Agility is vital to keep every business up and running. Procurement is one of the functions, which requires constant change. Today, procurement teams are expected to play a strategic and tech-enabled role. Before, procurement teams had two focuses: cost reduction and risk mitigation. The advent of automation and cloud services has led to more emphasis on efficiency, accessibility, and sustainability of purchasing decisions.
A 2018 Deloitte survey, ‘Leadership: Driving innovation and delivering impact’, gathered based on the views of 504 procurement leaders from 39 countries, representing organisations with a total annual turnover of $5.5 trillion, found that the digitization of procurement is helping overcome a number of key challenges. These include market volatility, collaboration and leadership.
While key findings discovered that 61 % of procurement leaders said they delivered better savings in 2017, 66 % predicted that digital technology would be responsible for the biggest changes in supplier management over the next five years. Half said they were using advanced analytics in a bid to help reduce costs. Since more and more organisations are embracing connectivity with an emphasis on efficiency and productivity, digital technologies are opening up new ways for them to respond to the needs of consumers and suppliers.
Cloud-Based Platforms
Procurement is now moving completely to the cloud. According to a CPO survey, cloud-based procurement platforms are now mainstream. Since several traditional enterprise providers are embracing a cloud strategy and an array of new providers are entering the market, moving to the cloud is highly expected. With investment in cloud procurement rising up, the migration to the cloud is gaining momentum.
Lower barriers to entry connected with cloud technology have paved the way for a competitive and innovative yet disruptive market. Indeed, cloud solutions can provide significant opportunities for a procurement process, including cost effectiveness, energy efficiency, and a more coherent and navigable global supply chain.
Machine learning
Machine learning’s capabilities extend far beyond this, but the nudges and corrections some procurement software offers have a fairly low barrier to entry in terms of behavior change and can drive big benefit by removing some of the human errors from processes. Quick adoption and fewer errors lead to faster operations — a stepping stone on the path to agility. A series of algorithms that gets better on its own with time and data is called a machine learning program. A self-learning machine is what makes an AI (Artificial Intelligence) application. These applications can actually help in speeding up your procurement process. AI-powered chatbots are one of the most useful applications of Machine Learning in procurement. Some simple questions are asked in a series along with information and choices which have predictable responses and eventually with its help, you can take the right step in the right direction, as shown in the image below.
Natural language processing
Natural language processing is another form of AI that can read text and decipher meaning. The procurement process is full of text-heavy documents, agreements and conditions. Reviewing supplier contracts quickly is a key task needed to get goods moving, and language processing software can reduce this time by flagging suspect clauses.
“Let’s say you’re in merger environment, and procurement suddenly has thousands of new contracts that they’ve got to figure out and manage. So they use these AI tools to quickly do the analysis to find terms that are worded differently but mean the same thing,” said Connaughton, adding that some software can even ascribe a contract a risk score.
Beyond contracts, natural language processing can spot invoice anomalies and even sniff out fraud.
"It helps when the system is able to recognize that things are out of balance and send an alert. So it might not be that you take the person out of the equation, but you give that person additional insights — additional data," said Connaughton. Those insights effectively expand the cognitive power of a procurement team without increasing headcount, while speeding up the fundamental processes to boot.
Robotic process automation
Robotic process automation (RPA) takes the insight machine learning can provide and turns it into action. While machine learning observes procurement professionals’ behavior and gleans the right way for processes or documents to play out, RPA follows pre-programmed “if/then” instructions. It’s a more formulaic and less fluid technology, but that rigidity doesn’t make it less valuable.
This technology which can save both time and money of your procurement business is RPA. RPA can help in developing the partnership of business and procurement, collaboration with suppliers, risk identification, and saving hours for valuable activities. Robotics can help in each and every process which has some rules or follows a pattern. Highly transactional procure-to-pay processes which involve a lot of fact-checking and reconciliation of accounts can be automated using RPA. Even in source-to-contract processes, RPA can handle the tasks like the assessment of contracts and reporting of deviations from standard practices.
Category management, spend analysis, background checks of suppliers and management of bids and invoices, etc. all these routine tasks, which waste precious man-hours in the procurement departments across the globe, can be automated using robotics. It just needs some homework to be done by the CPOs so that they can accurately identify the tasks which must or should be automated.
Big Data and Analytics
Procurement organizations deal with a humongous amount of data. The sources of data have increased rapidly in number, providing both structured and unstructured type of data. The transaction of information takes place, crossing geographical boundaries through numerous mediums. But how this data which is available in huge amount can help procurement organizations? The data helps only when you have appropriate analytical tools to harness its potential. If you are working in the procurement function of a business, then you can use the power of big data in improving your operations with the help of Automated Reporting, Predictive Analytics, Risk Mitigation, and Data Mining.
Big Data can also help in creating graphical scorecards of the performance outputs of the procurement and in developing visualizations, which can tell you about your whole supply chain in a single view. All these features of Big Data not only help in fast decision making but also in better decision making. That is what agility is all about. Running fast and moving in the right direction.
Automation
There is no doubt that various organizations are shifting their focus to automate all aspects of procurement. In fact, nearly two-third (63%) of procurement leaders deemed automation as a key priority. Having a fully automated procurement process will remove inefficient, time-intensive aspects of procurement, and make it more efficient. Automated procurement technology solutions provide organizations with an easier way to manage the myriad of information involved in the procurement process.
With procurement automation, organizations can:
· Spot business needs
· Eliminate repetitive processing
· Manage suppliers
· Track spend in real-time
· Monitor risks and
· Predict future demands
Procurement professionals are expected to level up their game by reinventing traditional processes and embracing new procurement technologies. Investing in procurement tools and technology leads to increased efficiency and productivity. In the end, it leads to a reduction in costs that allows you to put more of your resources toward strategic initiatives aimed at increasing company growth.