Procurement Automation: Which Processes to Automate (and How)
Procurement is a mission-critical business process. It ensures that companies have the materials and services they need to achieve their goals. But the inherent complexity of the procurement process means that it’s also prone to inefficiencies, errors, and broken handoffs. That makes procurement automation more important than ever.
Escalating supply-chain volatility and inflation put pressure on procurement teams to “do more with less.” At the same time, teams are expected to source and pay for these products and services with efficiency, speed and precision. That makes procurement automation more important than ever.
This guide takes an in-depth look at procurement automation to help you understand how and why more businesses are turning to this technology to contain costs, improve visibility, and protect themselves from supply chain disruptions.
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What is procurement automation?
Procurement automation refers to the use of technology to manage previously manual tasks and activities. Procurement automation can also refer to the use of this technology to manage end-to-end workflows within the procurement process. For example, workflows such as sourcing, vendor onboarding, RFP, and P2P.
Automating the procurement process typically involves integrating the different data, apps, and systems used procurement to create a single, unified system. While this might sound complex, the fact is that tools are making procurement automation easier than ever.
Before moving on, it’s worth noting that automation is helpful for both direct and indirect procurement.
Why automate your procurement process?
Procurement teams automate their processes for a couple of different reasons. Almost every team that chooses automation is looking to create a more accurate, efficient process. Other reasons to automate the procurement process include:
- Scaling existing workflows and processes
- Integrating multiple apps and systems
- Standardizing procurement processes
- Improving visibility and control
- Avoiding errors and mistakes
- Preventing missed handoffs
- Eliminating spreadsheet sprawl
- Containing costs
Some teams look to procurement automation to improve vendor relationships or reduce the amount of manual work required. Other teams are most interested in creating a unified procurement process structure to solve workflow gaps and centralize information.
Almost every procurement team that chooses automation wants an optimized process that can be quickly and easily modified as the business evolves.
Perils of manual procurement
More and more teams are moving away from manual procurement, and there are some good reasons for that. Manual processes are prone to errors, mistakes, and delays. They can take too long and teams frequently lose visibility of the information and activities they need to track.
Procurement teams also choose automation because the apps and systems in their current stack lack unity, leading to fragmented processes and workflows. Automation makes it easier to move data and improve collaboration, especially in terms of cross-team collaboration.
6 Processes every procurement team should automate
Procurement isn’t a single process — it’s a series of related processes and workflows that procurement teams rely on to achieve their goals. That includes everything from sourcing and vendor management to requisitions and payments.
The good news is that every process the procurement team manages can be automated. The better news is that, in most cases, they can all be automated with the same tools so that teams have more cohesion and control.
Here are some of the workflows that teams can automate to achieve total procurement automation:
- Purchase requisitions
- Procure-to-pay (P2P)
- Sourcing processes
- Approval processes
- Purchase orders
- Supplier relationship management (SRM)
1. Purchase requisitions
Procurement teams handle a lot of purchase requests. These requests can arise from any department, relate to any project, and come at any time. The volume and complexity of these requests makes them ideal for automation.
Automation can simplify purchase requisitions in two key ways. First, by standardizing these requests through the use of digital forms and portals that use rules to prevent missing or incomplete information. Second, by consolidating incoming requests and organizing them by project, team, or deadline.
Portals are especially useful for procurement teams, since they make it easy for team members in other areas of the business to find and submit the appropriate purchase requisition form.
2. Procure-to-pay (P2P)
For teams that integrate the purchasing process with their accounts payable, automation is a must. At this level of complexity, extensive coordination is required between the people, data, and systems that connect the purchase requisition workflow to the accounts payable workflow.
Automation provides a connective tissue to ensure that the data, information, and activities that originate with the purchase requisition are documented throughout the process, so that they can be accessed by all team members. When combined with rules and conditionals, procure-to-pay automation adds structure and control to the P2P workflows by routing items to the next team member or system in the sequence.
3. Sourcing processes
Sourcing consumes a lot of the procurement team’s time. That’s because sourcing is really a kind of meta process composed of subprocesses such as requests for information (RFI), requests for proposal (RFP), and requests for quotation (RFQ). Sourcing may include other workflows and processes as well.
A request for information is one of the first steps in the sourcing process. At this point, procurement teams are trying to determine whether or not a particular vendor is a good fit for the products and services needed.
Like purchase requisitions, managing RFIs becomes much easier when forms are standardized. This helps the procurement team quickly assess a vendor’s suitability and simplifies comparisons with other vendors.
Automation can help deliver this standardization, as well as route an incoming RFI to the appropriate reviewer/approver. Data captured in the RFI can also be automatically added to databases to avoid duplicate data entry.
Related processes such as requests for proposals (RFP) and requests for quotations (RFQ) can also benefit from automation.
Learn more about strategic sourcing.
4. Approval processes
At some point, practically every purchase request requires approval from someone other than the requesting party. In some cases, multiple layers of approval are needed. Often, the approvers are people in other business areas such as finance, compliance, or IT. That can make approvals complicated.
Fortunately, approval processes can be automated. Automation captures incoming requests, routes them to the appropriate approver, and captures signatures and other information. Databases are automatically updated and procurement teams have total visibility into approval status.
Related notifications, such as items pending approval or items not approved, can also be automated so that handoffs aren’t broken and delays are avoided.
Automating approvals also makes it easier for information and communication to cross team or department boundaries. For example, when an incoming purchase request from the sales department requires approvals from both finance and IT departments, automation tools make it easy to route these items to those other departments without the procurement team ever losing sight of it.
5. Purchase orders
Once a purchase requisition has been approved and a vendor has been selected, the next step in the procurement process is to issue a purchase order or PO. The purchase order process can also be automated.
The beauty of automating the purchase order process is that it reduces that amount of data entry required each time a PO is issued. This speeds up the process and helps teams avoid errors. When combined with other automation features such as email or messaging notifications, tracking the status of the PO becomes effortless.
Automated purchase orders also make it easier to keep databases updated and to organize all POs by status, vendor, or other criteria.
6. Supplier relationship management (SRM)
Supplier management is another procurement process that many teams choose to automate. Like procurement, vendor management is an umbrella term that typically refers to several subprocesses involved in working with vendors. For example, supplier segmentation and supplier evaluation.
How to automate procurement processes
To automate procurement, teams need to start with a clear understanding of their current processes and workflows. Most of the time, this means doing a bit of process mapping in order to identify all the people and systems involved. Mapping may include talking to procurement team members, reviewing documentation, and creating a flowchart.
Once the as-is version of the process is mapped, it might be necessary to create a to-be version of the process. This is an optimized version that addresses any problems like data silos, poor handoffs, or bottlenecks.
At this point, automation becomes much easier. Procurement teams ready to automate can follow these steps:
- Identify all the people who will take action or provide input into the process. Organize them by team or department.
- Create an inventory of all apps and systems used by the procurement team.
- Build a list of all procurement processes that should be automated and unified.
- Determine whether or not a low-code automation tool is right for your team. (Low-code tools rely on a visual interface, making it easy to adapt processes quickly, without adding to the IT backlog.)
- Evaluate automation tools for fit. This includes the number of users, integration capabilities, automation features, templates, and budget.
- Implement the automation tool.
- Use the tool’s interface to build and automate each process.
Here’s a more in-depth look at how to automate processes.
Automate your procurement processes with Pipefy
Procurement plays a key role in making sure your business has the materials and services you need to succeed. That’s why it’s essential to build procurement processes that are as structured, efficient, and integrated as possible.
Pipefy’s low-code process automation makes it easy for procurement teams to take control of their processes and workflows. An intuitive, visual interface gives procurement teams access to a full suite of automation features and capabilities. Pipefy integrates with a wide range of apps and systems to unify and harmonize the various workflows and processes the procurement team manages.
Best of all, Pipefy helps businesses conserve their IT resources by empowering procurement teams and simplifying security and integrations.