According to Zycus, the philosophy of Procurement is to “Procure the right thing at the right time at a right price from the right vendor“.
This may be easier done than said in the future as technology continues to develop quicker than ever before. Procurement has seen a heightened demand and need for rapid responses as a result of the pandemic, along with increased efficiency and cost savings requirements.
Indeed, automation has moved from purchase to pay processes into more complex areas, and leaders continue to progress faster in adopting next-gen digital technologies.
Why is Automation being used in Procurement?
The Sourcing Automation white paper from Keelvar acknowledges the technological advances happening in Automation by using multiple Artificial Intelligence (AI) techniques that permits businesses to deploy these solutions whilst seeking value from their investment.
The popularity of automation has accelerated over recent years, with Robotic Process Automation (RPA) aiding companies to simplify time consuming tasks to drive savings, speed and reliability, giving users more time to be productive and focus on other tasks and seek the best outcome for procurement. This can also be done by using Bots (i.e. ChatBots) to answers users’ questions or direct them to a relevant assistant.
What are benefits of Sourcing Automation?
How can organizations move towards fully autonomous sourcing systems?
Every business starts as a beginner: Keelvar provides a loose guide as to how they move from monitored to unmonitored sourcing, as users build more trust in using autonomous systems.
“For large strategic sourcing bids then optimization (L3) is usually the most appropriate level of automation (ie partial). L4 is appropriate for repeated tactical buying that in aggregate doesn’t move the needle. L5 is the target for strategic spend categories where the spend is divided (temporally or regionally) but in aggregate is significant. Then AI enabled continuous improvement is highly desirable.” Alan Holland, CEO Keelvar.
Drawing upon Paul Armstrong’s ‘Levels of Procurement Automation’, it is appropriate to suggest there are 2 main levels:
- The human monitors the environment
Here, the organization and its workers perform manual tasks which can be time consuming with no automation in place. Some users may be apprehensive at first, yet as technology and partial automotive tasks are introduced, this instils trust and confidence, especially when the user witnesses the amount of time it frees up for them to complete other tasks. With partial digitisation in place, the user may want to check for errors, even though they are likely to be prevented compared to a human completing tasks manually.
2. The system monitors the environment
As the organization and its users gain confidence and trust in the digitisation of its procurement practices, they can introduce more automation such as smart assistants (chatbots), advanced monitoring capabilities and produce high quality content. High to full automation exists where users are able to focus on coaching their AI engines and optimise processes, leaving automation to carry out specific tasks with few to no errors, with no human attention or interaction required at all.
Application is scaling rapidly with 2 real life examples being Bid Ops and Pactum. “Bid Ops customers have successfully achieved Level 4 “high automation” sourcing cycles using our predictive quoting model, but of course even this approach still requires that the suppliers are enthusiastic participants automated tendering, which is why optimal-by-default data and behavioral analytics are key. If I’m not mistaken, it may be true that Level 3 “Conditional Automation” has already been achieved in a lot of Procure-to-Pay transformations, but procurement and suppliers will have to be aligned on similar buying channels for Sourcing to get to Level 5.” Edmund Zagorin, CEO Bid Ops.
“If we look at a narrow use case with massive amount of repeatability we are at level 5 with most customers. The machine pulls data, analyses it, reach out to the vendor, conducts the negotiation, generates the contract, sends it for signing and updates spend management systems – no human involvement. Most human involvement is required when the contact details are wrong, and we cannot get hold of the right person. Broader use cases are at level 4. We call this approach Human in the Loop. Where we pull in a specialist for more complicated decisions. Keep in mind, this is mainly tail spend where there is limited human interaction in large corporations anyway. So the task is not so futuristic as it seems from first glance.” Martin Rand, CEO Pactum.
Procurement Automation is likely to be the future for digital procurement for companies to extract value from their investments. Such actions will help to maximise productivity, deliver value, streamline sourcing and maintain supplier relationships – the list is endless!