative to understand and sell the tangible results that the solution is proven to achieve: from traceability to employee satisfaction. The name of the game is multi-faceted ROI, and the right automation strategy can deliver results within weeks.