What Procurement Technology is Right for Your Business?
Determining what procurement technology you need to bring your organization into the digital era can be intimidating. It’s a complicated endeavor with lots of moving pieces. How much do you start with? Should you focus on optimizing areas you already have under control, or start with workflows that are currently your weakest?
Once you’ve determined that the time is right to invest in procurement tech, you have to figure out what exactly you need.
To help solve this problem, we’ve collected some areas to focus on when determining what technology is right for your business. These are key areas that most organizations will benefit heavily from and some features to look for in each.
Many organizations start by looking at whether they want to implement source-to-contract or procure-to-pay solutions first. Source-to-contract, also known as “upstream,” refers to the process of sourcing, signing contracts, and managing suppliers. Many see this as a logical starting point for digitalization because it’s the beginning of the procurement lifecycle.
In many ways, upstream workflows generate value for your organization. This is where you do the hard work of running auctions, negotiating deals and building supplier relationships. You certainly don’t need to start your technology journey here, but if you want to, there are three main areas to consider.
For many, sourcing is the beginning of the cycle of procurement. You decide what items you need and you enter an RFx process, host auctions or contact potential suppliers for pricing. Sourcing has some of the most efficient technology available in terms of pure time and money savings. For example, digital auction tools can help you create and run an e-auction in minutes, then help you analyze responses and add follow-up questions as necessary. Many also include the option to run multiple scenarios and compare possible results, letting you quickly identify which suppliers are the best option should volume or timelines change. Any sourcing solution worth its salt will also include robust tools for analyzing submissions. The most advanced tools will even provide intelligent award recommendations, allowing you to skip much of the analysis process for routine sourcing events.
Supplier management technology is another key piece of the procurement puzzle. While it’s not often a first step on its own, a supplier relationship management tool can be a valuable piece of the S2C implementation. When you’re considering platforms, it’s important to look at key features surrounding risk. Not only should your SRM tool connect with contracts to track supplier performance, but it should also provide detailed risk analysis features to preempt poor performance and improvement programs to help suppliers who do underperform. Look for solutions that have built their own risk data tools or partnered with industry leaders like riskmethods to make sure you’re getting the most from a supplier management solution.
Keep in mind that a robust supplier network is just as important – you need a large database of suppliers that you can easily connect with and start working with, especially if you have a change in demand level or need to suddenly source new products. You’ll want to make sure you have an extensive supplier network that can connect you to new suppliers easily.
Contracts has been one area to see drastic improvement due to digitalization. A good contract system will provide a single repository for your entire organization, ensuring that you don’t have versioning issues, and connect with your supplier management tool to ensure contract compliance. A good system will also allow for electronic negotiations, revisions and signatures. But a great tool will do many of these things automatically. For example, innovations toward autonomous procurement have made contract authoring as easy as a few clicks for most use cases. The best platforms can use supplier information and risk data, among other pieces of information, to automatically add or remove clauses accordingly. Then they provide proactive notifications to begin the renewal process when the time comes. All of these technological capabilities combine to give your contracts staff more time to focus on strategic initiatives and negotiating better deals.
The other half of the procurement flow, procure-to-pay, is also known as the downstream process. This is everything from actually purchasing items from a catalog to paying the invoices for those orders. If the upstream is where your team generates value, the downstream is where you realize it. As users purchase on contract items and invoices benefit from early payment discounts, your organization saves money.
eProcurement tools might seem simple at first glance. After all, they’re just online marketplaces to buy things. But be sure to look for valuable details like preferred supplier placement, which give priority search placement to suppliers that you deem strategic or key suppliers. The best tools will also allow you to automatically stop purchases from suppliers that are non-compliant or having performance issues. Plus, don’t overlook the things that might seem superficial. You want to provide an intuitive, enjoyable experience to your users, because the more they use it, the more you save.
Invoicing solutions are also gaining features thanks to innovations in machine learning and artificial intelligence. Modern accounts payable tools can collect invoices in any format, even if they’re emailed as attachments or submitted in hard copy, and digitalize them automatically. From here, they’re fully readable and the system can leverage all of the data in the invoice to match it and push it through the approvals process. Top-tier AP systems can also learn approval rules based on supplier type, dollar value or location, and automatically adjust the workflow as needed. That means your invoices get paid faster, your suppliers are happier and you can take advantage of early payment discounting.
Spend analytics can really take a procurement organization into the modern era. If you’re coming from a less specialized platform, for example an ERP, you’ll see a massive gulf in performance by moving to a dedicated analytics tool. You should be on the lookout for analytics that not only help make sense of your massive data sets, but also provide recommendations based off of them. Making data actionable is the key.
You should also seek out platforms that provide augmented analytics, which provides data summaries and recommendations to different users. Importantly, these tools provide data at the level of the user, giving complex analyses to business intelligence while providing high level trends and summaries to executives. You want procurement technology that will let you spend less time organizing your data and more time putting it to work.
That was a whole lot of information, we understand. But try not to be overwhelmed with the technology landscape, and instead use this as a guide for where to focus. Take an honest look at your procurement organization and identify where you think you’ll see the most benefit, then start there. Build a clear blueprint for your implementation, and consider starting with a minimum viable product and using an agile methodology.
It’s also important to know that a procurement suite is only one piece in your software stack. Make sure you opt for tools that have many integration options and can connect with other platforms as you expand.