How critical it is to automate the procurement process? Is it possible to increase savings by automating procurement? How fast is it possible to get a return on investment in the implementation of procurement automation software and start making a profit? Or maybe it is better not to deal with procurement automation since everything works with Excel?
Let’s figure it out.
Procurement, as well as other business processes, can be conducted in different ways: some companies automate their procurement by implementing relevant IT solutions, while others conduct their procurement activities in the “traditional” way by using Excel, Word, Email, paper sheets, etc.
Today some managers of small and medium enterprises do not recognize the importance of procurement automation on a strategic level. It means that these managers do not consider allocating resources to procurement automation as a priority. As a result, some companies are stuck in terms of procurement maturity, which increases their purchasing costs by an average of 20%.
Some managers are afraid to automate their purchasing processes for a variety of reasons. Some of them are convinced that procurement managers in their companies are highly-skilled professionals with a deep understanding of all business processes, and procurement automation systems would not be able to replace them. In some points, they are right because IT solutions are not aware of how to “enforce” suppliers to reduce the price or how to reassure the controllers. The procurement automation system is essential for highly-skilled procurement professionals to execute their direct responsibilities such as collecting the purchasing requirements across departments and employees, sending POs to suppliers, ensuring compliance within contracts, preparing reports, etc.
If a company needs to get the most out of its procurement activities, then procurement automation is essential. The implementation of a procurement automation system will not resolve all the problems in purchasing process but it will enhance the procurement maturity of a company. With maturity comes cost efficiency, transparency, and control over the process.
Another reason why some companies are not rushing to automate the procurement process is the fear of changing a workflow.
Only 2.5% of people try new products or technologies with ease. 13.5% see the need for innovation or changes and are open to considering new solutions. They are called “Early Adopters”. And the remaining 84% do not want to take risks and are ready to accept something new only after it has been tested by others, and the safety and usefulness of such innovations have been proven.
For the effective implementation of a new tool, it is necessary to conduct explanatory work with innovators and early adopters and clearly explain what advantages they will get from the implementation of procurement automation solutions.
Excel is a great tool for working with data. But the capabilities of Excel would not be able to handle the procurement when:
• too many people are involved in procurement, including suppliers
• the data volume constantly increases and it slows down data processing, which slows down the operations overall
• there is a need for data exchange: sending and processing purchase requisitions
• it is necessary to set certain algorithms, for example, approval routes
• it is necessary to protect data from unauthorized changes
These are just some of the situations when Excel would not be able to handle it. If the procurement department consists of only one buyer, and this buyer manages everything, then utilizing Excel only is enough. But if there are 3 or more buyers in the procurement department, then it is necessary to implement a procurement automation solution.
It would be much more convenient to automate procurement by implementing cloud-based procurement solutions. Their capabilities are enough to move procurement of the company from Excel and paper, and the implementation of such solutions is affordable even for small companies.