Boosting Procurement Efficiency Through Automation
How procurement automation can empower procurement managers
While the benefits of procurement automation are relatively well documented, the number of software solutions on the market can make finding the right one a little overwhelming. In fact, there is relatively scarce information about how to objectively assess the benefits of a software solution based on industry best practices.
One seldom discussed benefit is empowering your procurement team:
As a procurement manager, you are constantly walking a fine line between making smart purchases for an organization and keeping your suppliers happy. Efficiency is vital, and a clear strategy is necessary to ensure that all parties’ needs are satisfied.
Empowering your procurement managers through workflow automation can boost procurement efficiency and shorten timeframes. Not only this but by increasing procurement autonomy, legal no longer has to get involved with trivial tasks – saving them time as well.
This article will look at the key benefits of automation for procurement managers and provide actionable guidance in choosing the right software for you.
Finding the right procurement automation solution
There are two key factors when it comes to assessing a potential procurement automation solution:
- Level of complexity that can be automated
- Which of your purchasing are well suited to automation
Both of these factors are often overlooked and can cause a little confusion. Let’s look at these in turn:
1. Level of complexity
Assessing the level of purchasing complexity a software solution can handle is absolutely crucial in picking the right one. To understand this first point, let’s look at the role contracts play within a typical purchasing process:
Typical procurement automation workflow:
- Assembly – A Supplier Agreement draft is generated from a standardised template based on predefined clauses and supplier-specific information
- Review – The Supplier Agreement draft is approved by internal stakeholders (if required, approved) and released to the supplier
- Negotiation – Should a supplier have questions or disagree with a part of the agreement, the terms are negotiated and additional stakeholders may be involved (dependent on the nature of a proposed change)
- Signature – the supplier signs the contract and the Supplier Agreement takes effect
- Management – The contract is stored in a central repository with deadlines and obligations tracked throughout the contract’s lifecycle and the supplier is onboarded into a Supplier Relationship Management (SRM) system.
Most automated solutions generate the Supplier Agreement from a clause library by prompting a procurement manager to answer questions around the supplier and nature of the purchasing relationship. This contract draft is then approved and distributed to the supplier to sign.
This process is fine for relatively low-risk supplier contracts including Purchase Orders or NDAs where you don’t expect much pushback or negotiation.
But what happens when a supplier wants to negotiate the terms of an agreement? As a procurement manager, more often than not you have to involve legal for a relatively trivial aspect of a supplier contract, or purchase order.
This is not only inefficient but it breaks the procurement automation workflow and negates the benefit of spending significant amounts of time and money automating the purchasing process.
2. Which purchasing processes are suited to automation
Once you have determined the level of complexity that a software solution can handle, you can work out which of your workflows can be fully automated. This is really the key to finding the right software for you.
How does this apply to the procurement cycle?
By gauging the level of involvement from legal in your procurement workflow, you can objectively assess what your software should be able to automate and what the benefits would be. If legal get involved in purchasing processes quite often, then an automation solution that can streamline supplier negotiations could save you valuable time.
At the same time, this could make your procurement team much more autonomous, as they can use pre-approved negotiation positions and avoid involving legal for every minor change – one software solution could actually streamline two workflows. Everyone’s a winner.
Key benefits of automating your procurement process
So now you know how to benchmark automation software, what are the key benefits that can be gained?
1. You get more done
In most organizations, procurement managers spend an inordinate amount of time writing up contracts or reworking them to reflect changes. By digitizing your contracts and placing them in an automated workflow, you can output contracts much faster, working from a standard template and customizing them with a few keystrokes. Recurring or renewable contracts can be automated as well, so you won’t even have to think about it when it’s time to renew.
2. You communicate better
An automation platform allows you to stay connected and communicate with all stakeholders on a project throughout the procurement lifecycle. Real-time communication eliminates paperwork, gets you approvals faster, and helps you move on to the next thing more quickly.
3. You capture supplier data easily
Once you have entered supplier data into a Supplier Agreement, this data flow through your purchasing process and will never have to be manually keyed-in again. Invoicing and all documentation is conducted from the platform, giving you access to the information you need instantly.
4. New supplier relationships are approved faster
Getting approval from multiple departments can be time-consuming and largely inefficient. Through the contracting automation process, all departments will have access to the data they need, when they need it. Because documents are stored in the cloud, stakeholders have convenient and flexible 24/7 access to the information they need.
5. Greater transparency
Since contracts are managed throughout their lifecycle, any data that is generated during the process is accessible at any time, for clarity, for accuracy, and for accountability purposes. Further, you can see any and all changes that have been made to a Supplier Agreement from first draft to signed contract, who made them and why.
6. Get paid faster
When your procurement processes become more predictable and expedient, it will generate greater trust. When your organization runs like clockwork, it creates value for everyone you do business with and you can monetise value and realise cost savings faster.
Procurement automation success story: Marley Spoon
Marley Spoon is a hyper-growth meal-kit delivery service which has raised 27.5M€ in venture investment and serves more than 250,000 customers. The problems Marley Spoon were facing were typical of a standard, high-volume procurement workflow:
- Constantly engaging external law firms to review and negotiate agreements sent by prospective suppliers.
- Volume of agreements was sharply increasing (along with legal fees)
- Delays put project timeframes at risk.
- No consistent overview of obligations or service levels across their rapidly growing supplier base.
Marley Spoon opted to partner with synergist to automate their procurement process. Part of the cleverness of automating your procurement workflow with automation software such as synergist is that when suppliers push back, this data can be collected and used to optimize a negotiation playbook with each iteration.
With the help of synergist Marley Spoon can now customise and send supplier agreements in a matter of minutes, reducing time to send by 90%; the number of high-risk terms in their supplier agreements has reduced to zero. Overall, they were able to reduce legal spending in this area by 75%. Marley Spoon’s Management can track progress and manage all their Supplier Agreements from a single dashboard. (Read the full case study here)
Final thoughts: automation is about more than just saving time
Automating procurement workflows is about so much more than just saving time. As Marley Spoon discovered by opting for software that can also handle negotiation, legal does not have to be brought in every time a supplier want to negotiate a contract, greatly saving on legal spend.
Software like synergist also allows you to integrate supplier feedback into each new iteration of the automated workflow. This means that, over time, the software can handle even more cases.
Finally, automation software gives procurement managers much greater insight into the contract negotiation process. By having a dedicated dashboard to monitor the progress of each Supplier Agreement or NDA, you can avoid any delays that put project timeframes at risk.
If you would like to learn more about how you can improve your procurement process through automation, get in touch today.