7 Ways Automation Can Improve Your Procurement Strategy

Procurement automation saves money and reduces risk by replacing manual purchasing processes with software. Start automating today with this quick guide.
Written by:  Allison Reich
Last Updated:  January 19, 2023
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7 Ways Automation Can Improve Your Procurement Strategy

If your organization still uses manual procurement processes, you already know they’re time consuming. But many procurement professionals don’t realize how costly and risky they can be—or how dramatically automation changes the game. 

Today we’re discussing the benefits and processes of moving to procurement automation. This article addresses common questions you might have when considering moving to automated purchasing, including: 

  • What is procurement automation?
  • Why should you use procurement automation in your organization?
  • What are the benefits of procurement automation?
  • How does technology improve procurement automation?

What is procurement automation?

Procurement automation means digitizing and systematizing the sourcing, purchasing, and processing of payments for goods and services. Automation often occurs within a procurement software tool to create a repeatable and traceable process for every purchase flowing through an organization.

Why should you automate your procurement process?

Companies use procurement strategies to plan purchases while achieving two core objectives—risk reduction and cost efficiency. Especially as companies grow, it becomes impossible to accomplish these goals using spreadsheets or manual processes. Orders become haphazard, accounts payable staff perform unnecessary repetitive tasks, and additional fees for incorrect data entry or missed payments drive up supply costs.

Procurement automation software helps companies avoid many of these costs through proper processes.

Procurement process automation creates cost efficiency by streamlining the purchase-to-pay process and automatically routing requests to optimize the procurement cycle. It allows accounting to:

  • Route purchase requests quickly 
  • Automate reviews and approvals
  • Quickly and accurately account for purchases
  • Centralize purchasing data for quick retrieval

Inherent within procurement is risk. Important orders get misplaced, deliveries arrive later than expected, and suppliers fail to meet compliance standards. Factor in a complex web of suppliers, and room for error and the likelihood of cost inefficiencies and fraud grows exponentially.

Procurement automation reduces these risks by creating a secure, repeatable process with high levels of vendor confidence.

  • Purchases occur through verified and pre-approved vendors who have been adequately vetted and onboarded
  • The purchase process proceeds through an automated system to three-way check both order and invoice accuracy
  • Automatic general ledger (GL) coding ensures purchases are properly recorded and tracked
  • Automated payments verify the right vendor is paid on time every time while preventing duplicate payments
5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)
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5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)

Identify top areas where your current purchasing process might be falling short—and costing you BIG.

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7 Benefits of procurement automation

Technology automates many components of the typical procurement strategy, increasing its likelihood of success. Here are seven ways automation reduces both the costs and the risks of procurement.

Compares cost across vendors

One of the most obvious ways to deliver on the cost-efficiency component of procurement strategy is to identify vendors with the lowest prices. Doing so manually, however, takes days or weeks.

Fortunately, vendor management systems automate much of the research for you. This ensures your business finds the best deals without draining your team’s resources.

Our sourcing engines at Order.co automatically seek vendor and product substitutions that may be more cost-effective. This service identified over 10% in cost-reduction opportunities for Cozen O’Connor, a leading global law firm. The firm saved between $5,000 and $6,000 per month without replacing its preferred products or brands.

The same sourcing technology can also reduce risk. XPressSpa, a health and beauty company, faced the unique procurement challenge of adhering to airport security standards. Using Order.co,  XPressSpa could filter vendors that meet compliance standards. This resulted in on-catalog compliance growth from 70% to 100% and a cost savings of over 9.6%, or $68,000, per year.

Bundles orders 

Another way to achieve cost savings is to consolidate supplier relationships. Automation groups orders across a business's various locations so you can purchase supplies in bulk at a discount. This increases savings on large orders and reduces compliance paperwork.

This strategy is especially effective for businesses with strict supplier qualifications. Ordering from a single vendor eliminates the need for the compliance checks and paperwork necessary when using multiple vendors. Bundling orders through automation decreases operational and material costs and reduces the risk of non-compliance.

Keeps information organized

Disorganization is one of the greatest risks to a successful procurement strategy. When information is scattered, employees waste time tracking it down, and opportunities for human error increase.

With the right procurement technology, the entire process is centralized, so that vendor and contract management are largely automated.

By centralizing the buying process with a procurement system, you avoid visiting dozens or hundreds of websites and keeping track of countless logins. Placing and approving orders becomes simple, which saves time for everyone. Reducing these activities to a single platform also reduces data risk.

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Reduces time spent on purchasing

Automation saves finance and operations teams considerable time by centralizing product orders and purchase order processing. This reduces bottlenecks and even creates the ability to order from several vendors simultaneously. 

It’s also possible to automate orders that have consistent demand. Instead of generating a purchase requisition every time, repeat purchase requests are set up as subscriptions, decreasing the burden on the stakeholder and procurement department.

This function also speeds up the ordering process. With faster cycle times come faster deliveries, so businesses also reduce the risk of delayed shipments.

Eliminates maverick spend

Although most often done without ill intent, unapproved or maverick spend is still harmful to a business. It breaks the budget and increases risk. 

Procurement strategies are often thwarted by stakeholders who believe they can save time or money by circumventing the system. If the system is manual or clumsy, stakeholders may see it as an obstacle to meeting their goals.

With automation technology that organizes and manages spending, employees make purchases within simple, approved processes. These processes are key in reducing tail spend while enforcing guidelines and budget limits that prevent overspending.

Simplifies invoicing

To manually track spending across vendors, finance departments manage the tedious process of recording and paying receipts and invoices. Automation simplifies this process by reducing, tracking, and centralizing all invoice data. 

This simplification saves significant time for finance teams and reduces the risk of errors in their reporting and tax filing.

This was the case for ZeroCater, who faced a monthly flood of invoices and inefficiency. Automation allowed them to consolidate and streamline the invoice payment process. “For Amazon alone, we went from 200 invoices a month to maybe 3 or 4,” said Order.co client Keith Bowles of ZeroCater.

Provides the data needed to measure success

Every sound business strategy should include a plan to measure success. For procurement teams, one of the most telling measurements is spend data.

Spend data can take a lot of time to recover and organize. But with automation, it’s much easier. Vendor management systems automatically track spend data in one centralized location. This allows finance and operations teams to run spending reports and conduct analyses in a fraction of the time it would take manually.

With the help of these reports, finance teams easily track the success of their procurement strategy and flag any issues that may prevent their businesses from reaching their procurement goals.

Steps for implementing procurement automation

If you’re at the beginning of your automation process, here are some simple steps to set the project up for success:

1. Set procurement policies 

The heart of automation is a solid process. Develop and document a procurement policy that establishes spending guidelines, vendor due diligence, legal and security reviews, and approval workflows. Setting the foundation with well-crafted business processes ensures the automation project works for your organization as intended.

2. Collect your vendor data in one place

Pull together all available information on the current vendors in your supply chain. This information may come from accounting data, contract management sources, or department heads responsible for ordering. Get all the data into one place (for now, a spreadsheet can work). 

3. Work toward total digitization

Paper-based systems are incompatible with procurement automation. Get all contracts and invoice data into a digital format for easier access. Scan paper documents using optical character recognition (OCR) technology, and research partners for procurement automation software.

4. Identify areas for consolidation

Having procurement data in one place provides enough visibility to identify overlap and redundancy. Find opportunities to reduce your number of vendors, bundle orders across locations, and benefit from economies of scale.

How Order.co promotes growth with an automated procurement strategy

A procurement strategy reduces risk and spend when it’s backed by automation. An organization that brings automation to the procurement process creates scalability in its procurement functions to make growth and expansion easier. Spending processes can easily be replicated to reduce complexity, and orders can be grouped to augment cost savings.

Order.co automates the key processes that lead to savings and risk reduction across your organization at any stage by:

  • Creating an automated workflow to streamline time-consuming purchase requisition and approval processes
  • Allowing stakeholders to make purchase requests through a preapproved selection of vendors, which saves money and reduces third-party risk
  • Removing manual accounting processes to speed purchase order processing, fulfillment, reconciliation, and invoice processing

Find out how Order.co’s technology helps automate your procurement strategy, reduce risk, and support future business growth. Request a demo to get started.

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