Practical Lessons from the Frontlines of Automating Procurement
“Most of the time you find that all of those problems arise … from somebody believing that a new system is going to work from the second you switch it on and it's going to revolutionize the supply chain.” — Simon Croom, professor of supply chain management at the University of San Diego, to Supply Chain Dive
The stark reality is, many, if not most, businesses fall short when implementing automated processes within procurement. Company leaders driven to improve efficiency and flexibility often attempt to revolutionize their entire function at once, opting for the "done and dusted" approach; this is a flawed strategy. As our industry looks ahead to navigating an unprecedented post-pandemic marketplace, the single certainty is that digital/agile businesses will enjoy a massive competitive advantage over those that become mired in the pitfalls of such a highly complex and time-consuming transformation.
The key to successfully automating your company’s procurement function is implementing bite-sized initiatives rather than overhauling the entire process right out of the gate. Here, we present a simple three-step process to assist you and your organization.
1. Prioritize by creating a matrix of your organization’s key procurement activities and the head count of employees working toward your goals.
The matrix shown here is what a leading global healthcare organization used to categorize its automation priorities. Also known as a “workload” matrix, it offers a high-level view of how your procurement team is functioning. By focusing on business continuity and utilizing an automation tool tailored to perfectly match its needs, the organization seamlessly automated its agency management system in under six months.
This matrix immediately identified the misutilization of the company’s workforce, with employees focusing on tactical initiatives rather than strategic. The path forward included redirecting efforts and finding a solution that consolidated vendor communications, SOW approvals, and opportunity assessments into a cloud-based “vendor management” platform that synergized with the entire organization.
As your organization dives deeper into its procurement prioritization, ask yourself the following:
How many RFxs are published monthly, and are they created from scratch? The count of RFxs directly relates to a lack of information about your vendors; a count created from scratch means you lack a repository that houses all your templates in one single location.
How long does it take to retrieve data from your vendors for projects? If your organization spends a month requesting vendor data, that’s a month of precious time lost that could have been used for executing instead.
How much time is spent strategizing and executing versus putting out fires? Procurement will always get caught between our business partners and vendors unless we remain forward looking. By creating a mix of tactical and strategic workloads, you can improve your business outlook and be better prepared for any future scenario.
2. Research and identify the right set of procurement automation tools.
Every company needs a tailored approach to automation, which includes choosing the right tool. For some, it may be RFPIO — an AI-enabled RFP software that streamlines the entire request process; for others, it may be onboarding a should-cost solution that automatically verifies the SOW’s price and approves it.
The easiest way to select the right tools for your organization’s needs is to simply put yourself out there where the discussions are happening. Engage openly with your peers. Attend conferences and industry summits. Be present where there is a constant flow of information and talk about your company’s ideal state, and the knowledge you gain will enable you to select the best tools for your success.
It’s also important to keep in mind how your employees will adopt a new tool, which in most cases is the single largest barrier to successfully automating procurement. The key is to clearly identify the specific business priority and then select a tool that fully enables your team to address any roadblocks to that priority.
In the case of the global healthcare company above, their chosen tool was Decideware — a vendor lifecycle platform that boasts high business intelligence capability. As with any change management initiative, the procurement team faced implementation challenges, but the tool enabled the team to ensure steady adoption (their tool is now integral to their process of working on an entire category).
3. Make incremental improvements.
Today’s CPOs and IT leaders generally stop at what they consider to be the big achievement: a project’s completion. They believe they’ve crossed the finish line, when in reality, the race has only just begun. Take the example of HD Supply: just weeks after the launch of its high-tech Atlanta warehouse, HD Supply suffered approximately three months of service disruption due to the lack of attention their systems received post-automation.
To support your procurement function’s growth and enable it to drive real competitive advantage, set up a quarterly update with your change management champions for completing quality control on existing automated systems. By regularly innovating ways to increase operational effectiveness, you’ll put your organization ahead of every other industry peer.
During these uncertain times, it falls upon procurement to ensure business continuity while achieving greater results. These three steps will allow you and your team to not only drive procurement automation for increased returns but also to be the torchbearers for any change management initiatives for years to come.