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The procurement process is usually complicated. When an organization disregards the use of technology, the procurement process becomes labor-intensive, time-consuming, and involves too much paperwork.
On the other hand, using technology in the procurement process saves much time and reduces the need for labor. Through automation, the process becomes more straightforward with fewer hassles. There is a plethora of benefits associated with using technology in the procurement process of an organization.
Before highlighting the merits of automating the procurement process, let us review the common challenges experienced by procurement personnel.
Significant Challenges in Procurement Processes
The organization deals with numerous challenges in its day-to-day procurement responsibilities. When the process overly relies on manual labor, it is prone to ineffectiveness due to human errors.
Some of the challenges experienced by the procurement department are outlined below.
Challenge in Identifying High-Quality Vendors
For any company, meeting suitable suppliers while procuring resources is vital for growth. Based on studies, overreliance on human workers leads to challenges in identifying the right vendors to meet business needs. This is usually caused by biases and a lack of standard criteria in evaluating vendors and what they offer to the company.
Redundancy and Inefficient Procurement Procedures
Most organizations have inefficient and redundant procurement procedures. These processes cause bottlenecks in the organization's operations through poor data management. When the data management is infective, further problems occur across the company hierarchy, causing duplications, delayed payments, and lags in project completion.
Increased Supplier Lead Time
If the data management procedures are poor, the supplier lead times increase significantly. This is the amount of time that usually elapses between the time an order is received by the supplier and the time it is shipped to the company. This directly impacts the costs and can lead to losses where contracts are strict.
Receiving Low-Quality Materials
Poor procurement procedures can lead to companies getting low-quality products. This is because the processes to track and standardize goods are absent. Moreover, there is usually a poor fraud protection system, which can lead to further challenges in the procurement process.
The Benefits of Automation of Procurement Processes
Due to these recurring challenges, automation can come in handy and resolve or reduce the occurrence of such issues. Here are some core benefits of automation and technology use in procurement.
Automation Improves Efficiency and Speed
Automating procurement procedures can eliminate bottlenecks and enhance the speed and efficiency of the process. This can ensure timesaving and guarantees efficiency in the operations of the procurement department.
There are important tasks that can be automated instead of human workers. The procedures will eliminate stress on procurement personnel and give them more time to handle tasks that require human intervention.
Reduces Average Cycle Time
In procurement, having a minimum cycle time is essential. When companies use manual procurement processes, the team spends more time drawing plans and reworking contracts. However, technology can be vital in ensuring that these processes are minimized, and results are achieved with minimal deadlines. Online approvals for purchases will streamline the process and make it easier. Also, technology can allow quicker changes to contracts to make them suit the company's standards and expectations. Technology can also be leveraged to store existing contracts and reuse them whenever needed instead of working on new contracts each time.
Automation Eliminates Manual Document Storage
Using manual procedures in procurement leads to too much paperwork, which can cause burnout on the team. It is usually difficult for the procurement team to search and track documents through manual processes. Organization of these documents is also hard and causes challenges.
Therefore, companies need to leverage technology to automate processes and eliminate paper-based storage systems. An automated procurement process ensures that vital records are stored manually and extracted when necessary. Data organization will also be easier based on the date, items ordered, budget allocation and other components. This will enhance the management of the procurement process.
Increased Data Accuracy
About 50% of organizations acknowledge that manual data entry is inefficient and causes many bottlenecks in operations. Most business errors are caused by inaccurate data from biases and human errors. So, relying on manual processes can negatively affect the procurement process's effectiveness.
Automation is a great strategy to eliminate biases and errors in data entry. It ensures that data is consistent across the organization. This is vital to enhance productivity in the procurement department because errors will be minimal, and results will be achieved faster.
The documentation process will also be more organized because most records will automatically be stored in local drives and the cloud. Another aspect that results from using technology is enhancing transparency across the organization. This eliminates fraud cases and ensures that vendors supplying the organization have followed the required criteria.
Making Smart Purchase Decisions
When the purchases are managed through manual procedures, it is impossible to make informed decisions. Therefore, technology can greatly enhance the results and guarantee effectiveness in procuring goods. Manual procedures also make companies miss out on bulk discounts or overpay on deliveries. As the company incurs more losses, the profit margin is reduced. There will also be many unapproved purchases because all processes should be done manually.
Procurement automation usually offers deeper insights into the purchase processes. The personnel can easily approve purchases through an automated procurement portal and eliminate overspending. They can leverage supplier performance to get better prices and enhance the speed of accomplishing project goals.
Reducing Risks in Procurement
While every business decision has some risk aspect, the proper use of technology can reduce such risks drastically. Many people never enjoy menial and manual tasks, such as data entry. Monotonous tasks are draining and time-intensive, which leads to poor outcomes in fulfilling the project goals. People struggle to focus on these tasks and often make mistakes that cost the organization many resources.
To minimize these risks, the procurement process can be automated and ensure minimal need for manual inputs in managing data. This can greatly enhance productivity and eliminate bottlenecks in project work.
Adaption to Unpredictable Market Conditions
There is an unprecedented increase in technology on all business fronts. If an organization insists on remaining manual, it will miss out on important trends in the market. Technology provides opportunities for upgrades to make operations seamless. Therefore, using technology will ensure that the procurement procedures align with the current market trends. As the technologies continue to advance, it will be easier to make upgrades consistently as new functionalities emerge in the market.
Through automation, the organization will have the time, data, and resources to keep the business agile. It also improves insights into the supply chain and how certain aspects can be addressed. This component gives the company advantages and eases how procurement decisions are made. The organization will have much leverage in adapting to emerging changes and dealing with any challenges in the market.
Roadblocks to Cause by Technology Adoption in Procurement
The tech-related challenges and roadblocks result from the complexity of adopted technologies, increased risk of failure, and high costs. To successfully adopt technology and automate procurement procedures, it is vital to understand these issues and address them or mitigate them. When organizations prepare for this, they prevent future challenges from using technology.
Here are some of the most common roadblocks in procurement automation.
The Rapid Changes in Technology
Technology is rapidly changing, which can impose pressure on procurement departments because they are mandated to make constant upgrades within short timelines. Specialists also have minimal timelines to learn and adopt new technologies, which can negatively impact the business's operations.
Conflicting Needs of Stakeholders
In an organization, the procurement process involves different members and departments. This can cause conflict because different members might require different technologies to be adopted. In the process, the goal of adopting the technology is missed because of conflicting interests.
Wrong Initiation of the Procurement Process
Technology can only be operated following a certain procedure. When the process is initiated wrongly, bottlenecks results and lead to poor outcomes. Therefore, it is vital to follow the correct operational procedure to avoid challenges in operating the chosen technology. Another important consideration is ensuring that the technology suits the organizational goals and skills of the team.
Lack of Expert in Procurement Technology
Another technology bottleneck is the lack of experts in procurement technology. This is a huge aspect because it determines whether the adopted technology attains the desired goals. When the company lacks professionals who can work with the technology, it will be hard to adopt it through the organization. Therefore, it is vital to get the right experts before the technology is adopted.
Overall, technology is a great tool to enhance procurement department productivity. The aim is to consider both the benefits and roadblocks to make informed decisions on the type of technology to use.
This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.
© 2022 Donald Ngonyo