How Procurement Automation Enhances Efficiency in Business Operations

Consider a member of the procurement team who consistently completes all tasks on time, never requests time off for any reason, never requests a pay raise or demands promotion, and makes little to no mistakes. Literally, the "perfect worker." Yes, we are referring to the newest member of the procurement team, the automation bot for procurement. Over the past ten years, digital procurement technology and procurement automation have advanced. Procurement bots are the inevitable next step for firms that want to employ digital technologies.


Recognizing the Procedures of Procurement


Regardless of the nature or how big an organization is, the procurement department is a crucial component. An organization's procurement function consists of a set of actions that it takes to acquire the goods or services needed to accomplish its goals and objectives. The procurement function's goal is to locate the finest suppliers and collaborate with them to acquire high-quality products or services at competitive pricing.


The results of the procurement function directly affect the organization's cost-cutting plans. The procurement function prioritizes contract utilization, supplier performance improvement, sourcing cycle time reduction, risk and compliance management, along with cost-saving goals. A successful procurement procedure goes beyond only buying products and services. Some of the primary focal areas of the procurement role include gaining a thorough comprehension of the requirements of all business units, matching the appropriate supplier with the requirement, evaluating the performance of vendors, and negotiating contracts to obtain value for money.


Here are the crucial 6 phases for a successful procurement:


Understand each business unit's requirements.



A project that is well started is half done. The best way to begin the procurement job is to comprehend the business requirements of various company divisions. Identifying and combining all business units' needs gives the corporation visibility into its categorical spending and cost-saving opportunities.

Compile and assess a vendor list


Following the identification of the requirements, the lookup for pertinent providers starts. Online searches for vendors are possible, as well as more formal searches using RFPs, FFIs, and RFQs. The nominated suppliers are then evaluated based on their price, track record, warranty and guarantee conditions, industry recognitions, and level of service. From the list, the procurement team selects the vendor delivering the best market price and the greatest value.


Discussion of a contract with the selected provider


The business starts the contract negotiation procedure after selecting the provider. The procedure of contract negotiation is crucial to the buying process. Tactical contract negotiation can enhance the relationship between the customer and the supplier as well as the value generation for the transaction. The factors argued during contract negotiations include the work's scope, the pricing structure, any discounts, the delivery schedule, and the terms and conditions.


Create a purchase request, submit it, then release the purchase order.


The formulation and submission of the purchase requisition (PR) is the following stage in the purchasing process once the vendor contract is finalized. In the purchase requisition, all the contract terms that have been mutually agreed upon are listed. After, the procurement director and finance submit the PR for approval. A purchase order (PO), containing details such as the buy order number, supplier information, pricing, and delivery date, is raised by the finance team to the supplier once the finance department has approved it.


Process the payment to the vendor against the invoice


The majority of providers include the cost of the provided goods or services on the invoice they submit for payment at the time of delivery. To confirm that the quality and quantity of the purchase are satisfied, the procurement team compares the PO and the invoice. According to the terms decided upon by the supplier and the buyer, payment of the invoice may occur before or after delivery.


Keep track of the buying procedure


End-to-end purchase-to-pay cycle documentation is necessary after the purchasing procedure is finished. The tracking and analysis of expenditures is aided by documentation, which also guarantees the procurement process is audit-ready.


Each of the aforementioned actions can be altered to suit organizational requirements.


Risks Associated with Manual Procurement Processing


With the globalization of businesses, the complexity and scope of the procurement function is growing by the second. Using manual procurement procedures exposes the company to several hazards. The risks of doing the purchase process manually include:


Compromise in risk and compliance management


One of the difficulties the procurement department has is managing supplier risk. Market risks, delivery risks, fraud risks, and operational risks are some of the additional hazards associated with manual procurement processing. The possibility of fraud and inaccurate data is raised by the human bias inherent in manual processing. In manual procurement procedures, effective compliance management is always a challenge.


Maverick spending


When a purchase is made that is not directly related to the direct purchases. Spending that is unchecked and unaccounted for costs firms money. With manual procurement processing, the potential for indirect purchases is greater.


Long and complicated process cycles


The buy-to-pay cycle is lengthy and complex when a manual procurement process is used because of the delays and bottlenecks that plague it. Employees' productive work time is eaten up by repetitive administrative activities, which affects productivity and leads to unsatisfied workers.


Data inaccuracy and inconsistency


These problems can occur in any process that relies heavily on human labor. Key performance insights are provided by reporting and analysis of purchase data. Data management by hand is prone to errors and omissions. Inaccurate procurement data causes inventory surpluses or shortages, bad business decisions, and financial losses.


A lot of paperwork


Each step in manual procurement processes involves a lot of paperwork. Large amounts of paperwork might be difficult for the procurement team to manage. When handled manually, paper-based invoices can be accidentally misplaced or damaged.


Insufficient vendor management


The procurement function must keep good connections with its vendors. Processing PRs and POs more quickly guarantee effective vendor onboarding and prompt payment. The manual processing of the PR and PO increases the possibility of errors and fraud. The buyer-vendor relationship suffers when vendors grow impatient with the processing of their invoices.


Therefore, it's easy to say procurement automation makes life easier for procurement managers by streamlining and simplifying the purchase process.

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