4 Great Reasons Why You Should Use Purchasing Automation

Recently, it’s become significantly easier to integrate purchasing automation software, also known as e-procurement or procurement automation software, with your ERP and inventory systems. This is, perhaps, part of the reason why the market for procurement automation software is set to grow to $14.1bn by 2030, with a CAGR of 10.1%.

(Image source: marketresearchfuture.com)

There are other factors at play too – businesses are looking for ways to fulfil ever more demanding customer expectations surrounding delivery times with increasingly fewer staff. UK job openings have been hovering around a record high since January 2022, with May seeing more openings than unemployed people for the first time on record.

(Image source: bbc.co.uk)

 

Automating your procurement processes using a solution like Claromentis Business Process Automation software helps meet both of these challenges. Automation removes manual, repetitive tasks from the procurement cycle that take time whilst adding little value, so you can do more with a smaller procurement team. At the same time, the data-first approach used by modern forecasting systems allows you to anticipate periods of high demand and plan purchases accordingly.

What is automated purchasing?

If you’ve overseen procurement processes for larger orders, you’ll understand how much administrative effort they take. On top of maintaining supplier relationships and the vendor management process, there’s often your own approval process to manage, alongside manual invoice processing, contract management, and more.

Unexpected issues – even basic, everyday hiccups like staff absence – can delay the purchase by days or even weeks. This can mean the difference between fulfilling orders on time or disappointing customers.

Automating the procure to pay cycle with procurement automation software like Claromentis minimises these delays by removing manual workflows for complicated procurement processes and reducing opportunity for human error.

What are the 4 steps in purchasing?

Different procurement teams break down the purchasing process differently. We like to break it down into four steps for simplicity’s sake.

1. Identifying purchase requirements: a need to procure goods or services is identified internally. The business then refines exact requirements for the purchase.
2. Supplier selection and contract management: the business chooses which supplier to use, either by leveraging existing relationships or by inviting multiple suppliers to tender.
3. Sending a purchase order: once the business has chosen a vendor and agreed contract terms, a purchase order is sent to outline deliverables including price, specification and terms and conditions of the product or service.
4. Delivery and invoice management: the business checks the goods against the terms of the purchase order. If all is well, the seller sends their invoice, and your procurement staff process it.

An automated purchasing system automates repeatable tasks at every stage of your procurement workflow to reduce manual errors and improve process efficiency.

How do you automate purchases in the supply chain?

To optimise your procurement processes, invest in automated procurement software. The right procurement automation software can automate:

• Identification of goods needed based on inventory
• Processing internal purchase requisition forms
• Sending and managing purchase
• Choosing the right vendor
• Generating purchase orders
• Approving delivered goods and services
• Invoice management and processing

When integrated with your inventory management solution, procurement software automates entire process of identifying which goods you need based on current inventory.

Many businesses use the procurement process automation features contained within their intranet software. For example, here’s a video for how to automate purchase orders using Claromentis.

(Video source: youtube.com)

4 Great reasons why you should use procurement automation

1. Immediate cost savings

If you can see, given a list of pre-approved vendors, who’s offering the best deal on the goods you need to buy, you can make major cost savings.

Of course, you might not always opt for the cheapest. Equally, it’s significantly easier to assess each vendor’s particular offering upfront, without a long trail of time-consuming emails and phone calls.

You also save money on costly invoice processing and staff time in general. 

Ultimately, procurement automation allows you to do significantly more with significantly fewer staff hours. One option here is to reduce the size of your procurement team – but a more strategic move in the long-term would be to reinvest those hours saved into value-add activities like research and maintaining vendor relationships.

2. Stronger vendor relationships

It might seem counter intuitive but removing some of the direct contact with your suppliers doesn’t mean a weaker relationship. In fact, there’s a good chance your relationship with your suppliers will improve as a result.

Many of the manual processes governed by email contract don’t add much value to your relationship at all – they’re simply administrative tasks that are prone to human error, as all manual tasks are. Even if accidental, a late payment or misread PO can place unnecessary strain on your relationship.

Process automation reduces frustrating delays and misunderstandings for everyone involved in the process. Alongside this, procurement teams can invest hours won back by procurement automation on activities that really add value to your relationship. For example, brokering exclusive deals for better prices, providing valuable feedback on products or agreeing to trial new releases, can all strengthen ties with vendors.

3. Fewer manual data entry errors

It’s generally accepted that the error rate for manual data entry is 1% or one in a hundred, though this can be more depending on a range of variables, from how tired a particular worker is on the day, to how hard it is to read someone’s handwriting

Is it worth leaving so much of the smooth running of your business to chance? A simple typo on one purchase order could leave you with a significant shortage of stock, or an overabundance that you don’t have the warehouse space for.

Procurement automation software removes a good deal of this risk as it generates suggestions and forecasts directly from your inventory data. This doesn’t remove error from the procurement process entirely (manual data entry is still needed in many frontline inventory processes), but it does remove a lot of unnecessary risk.

4. Opportunity to benefit from advanced forecasting tools

When you automate the entire purchase order cycle, you start generating data about your purchasing patterns. This data can then be used by BI and forecasting tools to anticipate spikes in demand and sync purchases with available warehouse space.

Your finance department can budget accordingly and your procurement department can anticipate purchase needs ahead of time. Delays due to internal reporting lags, such as late filing of purchase requests, are minimised and operational efficiency improves significantly as a result.

Final thoughts on procurement automation

Currently, procurement professionals are trying to balance rising customer expectations with fewer staff. Automating the procurement process helps ensure you have enough stock to fulfil customer orders and maintain effective internal operations.

Cloud based procurement software reduces inefficiencies based on human error (such as poorly managed purchase orders) whilst allowing you to:

• Streamline vendor selection
• Increase process transparency
• Manage contracts more effectively
• Forecast demand and act accordingly
• Save money on invoice management

With a solution like Claromentis, your procurement process becomes more efficient, your procurement function can reinvest time in more valuable activities, and vendor relationships improve as a result.