Though it sounds simple, the process of procurement is quite complex. It involves sourcing, purchasing, supply chain management, logistics handling, negotiations, risk management and inventory control. This can be simplified by digitalizing the process. Companies that adopt digital procurement solutions can improve the quality and speed of procurement, enhance innovation and reduce risks. Global supply chains are becoming increasingly complicated and integrated and lines between suppliers, customers and other stakeholders are blurring. In such a scenario, companies that can leverage on digital procurement tools will gain a competitive edge over others. On the other hand , companies that are slow or delay to digitize their procurement process, will eventually be outmaneuvered by their more agile counterparts. This article highlights some key technologies to implement digital procurement in an organisation.
Spend Visibility Analysis Tools
Spend visibility simply refers to traceability and accountability of money in the entire purchase process. It is an organised and detailed system of recording every dollar spent in a purchase transaction. Spend analysis has catapulted procurement from being an irrelevant purchase activity to one of the most important high priority function.
Companies often make the mistake of allocating funds on the basis of inaccurate data resulting in wastage of valuable resources. Spend visibility can highlight procurement categories where excess funds are being directed, more than the value a company derives from it. It puts the spotlight on those projects where the company is bleeding money. Supplier spend analysis can help the company to identify the best deals and prices resulting in better long term relationship with efficient suppliers. It also helps procurement managers to plan and maintain optimum levels of inventory and benefit from economies of scale.
For all this to be done effectively, companies should train its employees and invest in spend analysis software, and ensure that it is compatible with other systems & technologies within the organization.
Blockchain Technology for Smart Contracts
Smart contracts are self-executing transactions that are stored digitally on a block chain. It is a peer to peer trust protocol that allows the performance of a contract without involvement of any intermediary. It is a decentralized system as it does not involve any middlemen, thereby saving time and money. When certain conditions are met and verified, a network of computers will execute the workflow. There is greater efficiency due to high speed and cost reduction. There is also zero error as smart contracts are automated and digitally verifiable. There is no way to dispute the codified terms once smart contract is established. As all transactions on the block chain are encrypted it is almost impossible to hack. With massive investments and greater trust in block chain technologies procurement based applications are gaining greater relevance in recent times. Smart contracts executed through block chain will lead to a cleaner and greener supply chain as all transactions will be authentic, verifiable, traceable and trust worthy. The diagram below shows how blockchain works.
Robotic Process Automation (RPA) Technology
RPA is a technology application that automates business processes by using business logic and structured inputs. A company can configure software, or a “robot,” to capture and interpret applications for processing a transaction, manipulating data, triggering responses, and communicating with other digital systems using RPA tools. Previously, the procurement team had to manually process the procurement request and create a purchase order. It used to cause delays in issuing a Purchase Order and increased the possibility of errors. With RPA integrated into the procurement process, the team can complete the entire process in a short period of time, from issuing a purchase request to raising a purchase order. RPA assists organizations in managing demand and supply planning from start to finish. It eliminates silos between departments, such as procurement, shipping, warehousing, and inventory management, and manages them as a single centralized team. RPA is especially useful for job-specific tasks such as Work Order Management and Invoice Processing.