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Slash Costs, Lower Risk: Procurement Automation in 2023
Every company needs procurement. Being able to reliably source needed supplies (everything from printer paper to essential parts) is vital to keeping a business running smoothly.
In many companies, though, procurement is a process that’s challenging to manage efficiently. As of 2017, only 6% of surveyed companies reported total visibility into their supply chains (GEODIS, cited by Finances Online). In another survey, 32% of procurement teams say they cut corners to secure suppliers (Procurious, cited by Procurement Tactics). At the same time, procurement teams face pressures to become more strategic, prioritize sustainability, and ensure cybersecurity.
Your company needs a reliable software solution for managing the procurement process. Business process automation (BPA) software streamlines procurement. It automates many steps (such as generating POs and enforcing purchasing policies) and makes other aspects of the process easier for your procurement team to manage (such as supplier management and data access). It can also help you solve common problems that tend to show up in procurement.
Problem 1: Maverick Spending
Maverick spending or procurement bypass happens when someone in the company makes a purchase without following the approved procurement process. In some cases, they’ll try to bypass the procurement department entirely.
Procurement bypass is a problem for several reasons. It can be very costly to the company because the procurement department doesn’t get the opportunity to compare prices or place orders with established suppliers. It can also lead to duplicate orders or missed opportunities to save money by making bulk purchases.
Additionally, bypassing the procurement department means the procurement team doesn’t have access to purchasing data. This makes it very difficult to track all the purchases across a company and match POs to invoices. It can also damage supplier relationships.
Solution
Maverick spending isn’t always malicious or even intentional. Often, employees bypass procurement policies because they are not clearly defined. Other times, employees may shop outside the approved procurement channels because they are so difficult to use.
Process automation software can curtail or even eliminate maverick spending. When you implement purchasing software, your procurement department will set up punch-out and item catalogs. These features make it very easy for employees to make purchases in the system. Plus, it automatically enforces company policies and only shows pre-approved items.
Problem 2: Lack of Communication
In companies where major business processes traditionally operate in silos, it’s challenging to establish good communication and cooperation. Isolating major decisions can cost time and money.
This is true whether another department makes purchasing decisions without consulting the procurement team, or if procurement goes ahead with major purchases without looping in stakeholders for that decision. An extreme example would be procurement making decisions on purchasing new computers without consulting IT.
Since procurement works with everyone who needs to make purchases, good communication between the procurement team and other departments is essential. Without open lines of communication, procurement of important supplies might be delayed. It can also lead to mistakes that require time and resources to correct.
Solution
A procurement automation system makes it much easier to get everyone in the company on the same page with procurement. When you automate using a software-as-a-service solution like NextProcess, everyone involved in purchasing has access to the same system.
You’ll be able to set up custom views for different people. The procurement department will have full access, while others will have more limited permissions based on their role in the company. The software makes it easy to communicate about purchases and ensures everyone has access to the same information related to purchases.
Problem 3: Low Visibility into Procurement
As mentioned in the introduction, 69% of companies reported a lack of visibility into their supply chain in a 2017 survey. In the same survey, only 6% of companies said they had total visibility.
It’s hard to optimize the procurement process when you can’t tell what’s going on. Procurement visibility involves transparency about where money is going and how the procurement process works. If procurement processes aren’t standardized or centralized, it’s going to be very difficult to get a high-level view of the whole procurement process.
Low visibility in procurement means the procurement team will need to spend a lot more time trying to track purchases and stay within budget. It’ll also be harder to access complete and accurate data. And without accurate procurement data, it can be difficult to make decisions related to budgeting, procurement, and cash flow.
Solution
Implementing the type of procurement automation NextProcess offers puts all the processes associated with procurement on one software platform. We don’t charge extra for adding more users, so everyone in your company who’s involved with making, approving, or managing purchases can easily use the same system.
The centralized procurement software system tracks procurement in real-time. It also saves all the data related to procurement in an easy-to-search format. The software puts accurate, up-to-date data right at your fingertips. It’s easy to generate reports, get a high-level view of procurement, and search for specific information.
Problem 4: Isolation from Strategic Goals
When procurement teams have to manually track down maverick spending, type up purchase orders, collect supplier data, and process paperwork it’s hard to find time to use procurement to support high-level company goals.
Procurement may also be isolated from a company’s high-level goals because it’s considered a back-office function. In organizations where procurement is siloed or not included in strategic discussions and financial decision-making, the company may be losing out on procurement’s valuable data and perspective.
Strategic procurement aligns the procurement process with an organization’s high-level business goals, purpose, and mission. When procurement is viewed strategically, it can help manage cash flow, leverage discounts for the company, build relationships with suppliers, track supply and demand trends, and contribute to sustainable business practices.
Solution
Optimizing the procurement process with automation makes it possible for the procurement team and Chief Procurement Officer to devote more time to strategic, sustainable procurement. With so much of the process automated, employees are free to focus on higher-level concerns.
The automated system also supports strategic procurement by providing timely and accurate data. When you digitize and automate procurement, you’re also digitizing and automating data collection. This data is easy to access. You’ll be able to quickly generate reports for analysis, which procurement can use to support company-wide strategic initiatives and goals.
Problem 5: Struggles with Supplier Management
Supply chain issues became a huge problem during the pandemic, and the supply chain is still recovering. These issues are only made worse if the procurement department doesn’t have a good way to manage supplier information.
Supplier management involves finding suppliers for goods and services, tracking data related to those suppliers, and maintaining business relationships with them. Some companies still use spreadsheets to track information related to their suppliers. Others have outdated or poorly defined strategies/policies for vetting new suppliers.
If you’re only working with a handful of suppliers, it’ll be pretty easy to manage. But in larger corporations or growing businesses, supplier management can quickly become complicated. Without good supplier management strategies, relationships with important suppliers can suffer. It can also make it more difficult to identify problematic suppliers, enforce vendor compliance policies, and keep track of supplier contracts.
Solution
You can easily improve supplier management with procurement software. The software will streamline the process for employees to request new vendors and to onboard vendors after approval. It also tracks data related to suppliers. You can quickly see which suppliers your company works with most, and if there are any suppliers with consistent issues like backorders or pricing errors.
NextProcess’s software system is flexible enough to manage suppliers even for companies with complicated corporate structures. You’ll be able to manage suppliers across your company, or even across multiple companies, with ease.
The software also supports good relationships and communication with suppliers. The software makes it simple to follow up with suppliers about missing invoices or order errors. It also automates some aspects of supplier management. The system can identify missing supplier information and send automated notices for them to submit corrections. You can also set up a vendor self-service portal.
The NextProcess Difference
The trend to use technology in procurement is only getting stronger. If your company isn’t already automating, there’s a good chance that it’s on the agenda. Whatever your current procurement process, you can enhance and optimize it with software-as-a-service from NextProcess.
NextProcess provides software to optimize not just your procurement process, but the entire procure-to-pay cycle. By automating your financial processes using a single software suite, you won’t have to deal with software conflicts. You’ll also get to take advantage of the benefits that come with end-to-end automation solutions, including robust data tracking, tools to catch and prevent fraud, and cash flow optimization.
Our software is also compatible with a wide variety of ERPs. All NextProcess modules integrate seamlessly with NetSuite, SAP, MS Dynamics, QuickBooks, and all other major ERP software systems. Contact us today for a free demo and to get started optimizing your procurement with process automation software.