Discover how DHL Group increased connectivity across the enterprise and automated multiple processes end-to-end
Delays caused by constantly sending documents back and forth, miscommunications and maverick spending are some of the top challenges faced by procurement teams. Automating procurement provides transparency for internal and external stakeholders and streamlines the process. This makes it easier and more likely for other employees to engage with the procurement department to fulfill a purchasing need, providing opportunities for cost savings across the organization.
"Delays, miscommunications, and maverick spending are major challenges in manual procurement, leading to costly errors and inefficiencies," warns Bizagi's Sebastian Mengewein. Emails, spreadsheets, and manual data entry can cause significant delays in generating purchase orders and processing invoices, while data held in siloed systems limits visibility into spending, supplier performance, and inventory levels. The result is a procurement process plagued by delays and errors that negatively impact organizational efficiency."
Some of the challenges include:
- Emails, spreadsheets and manual data entry cause delays in generating purchase orders and processing invoices. - Transferring quantities, prices, or vendor information between multiple systems can lead to costly errors. - Data held in siloed systems limits visibility into spending, supplier performance, and inventory levels. - Manual processes make it harder to enforce and track compliance with regulations. - As organizational procurement requirements increase, teams may not be able to keep up with demand.
Procurement automation is the use of technology to manage the tasks and workflows within the procurement process. Automating manual, repetitive, and time-intensive tasks frees up employees’ time and allows them to focus on strategic decisions and building relationships with suppliers, rather than completing administrative tasks.
Procurement teams are routinely dependent on paper-based processes or outdated systems that aren’t open to change. With those systems, it’s impossible to gain insight into the thousands of suppliers they work with and assess business continuity. Transforming procurement management with automation can streamline the purchasing process and improve budget visibility, aiding decision-making to deliver increased savings rates and reduce high-impact risk.
"By implementing procurement automation, organizations can eliminate manual errors, ensure compliance with regulations, and provide a central location for all stakeholders to reference the procurement process. This leads to faster purchase order processing, improved budget visibility, and a more efficient procurement lifecycle, ultimately driving significant cost savings and reducing high-impact risks," explains Mengewein.
1. Maximize cost-saving
According to Deloitte’s 2023 Global CPO Survey, 71% of CPOs cite improving margins via cost reduction as a top enterprise priority. Automation can help significantly when it comes to the procurement process, which historically is very paper-heavy, manual, and arduous. This could cost companies money in two ways. Firstly, the long procurement cycle can lead to money getting caught up in lengthy reviews and evaluations. Additionally, the daunting tasks of filling out procurement forms can mean that employees avoid engaging with procurement, so discount opportunities from bulk buying or using preferred suppliers are often overlooked.
2. Optimize user experience
An overly complex procurement process can put employees off using the procurement center for purchases. Organizations should aim to make the process as user-friendly as possible to maximize employee engagement and help the organization make more efficient purchase decisions. The easier it is for employees to interact with the procurement department, the more likely they are to use it, which means all purchases can be tracked and the organization can take advantage of discounts.
3. Reduce cycle time
Introducing process automation to the procurement process will help to shorten the procurement lifecycle by ensuring it is as efficient as possible. APQC’s Sourcing and Procurement: Blueprint for Success report showed that there can be a significant difference in cycle times, with top performers taking an average of five hours to place a purchase order, while bottom performers can take up to 48 hours.
Modeling the process prior to automation will help to eliminate any bottlenecks in the process and ensure that all the necessary steps are adhered to. Once the process is streamlined, automation can add efficiency by automating tasks within the evaluation processes which previously would have been completed manually, such as uploading request forms to the system, distributing contracts, and confirming orders. There is a significant amount of administration involved in the procurement process, so freeing employees up from these tasks means they can focus on other value-add tasks.
Process automation also reduces the chance of errors and omissions when collating information, so the back-and-forth of correcting mistakes is eliminated. The entire process will be completed faster and more efficiently, so your organization can benefit from faster purchase order processing, faster approvals, and ultimately faster receipt of goods.
4. Minimize risk
APQC reports that “Within procurement, the use of an approved vendor list is one key practice for driving consistent processes. The approved vendor list contains all suppliers that will be accepted to do business with the organization.” However, having a reliable vendor list is only the first step to minimizing risk. Organizations also need to ensure that employees are compliant with the procurement process. According to APQC’s research, only 43% of organizations have documented consequences for applying noncompliant sourcing processes to a very great extent. These maverick buyers can have a significant impact on the bottom line, with the total cost for the procurement process group per $1000 purchases for those with a significant number of maverick buyers being $40.42, compared to just $21.73 for the top performers who adhere to the procurement process, nearly double the amount.
5. Eliminate transaction disputes
With multiple stakeholders involved, including procurement management, evaluation committee, arbitrator, and vendors, it’s important for all parties to be able to have access to a single point of truth. This is particularly important if a transaction dispute should arise.
Procurement automation software orchestrates all systems and provides a central location to reference the process to ensure that goods have been delivered in time, to the desired standard, and payments have been settled. The process is mapped out for complete end-to-end visibility, so every point in the process can be reviewed with ease. Automated audits also guarantee that all documents from purchase requests through to approved invoices are referenceable.
Automation has a role at each stage of the procurement process:
Purchase requisitions
Submitting purchase requisitions manually can be an incredibly slow and error prone process. Multiple revisions and numerous approval levels often cause information to get waylaid and cause delays. Automating the process allows requesters to upload the information required in a predefined template which is then directed to approvers for review. Any feedback or changes can be updated directly in the platform making it easier to track progress and approve cases faster.
Purchase orders
Much like purchase requisitions, purchase orders often go through multiple touchpoints prior to approval. Automation allows you to create a workflow that automatically routes your purchase orders through the appropriate steps based on predefined business rules preventing bottlenecks and allowing them to reach final approval faster. The automated process can also update your ERP automatically.
Vendor onboarding
Collecting information needed to review supplier compliance and risk, then communicating requirements often takes place across different systems creating silos and preventing transparency. Automating tasks and centralizing documents allows you to input and share information more easily, ensuring that internal and external stakeholders know where they are in the process and the next steps.
Invoice processing
Matching invoices to purchase orders, resolving queries, submitting for approval and issuing payments can take anywhere from days to weeks. Automated invoice processing performs automatic matching to verify accuracy, routes invoices to the right people for approval and provides a central repository for records reducing manual data entry and speeding up the entire process.
Payments
Your accounts payable team need to be able to pay invoices quickly and securely. Automated payments provide them with access to the documents and communications needed to ensure that suppliers are paid on time, every time. This avoids late fees and sometimes opens up the opportunity for early payment discounts. Tracking payments in a single platform also allows you to accurately monitor and control cash flow.
Speeding up onboarding at adidas
Global sportswear manufacturer adidas wanted to streamline their lengthy vendor onboarding process. By creating an automated workflow they were able to centralize supplier data and gain more visibility into the onboarding process allowing them to track status. These changes led to a significant improvement in data quality and a 50% reduction in factory onboarding time.
Efficient vendor management at DHL
Deutsche Post DHL built a custom, fully integrated automated Vendor Master Data Management portal using Bizagi to support the procurement process. The portal has over 320,000 global users, helping vendors to self-serve, improving both employee and end-user experience. Bizagi has automated tasks in the process such as initiating cases, submitting forms, requesting approvals, and duplicating data in the ePurchasing solution.
The standardized process created in Bizagi helps to ensure compliant vendor selection, and automatically generates the information needed for audits, which was previously buried in emails or even deleted in error. The ease of use of the new platform provides a quality of process and improved user experience to the extent that users do not require training on the intuitive platform, saving further costs.
Procurement automation software automates tasks and workflows throughout the procurement process. This can help procurement teams increase collaboration and engagement along the entire procurement value chain, including planning, sourcing, contract management, order delivery, payments, and supplier management and give them valuable time back to focus on negotiating the best deals for your organization.
Find information about Bizagi’s procurement automation solution here.
