5 Reasons to Automate Procurement
By: Brock Hirschman
Director, Large Customer eCommerce Solutions. W.W. Grainger, Inc.
Automation can be a powerful tool in the world of procurement. Electronic procurement, often known as eProcurement or just ePro, can include several different aspects of the procurement process that are easily automated, monitored and measured. We’ll discuss the automation types shortly, but first let’s look at the key benefits of automation, which:
- Increases overall efficiency
- Frees up a procurement expert’s time for other strategic projects
- Improves control over payments and spend analysis
- Aids contract management and compliance
- Tracks supplier performance and compliance
There are five points of automation in the eProcurement process. There’s spend analysis, which looks at the process of data collection, cleaning, classification and analysis. Then there’s the supplier bid process to automate, which is also known as eSourcing. Next there’s the automation of the contract management process, followed by the actual purchase order process – aka eProcurement. Finally, there’s the payment process, which also goes by the name ePayables. Now, let’s dig deeper on the benefits of automating procurement.
According to a study by the American Productivity & Quality Center (APQC), companies that “automate the procure-to-pay processes achieve faster cycle times and more efficient purchase order processing.” The study, which was written up in Spend Matters, noted that companies with automated eProcurement complete purchase orders faster than those without it. What took two hours at companies with automation took seven hours at those without an eProcurement process. Saving an average of five hours is clearly a big difference.
Supplier lead times also shrunk at companies with eProcurement, by an average of two days compared with companies that didn't use it. According to the same study, nearly twice as many purchase orders were completed per full-time equivalent employee (FTE) at companies with automated procurement: 3,471 purchase orders per FTE in eProcurement-enabled companies, compared with 1,213 purchase orders at companies without eProcurement processes.
According to study from Grainger, the average cost of a maintenance, repairs and operations (MROs) purchase order is $75 and this cost can be reduced by as much as 50 percent through process automation. Automation can help reduce time spent on routine tasks, and it can maintain efficiency and accuracy by having routine work scheduled accordingly.
Automating the supplier bid process--eSourcing--can help you to use your time more efficiently. The time that you free up can let you spend more time on other critical projects and processes, especially those that can't be automated.
Also, think about the greater control achieved with ePayables and spend analysis. You can have a clear analysis of spending plus have payments taken care of easily through automation. The overall win here is greater control for the total procurement process.
Of course, before you can take care of payments, there’s the middle part – managing contracts and measuring supplier compliance and performance. Here again, eProcurement can make improvements. You can put your expertise with contract management and compliance into an automated approach that is repeatable and doesn’t require you to develop and send something new every time. Then there’s also the ability to easily track a supplier’s level of compliance and overall performance. By automating the processes you open up the opportunity to serve as your company's strategic procurement expert – taking the bigger picture into consideration.
So take another look at how you carry out your procurement processes. Can you use eProcurement to “work smarter, not harder”, as the old expression goes? Consider the benefits of automation and how you can help make a difference with your company’s overall bottomline.
Brock Hirschman is the Director of Large Customer eCommerce Solutions and leads a team that drives implementation, penetration and adoption of B2B eCommerce and eProcurement solutions across the large market customer base. He works closely with IT, eCommerce Development, Sales, and customers to develop, integrate, and deploy Grainger’s digital solutions.