Procurement, whether direct, relating to the core business of a company, or indirect, responsible for acquiring everything else an enterprise needs for its operation, is a complex, multi-step process. It is triggered by requisitioning, or identifying the need for a product or service, continues with finding the best offering matching this need through tenders or auctioning and concludes by performing the actual purchase.
When done manually, invoice management – the last major step in this long process – is fraught with missing goods receipts, error-ridden spreadsheets and out-of-policy spends. And although today we already have metrics to prove the efficiencies of an automated procure to pay (P2P) process, according to Zycus’s Benchmark Report, when it comes to invoicing, “email remains very much a strategy for pursuing connectivity with suppliers at 71 per cent, while 32 per cent rely primarily on paper-based and 19 per cent on fax-based solutions.”
P2P, the downstream stretch of the procurement value chain, lends itself more readily to automation than the preceding source-to-contract (S2C) upstream process. So much so that – as the Benchmark Report stated – in the top 10 per cent of the companies with the most efficient systems, 71 per cent of orders are already processed with zero intervention from on-staff professional buyers. But investing in P2P automation and not applying robotic process automation, AI and machine learning technologies to high-value sourcing (S2C) workflows is a bit like investing in a mine but forgetting to buy the tools you need to extract ore from the rock.
Although it seems procurement can leave its overhead status behind and inform strategic corporate decisions only if it undergoes end-to-end automation, the integration of upstream and downstream procurement processes has stalled since 2017.
As Richard Waugh, vice president of Zycus – frontrunner in the procurement automation space – explains, integrating data along the source-to-pay value chain is key to procurement reaching its full potential. “Upstream needs to flow naturally into downstream and ensuring that the same supplier record is used by both systems not only empowers data analytics but also improves the user experience considerably,” he says.
Zycus has created the Merlin App Studio building ‘botlets’, tailored to your business needs.
Data analytics: the business case for end-to-end integration
Many experts, consultancies McKinsey and Deloitte among them, see data analytics as the major disruptive force in procurement in the next couple of years. They believe that it can eventually become the silver bullet when trying to find a remedy for the two main pain points that CPOs invariably identify: a lack of software integration and poor data quality.
Data analytics touches a variety of activities across different sourcing and procurement functions. As Zycus’s Pulse of Procurement 2019 report points out, it can help monitor supplier performance for early warning signs of struggle or possible failure or capture and analyse key supplier financial and risk profile data via supplier onboarding. Having a central access to all data captured along the end-to-end S2P process and being able to analyse and make predictions based on these data will lead to better decisions and pre-emptive problem solving.
In the case of contract management, one area which can greatly benefit from data analytics, some of the processes, such as negotiating and creating contracts, come under sourcing, while checking whether service-level agreements (SLAs) are adhered to or identifying the need for contractual changes due underperforming suppliers are closely linked to the P2P process. Zycus’s contract management solution, however, will not only monitor supplier performance but also enable you to streamline your processes and make considerable savings on the buy-side by increasing the contract utilisation and compliance of your own organisation.
Spend intelligence that provides businesses with full transparency into how every pound is spent also straddles the whole source-to-pay (S2P) flow. Once new saving opportunities are identified in P2P, they need to be fed back into creating new sourcing events, as does volatility in raw material prices and exchange rates. In a similar vein, variance between supplier-contracted and actual payments needs to be identified across the S2P process in order to be redressed.
By replacing your manual processes with Zycus’s Autoclass Engine you can accelerate the data classification process and further streamline spend analysis, as well as overcome language barriers. Meanwhile, iAnalyse will provide you with a more efficient, automated tool to identify savings opportunities, and iCost will track cost drivers underlying commodity price movements and relate external market intelligence to internal spending data.
Other procurement automation use cases
A holistic view of procurement, and advanced data analytics, can also help ease the increasing burden of financial regulations, and the extended responsibility of businesses for the ecological and social sustainability of their suppliers. Rather than reacting to supplier non-compliance after it’s already happened, automation allows for greater proactivity in compliance and sustainability, and makes it easier to align vendor scorecard requirements with a company’s corporate social responsibility (CSR) strategy.
Waugh has also pointed out how having actionable, granular data at their fingertips can give procurement professionals more leverage with decision makers and budget owners. A unified view of suppliers and products sourced by the company, for example, may bring procurement to the forefront when pointing out the need for consolidating a fragmented supplier base. Also, cost-modelling software not only enables cost reduction and profitability but can also enhance procurement professionals’ negotiation skills, both with suppliers and management.
Improved stakeholder experience
In an age where operational complexities and breakneck technological advancement mean that businesses need to make enduring partnerships to succeed, achieving excellence in supplier experience through automation is more important than ever. It helps companies to better engage suppliers and establish balanced, long-term purchasing relationships, where new models of pricing and innovation are worked out together by the partners, and maintaining an efficient vendor ecosystem has priority over a transactional approach to procurement.
To learn more about autonomous procurement through installing a selection of robotic building blocks, or “botlets”, tailored to your business needs, and how to automate your supply chain to provide the corporate value chain with meaningful and actionable data sets, click here.
For Zycus’s P2P Benchmark Report, please click here.