7 Ways Automation Can Improve Your Procurement Strategy
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.
This article discusses the benefits of procurement automation. It also addresses common questions you might have when considering moving to automated purchasing, including:
- What is procurement automation?
- How does technology improve procurement?
- Which procurement processes should you automate?
- Which features matter most in a procurement automation tool?
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 and creates a repeatable and traceable process for every purchase flowing through an organization.
Why should you automate your procurement process?
Businesses use automated procurement strategies to plan purchases while achieving two core objectives: risk reduction and cost efficiency.
Risk reduction
Risk is an inherent part of procurement. Important orders get misplaced, deliveries arrive later than expected, and suppliers fail to meet compliance standards. As companies and their needs grow, room for error and fraud grows exponentially.
Procurement automation reduces risk by creating a secure, repeatable process with high levels of vendor confidence. With automation:
- Purchases occur through thoroughly vetted and onboarded vendors
- The purchase process takes place in an automated system that checks both order and invoice accuracy
- Automatic general ledger (GL) coding ensures purchases are properly categorized and tracked
- Automated payments verify the right vendor is paid on time while preventing duplicate payments
Cost efficiency
As companies grow, maintaining cost efficiency using spreadsheets or manual processes becomes increasingly difficult. 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 issues. Automating procurement processes 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
Choose the Right Procurement Technology With This Decision Matrix
Find 15 must-ask questions to narrow down your software search and make your research process MUCH easier.
7 Benefits of procurement automation
Technology automates many components of the typical procurement strategy, eliminating inefficiencies and reducing procurement costs and risks.
Compares cost across vendors
One of the most obvious ways to improve cost efficiency in a procurement strategy is to identify the vendors with the lowest prices. However, doing so manually can take days or weeks. Fortunately, vendor management systems automate much of the research, ensuring businesses find the best deals without draining their 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. XpresSpa, a health and beauty company, faced the unique procurement challenge of adhering to airport security. With Order.co, XpresSpa filtered vendors to meet compliance standards, resulting 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 and reduce risk is to consolidate supplier relationships. By bundling orders using automation, companies decrease operational and material costs and reduce the risk of noncompliance.
Automation groups orders across locations so companies can purchase supplies in bulk at a discount. This strategy is especially effective for businesses with strict supplier qualifications because it eliminates the excess work of performing multiple vendor compliance checks.
Keeps information organized
Disorganization is one of the greatest risks to a successful procurement strategy. When information is scattered, not only do employees waste valuable time tracking it down, but the likelihood of human error also increases.
By using a procurement system to centralize the entire process and enable automated vendor and contract management, team members avoid having to visit dozens or hundreds of websites and keep track of countless logins. Placing and approving orders on a single platform keeps information organized and reduces risk.
Reduces time spent on purchasing
Centralizing product orders and purchase order processing through automation saves finance and operations teams considerable time. Streamlining the purchasing process reduces bottlenecks and enables ordering from multiple vendors simultaneously, making procurement faster and more efficient.
Automation also allows buyers to set up repeat purchase requests as subscriptions instead of generating a purchase requisition every time. This decreases the burden on the stakeholder and procurement department and speeds up the ordering process. With faster cycle times come faster deliveries, so businesses also reduce the risk of delayed shipments.
Eliminates maverick spend
Procurement strategies are often thwarted by stakeholders who believe they can save time or money by circumventing the system. If a process is manual or clumsy, stakeholders may see it as an obstacle to meeting their goals. Although most often done without ill intent, unapproved or maverick spend is still harmful to a business. It breaks the budget and increases risk.
With automation technology that organizes and manages spending, employees make purchases using simple, approved processes. These processes are key in reducing tail spend while enforcing guidelines and budget limits that prevent overspending.
Simplifies invoicing
Manually tracking spending across vendors requires finance departments to manage the tedious process of entering and paying individual receipts and invoices. Automation solutions simplify this process by creating a central repository for all invoice data. Simplifying invoicing saves significant time and reduces the risk of manual errors in reporting and tax filing.
Invoice management automation helped ZeroCater, a workplace and event catering company, consolidate and streamline invoice payment processes. “For Amazon alone, we went from 200 invoices a month to maybe three or four,” said 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 metrics to measure is spend data. However, manually gathering and organizing this data is tedious and time-consuming.
Vendor management systems simplify this process by automatically tracking spend data in one centralized location, allowing finance and operations teams to run reports and conduct analyses in much less time. With the help of accurate data, companies can track the success of their procurement strategies and flag any issues that may prevent them from reaching their procurement goals.
Choose the Right Procurement Technology With This Decision Matrix
Find 15 must-ask questions to narrow down your software search and make your research process MUCH easier.
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Top procurement processes to automate
Automation can make every step of procurement easier, but a few big-ticket items within the process deliver the most impact. Consider prioritizing these common procurement tasks first:
Purchase order creation: Creating purchase orders from spreadsheets or a Google form is time-consuming and can lead to errors in the procurement process. Automate your order creation and approval processes to streamline purchasing while reducing the time and effort involved.
Supplier onboarding: Simplify the onboarding process for new suppliers with automated workflows, ensuring you collect all necessary documentation. Centralizing vendor data into a platform means you’ll never have to hunt for contact information, payment details, or contracts.
Invoice processing: Leverage automation to match invoices with purchase orders and delivery receipts, approve invoices for payment, and automate the reporting and reconciliation processes. Automating invoicing and payments greatly improves the speed of processing, accuracy of data, and ability to leverage early pay discounts.
Contract management: Use automation tools to manage contracts throughout their life cycles, from creation and signing to renewal or termination. Centralized contract compliance helps companies reduce risk and ensure supplier relationships remain competitive.
Spend analysis: There’s a wealth of data within your procurement function. Using technology, you can get more insights from your purchasing activities to build a stronger procurement process. Aggregate spending data within a procure-to-pay platform and use reporting technology to analyze spend, identify savings opportunities, and make budgeting easier.
Vendor performance tracking: Vendor performance is an important part of long-term procurement efficiency. Implement systems that help you track and evaluate supplier performance against KPIs (key performance indicators) and contracts. This advanced procurement technique can improve your purchasing program.
5 Features to look for in a procurement automation tool
A well-structured, flexible procurement tool is essential to running a successful, automated procurement process. When researching options, look for a tool that offers ease of use, integration capabilities, and features that reduce repetitive and time-consuming tasks.
- User-friendly procurement features: The ideal procurement system balances performance with ease of use. The platform should be simple to learn and navigate, allowing stakeholders to self-serve their procurement needs. Look for a system with guided purchasing features, such as a catalog of in-policy and popular items for easy selection and reordering.
- Comprehensive spend analysis features: Aim to select an automation platform that offers in-depth spend management analysis capabilities, including the ability to categorize spend across different vendors, departments, and projects. The right tool should also provide insights into spending trends and the effectiveness of current procurement strategies.
- Seamless integration with existing systems: Modern procurement software must interact with many other tools in a tech stack, such as your existing financial, ERP (enterprise resource planning), and CRM (customer relationship management) systems. Easy integration ensures data flows smoothly and enables real-time visibility and control over procurement processes.
- Automated workflows: Automation is key to increasing efficiency within procurement functions. Look for a tool that automates routine manual tasks such as purchase request approvals, purchase order generation, and invoice processing. This not only saves time but also reduces the likelihood of errors.
- Advanced reporting and analytics: Generating reports and analytics is an essential part of understanding and refining your procurement process. Select software that offers customizable reporting features for analyzing various aspects of your procurement activities. A tool that provides superior access to data insights will drive more strategic decision-making, help identify cost-saving opportunities, and improve overall procurement performance.
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, due diligence in vendor selection, legal and security reviews, and approval workflows. Setting the foundation with well-crafted business processes ensures the automation project works for your business needs.
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. For now, even using a spreadsheet to consolidate vendor information will work.
3. Work toward total digitization
Paper-based systems are incompatible with procurement automation. Transfer all contracts and invoice data into a digital format for easier access. Research partners for procurement automation software.
4. Identify areas for consolidation
Having procurement data in one place provides visibility to identify overlap and redundancy. Find opportunities to reduce necessary vendors and bundle orders across locations to benefit from economies of scale.
How Order.co promotes growth with an automated procurement strategy
When backed by automation, procurement strategies can reduce risk and improve spend management. Procurement automation allows for easy replication of spending processes and efficient order grouping, enabling cost savings. Organizations using procurement process automation create scalability that makes growth and expansion easier.
Order.co automates the key processes that lead to savings and risk reduction across your organization at any stage by:
- Creating an automated procurement 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 and invoice processing, fulfillment, and reconciliation
Find out how Order.co can enhance your procurement strategy, reduce risk, and support your business's growth. Request a demo to get started.
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