Achieving Procurement Excellence with Digital
COVID-19 has disrupted global supply chains and most enterprises have spent the past few months mitigating immediate risks. But as enterprises look to bounce back to growth some pertinent questionsregardinggrowth, resilience and adaptingthe procurement functions for ‘the new normal’ need to be answered.
Procurement functions are playing a critical role for accelerating recovery. Most enterprises are building on the lessons from the COVID-19 pandemic and reshaping their sourcing and procurement functions to emerge stronger. In this context, the top order of focus of procurement functions are:
- Enhanced Visibility: Greater visibility into our supply network helps correctly identify risks and capacity constraints. According to a recent global survey, 92% of enterprises are doing what they can to create more visibility within their supply chains, while also focusing on increasing transparency with suppliers and buyers as a top risk mitigation strategy.
- Better Supplier Relationship: Enhancing supplier relationships is a good way to reduce future problems and minimizing supply chain risk. The same survey found that over the next few years, 42% manufacturers expect to strengthen relationship and increase transparency across their supply chains.
- Dynamic Customer Demand: Being close to the customers helps understand their changing needs and manage inventory levels accordingly.
Several procurement functions still have manual processes, resulting in not only error prone and time-consuming processes but also making them highly inefficient and expensive. Tasks such as creating and floating RFQ/RFP, sending and receiving POs, invoice processing and payments contain manual touchpoints. Specifically, here are four ways in which manual processesare adversely impacting procurement:
- Inefficient Processes: Several procurement functionsare plagued with inefficient processes from accurately tracking down vendor information in lengthy email communications to reviewing contracts which have an adverse impact on employee productivity.
- Paper Intensive Processes: Traditional procurement processes can be characterized by contracts stored in hard-copy or PDF form and therefore managing approvals, invoices etc. can be time taking and error prone.
- Lost Savings: Slow moving processes insupplier selection, negotiation, placing new and repeat orders means lost savings due to poor visibility and late decisions.
- Lack of Information when needed: Documents are everywhere including emails, vendor invoices, contracts etc. and finding this information when required is a stressful activity. Several times, the latest versions are not found, audit trails for workflows are lost amongst thousands of emails and there is poor visibility to history of conversations and previous negotiations.
While the procurement transformation goals could differ between enterprises, it is unarguably the most important function to be taken up for automation. Digital transformation solutions not only enable efficient processes but also help procurement teams to play an important role in accelerating enterprise innovation. The key functions being looked at for automation include:
Information Management
Information is the lifeblood of procurement. Procurement contracts, vendor proposals, invoices, lorry receipts, approvals and several other information is across physical and electronic formats in multiple systems. Information is not found when required. Enterprises are adopting information and workflow management solutions in a frenzy to manage procurement better.
Reverse Auctions
The cost of procurement can be significantly brought down with reverse auctions, as prices are determined in a much quicker manner during live auctions rather than traditional long-drawn negotiations.
Supplier Onboarding
Enterprises need to put in place a digital onboarding process to monitor supplier requests, supplier profiling and segmentation, as well as approval workflows to automate and track supplier onboarding approvals.Enterprises are increasingly using self-service portals for suppliers, agents, and buying teams to collaborate during the sourcing process. The master data creation process is being automated to ensure cleanliness of supplier masters for effective reporting.
Supply Planning
Enterprises can seamlessly share real-time supply forecast updates electronically with supply partners (suppliers, factories, and agents) through automated systems. This enables factories to analyse fluctuations in demand and plan-ahead collaboratively.
Order Issuance
The order issuance process needstotal automation. Suppliers need real time visibility to orders issued and enterprises need to automate the order confirmation and order status process to have timely visibility of the delivery schedule.
Invoice to Pay process
This is one of the most cumbersome process entailing significant manual interventions to check the invoice correctness versus contracted terms and goods receipt status to then take appropriate action on invoices. Given that it directly impacts supplier cash flow, most enterprises are automating this process via digital.
Here are some of the technologies that enterprises are adopting to automate procurement:
AP Automation solutions
Solutions that automate the invoice to pay process are being adopted in an accelerated manner. The solution enables auto posting of invoices, keeps a strong audit trail of workflows and delivers various reports that provides visibility on invoice and payment status to both internal stakeholders as well as suppliers.
Robotic Process Automation
Enterprises are employing RPA to automate repetitive administrative tasks in supply chain processes and integrating and automating data-driven activities as well. Some of the RPA use cases in supply chain are in the areas of order processing and payments, supplier selection, email automation, inventory management, logistics and shipment tracking, supplier onboarding, sales order creation among others.
Digital Signature
As enterprises continue to carry out their processes virtually,digital signatures present an effective solution to accelerate processes and maintain transparency.
Advanced Analytics
Advanced analytics are gaining popularity in being deployed in areas such as product quality testing, dynamic pricing etc. The availability of real-time supply chain data such as dynamic sales data and weather patterns provides the ability to make accurate predictions and recommendations.
IoT
Supply chain management has been one of the leading beneficiaries of IoT and the technology is facilitating improved efficiency, performance, and business output through connected supply chain management. IoT finds application in live tracking of movement of goods, in-store merchandise tracking, fleet management and several others.
Artificial Intelligence
Through self-learning and natural language, AI solutions can help automate various processes in the supply chain such as production planning, demand forecasting or predictive maintenance. According to a recent survey, 61% of executives report decreased costs and 53% report increased revenues as a direct result of introducing artificial intelligence into their supply chains. AI provides enterprises with end to end visibility, reduces manual work and facilitates informed decision making.
Enterprises are fast tracking automation of the procurement function with digital. They realize that this is the foundation to accelerating the pace to recovery in the new world order and could deliver a significant competitive advantage when done early.