How can purchase automation satisfy procurement and business managers at the same time? Procurement managers want to negotiate Best Value deals for the business from suppliers who deliver the right product or service at the right time. Business Managers want to be able to make Best Value purchases, quickly. So, where’s the conflict?
The problem is that a lack of insight into expenditure trends and tedious approval processes means everyone is at odds. Business Managers question the quality of the suppliers; they chaff at time-consuming approvals. Hard-won supplier deals are compromised by non-compliance and rogue spend. On average, companies achieve only 40% of their total corporate spending under management – mainly as a result of indirect spending.
In this blog, we look at the challenges faced by procurement professionals and analyse how procurement process automation can (if done correctly) help overcome these challenges.
It’s not easy being a procurement professional. On the one hand, you live or die based on the savings you’re able to achieve for a business. On the other, your business makes this task almost impossible. How can you determine the best deals for the business when the only spend information available is suppliers’ turnover reports, the P&L or trawling through supplier invoices in the filing cabinet? Just compiling one category of suppliers’ invoice line level information and taking the time to consolidate your company’s spend profile can become a full-time job, and that’s before you even start putting the tender together.
Even when you do secure a great deal and save money via an existing or new supplier, how long before everyone in the company reverts back to type and starts buying from old, familiar suppliers at inflated prices? For business managers, the frustrating delays created of tedious manual approvals processes and the wait for purchase order numbers can affect day to day activity – and often leads to maverick spend simply in a bid to hit corporate deadlines.
For procurement managers, the result is an ongoing battle with business managers. Without the ability to control this maverick spend, any cost savings evaporate and relationships with new suppliers can be undermined. Tough conversations with the Finance Director ensue.
Yet step back from the battle lines and the objectives of procurement professionals and business managers are the same: great value deals for the business from suppliers who deliver the right product or service at the right time, delivered through a simple, easy and fast purchasing process.
Overcoming Procurement Challenges
Procurement process automation technology can transform the experience – for both procurement professionals and business managers – but only if the entire process seamlessly supports the complexities and challenges of procurement.
Visibility is essential. Purchasing automation technology that digitally captures every supplier invoice automatically, critically including both header and line level information, is the foundation. With this real-time spend data captured from the supplier invoices, it becomes possible to integrate the AP and purchasing automation project with the embedded procurement automation tools, providing a procurement manager with the ability to analyse the data and generate tenders in a fraction of the time.
Suppliers can be spilt by category; common spend items can be aggregated using the supplier’s line-item coding and descriptions; and your supplier costs can be compared with benchmark pricing. Essentially, a procurement manager has continuous and real-time access to every piece of insight required to create a tender and negotiate the best value.
Having captured the best deals for the business, enforcement is essential and that means using purchasing automation to lock down the use of preferred suppliers. With complete visibility of the purchase process, any purchase outside the preferred supplier list – or contracted product / service list – will be automatically flagged as an exception and automatically instigate the appropriate approval process.
Critically, this can include online purchasing – including online business marketplaces such as Amazon Business – to provide the very best, most convenient and fastest buying experience to drive adoption. This enables the business to maximise the value and convenience of online purchasing and combine it with the essential procurement control.
For business managers, this process has to be simple and straightforward. From automated and streamlined approval processes to highly intuitive purchasing software, the better the experience, the easier it is to enforce best practice procurement.
Automating accounts payable and purchasing processes is delivering significant time savings to businesses, but it is also important to look outside the finance team. Business managers and budget holders play a critical role in company expenditure and providing them with the right tools will deliver an ever-growing level of sustainable savings on what they already buy.
Strong procurement models are essential to achieve best value for any organisation – but it is by working together with business managers that procurement professionals can manage the challenge of procurement and deliver the common goal: supplier relationships that deliver both great value and a good business experience.