Reimagining procurement: Why digital helps accelerate success
Digitisation steps in to fast-track supply chain transformation, as automating the process from procurement to payment can speed up the process dramatically.
Supply chains have been forced to re-evaluate their IT strategies and migrate to digital over the past few months. They have been thrust into a new reality by COVID-19, where the speed of execution and digital solutions have been one of the critical answers to business survival.
Most procurement departments realise the need to automate the source-to-pay processes to attain fundamental economic efficiencies. True digital transformation happens through rethinking processes. It’s about vision and transition before it becomes a technology decision. The cost of IT upkeep, downtime and processing time spent on manual tasks and data organisation is taking its toll. However, achieving the full benefits of digital transformation can be daunting.
The large and growing market of suppliers vying for services has created more pressure. Selecting suppliers requires due diligence and hands-on testing of potential services. There are governance and compliance standards to uphold. Organisations are back to zero-based budgeting where nothing is guaranteed – from contractual terms to pricing. Everything is up for debate.
While there is much hype around digital transformation with new technologies, many companies lack the basic digital infrastructure and data integration to implement them successfully.
In a world where procurement is central to the success of business continuity, what will help accelerate success?
Increased demand and expectations for automation have been created by the remote worker environment, initially set up to cope with the pandemic but seemingly here to stay. It is estimated that nearly 40% of employee productivity is lost due to unorganised task-switching. That does not consider the 30% of their day that they spend manually looking for misplaced paperwork.
True digital transformation happens through rethinking processes.
Digital supply chains, linked by a secure, global platform for buyers and suppliers to collaborate on business transactions, and manage purchase orders, invoices, catalogues and payments, are leading the way.
Automating the process from procurement to payment can speed up the procurement process dramatically. It releases the team from repetitive and manual tasks, and minimises error, anomalous spend and governance oversights. A team once drowning in paperwork, audits and compliance can be empowered to make strategic decisions again, releasing value to the company and keeping costs low.
Think again – what are the six key areas that can be transformed?
1. Purchase requisition
Organisations often find this is the first sticking point. Complex hierarchies and busy managers slow down the approval cycle. Requisitions can be digitised to flow automatically to pre-determined authorised roles, with alerts when requests are delayed.
2. Quotation requests
Unending e-mails, briefings and meetings are unnecessary time-wasters when preparing requests for quotation or similar. Pre-approved suppliers can be automatically assigned to requisitions and allowed to do the work on a shared portal against set requirements.
3. Assessment and negotiation
Overwhelming data is not something humans compute quickly. Procurement teams need support to evaluate suppliers based on their responses, fairly and accurately weighing up value, lead times, discounts and terms. Automating adjudication and sifting out digital responses lightens the load and elevates the team to negotiators.
No matter how small or large the organisation, the risk is always there of a slip-up or oversight on the manual approval route. An audit trail of approvals, directed through a compliant workflow, ensures the right level of authorisation.
5. Purchase orders
There is no room for bottlenecks. Automatically issuing POs once due process has been followed, and sharing these on a supplier portal, can speed up the process greatly. It also ensures purchase orders cannot be issued before the necessary approvals are in place, or to unapproved suppliers.
6. Three-way payment matching
Quick three-way matching can happen when purchase orders are raised, captured and then mapped against delivery notes and invoices. This avoids payment errors, or missing early discounts previously negotiated with suppliers.
Crucial communication avenues fit in between each of these six steps. Supplier communications are being improved and accelerated by implementing portals or online communications platforms. These facilitate all aspects of supplier relations – onboarding, requisitions, purchase orders and invoice submission. Suppliers use the portal to retrieve purchase orders, submit proof of deliveries and invoices online and view information on payments, queries or exceptions that may be preventing payment.
Implementing a common communications platform brings tangible rewards to the procurement team, and the entire supply chain:
Quicker processing: Invoices are electronically captured, processed faster, and exception handling is simplified, making the payments process easier.
Better communications: Suppliers can view the status of purchase orders and invoices online at any time and, with the addition of simple chatbots, can minimise human requirements for handling queries.
Information accuracy: Suppliers can maintain their own company information, ensuring the most up to date and accurate invoice, payment and supplier information.
This is procurement gold. With an accurate and efficient supplier communication process set up, businesses can accurately preserve their credit lines, maintain discount levels, and effectively monitor account balances.
Applying a robust digitally automated procurement solution reduces administrative workload and improves compliance through automated workflows. It’s the quintessential essence of digital transformation: it takes away the manual workload and frees up the team to add value to the core business strategy.
In fact, there is a school of thought that digital transformation should really be called digital automation. As companies sprint to thrive in the new normal, automated processes and workflows are at the fore of their strategy.
Business process automation is, consequently, one of the best ways to accelerate and evolve processes − particularly in areas where automated processes can spread across the breadth of the business.
MD of Linxus.
Russell Glover is MD of Linxus. He is a seasoned professional from the supply chain management sector. He has more than 25 years’ experience in supply chain business processes and application design, covering portfolios from senior consultant at Deloitte, to supply chain director for listed paper and packaging company, Nampak. In 2013, Glover started Linxus, a software solutions company founded on the basis that simple solutions should be the link between people, processes and technology. The firm has forged relationships with leading players in South Africa and international markets, offering professional services and software solutions in the productivity, document management, business application and process management space.
Russell Glover is MD of Linxus. He is a seasoned professional from the supply chain management sector. He has more than 25 years’ experience in supply chain business processes and application design, covering portfolios from senior consultant at Deloitte, to supply chain director for listed paper and packaging company, Nampak.
In 2013, Glover started Linxus, a software solutions company founded on the basis that simple solutions should be the link between people, processes and technology. The firm has forged relationships with leading players in South Africa and international markets, offering professional services and software solutions in the productivity, document management, business application and process management space.He has worked in varied industry sectors during his career, including government, mining, professional services, finance, building and construction, paper and packaging, engineering, fast-moving consumer goods, construction, manufacturing and information technology.