Why procurement automation is a means to an end, not an end in itself
The idea of the procurement function has considerably transformed when it comes to optimum deployment of automation, making the best use of human expertise that organisations heavily rely on.
Procurement organisations with a far-sighted vision are aware of how standard features of commercial Enterprise Resource Planning (ERP) packages have become the mainstay. Artificial Intelligence (AI), Internet of Things (IoT) and Blockchain are making inroads to organisation’s core.
By making the technology productive as per the needs of the organisation, the organisation’s strategy can be re-developed and differentiated to lead to a competitive advantage.
We can gauge the opportunities and challenges that automation provides, taking an example of the banking industry. Since multinational banks have global networks of ATMs which require cash replenishment at regular intervals, maintenance and one-off service calls, there is procurement staff employed in each of the regions in order to control and manage local ATM service providers and look after their performances.
Through the application of AI, the process of collection of information regarding procurement activities can be expedited, thereby enhancing the contract compliance and creating smarter statements. AI can even help banks to monitor themselves and also outsource their maintenance services in the longer run. ATMs enabled through smart-technology can anticipate their service needs, award contracts to service providers and solicit bids. Based on actual experience with vendors, machine learning can render supplier performance and make contracting decisions.
The automation of these processes can help reduce labour costs with the elimination of local workers engaged in procurement. Automation in procurement also enables 100 per cent contract compliance and helps prevent frauds.
However, automation has its own set of challenges in logistics and network design that can only be overcome with innovative thinking. In order to gain more transparency in the information process and automation, organisations should focus on optimum deployment of new technologies in three key activities that are relevant to all categories and processes of procurement.
· Focus on process: The idea is to ensure automated source-to-pay processes that are ideal for the needs and purpose of the organisation without any gaps or side effects. These automated processes also help everyone get access to relevant information simultaneously.
· Content management: The interplay between demand and supply doesn’t take a backseat with the introduction of technologies in an organisation. Procurement officials need these market forces to manage external spends across product categories.
· Management of supplier relationships: Irrespective of the smart solutions offered by technologies and automated processes, human engagement and involvement is the backbone that can help gain competitive edge, shape supplier behaviour and cultivate winning formula for ecosystems. Without letting new suppliers gain more control, the procurement function will focus on these objectives and look for ways to disrupt purchasing relationships across categories.
Success in these areas is foretold if procurement organisations have the skills to counter short supply. The onus would be on procurement leaders with a problem-solving attitude, analytical mindset, exposure and willingness to embrace digital technologies, comprehend essential sources of value and excel in design thinking. As roles evolve within a procurement organisation, automation calls for a clever mix of creative and analytical thinking modes.
It is paramount to understand that even when machine learning and smart technologies look at heavy computational work, left-brain thinkers are equally significant when it comes to linear reasoning skills. Right-brain thinkers are similarly required for replacing routine relationship management and communications tasks in order to envision new creative possibilities for the technology-enabled systems.
Procurement which is driven by improvements in technology is also subjected to experimentation, risk tolerance and failure as a learning outcome, provided it doesn’t damage the organisational fabric. Rather than waiting for off-the-shelf solutions or generic solutions from commercial software vendors, procurement functions within organisations are taking the lead in adopting new technologies and shaping them according to their requirements. This adoption and customisation of automated systems happen through the aid of a wide range of vendors including start-ups.
Since procurement has always been an intermediary between outside vendors and internal stakeholders, these transitions need seamless communications and efficient planning and execution. With a clever mix of expertise and new skills, procurement’s influence and impact can be more.
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