Ingenious Procurement

In an era of digitization, industries want to move from traditional procurement to new ingenious procurement based on Industry 4.0. Buyers are looking for automated procurement processes embedded with predictive analysis to feed more insights into quick decision-making. Industries want to benefit from best in the class system and integrate them with the core ERP system while also providing a consistent and rich persona-based user experience.

The diagram below depicts how this can be achieved by leveraging technology such as:

  • Analytic techniques to collect and analyze the procurement data
  • Automation to make sure that time is spent on a more critical task
  • System integration to take advantage of the best solutions and to build easy-to-use apps with complete transparency

The futuristic procurement design must incorporate:

Analytics

An ample volume of data is available. Internal data is generated in the system by different activities or transactions, such as buyer’s procurement patterns, approval decisions, or supplier deliverables on agreed KPI. A high volume of data is also available in the external world that corresponds to suppliers or commodity trades.

The new business model must ensure that this streamlined data gets utilized at different junctures:

  • Statistical analysis techniques can assist in the approval decision-making process
  • Machine learning techniques can be applied to available historical transactional data and thus the system can assist in identifying the suppliers for a given material or commodity code
  • Intelligent information feed to generate real-time risk alerts regarding suppliers

System Integration

Instead of a generic solution, industries want to pick specialized solutions from different products and integrate them efficiently to get the best results. While also ensuring that the experience for end-users should be the same.

Different systems are getting used for strategic sourcing and operational procurement.

  • Legal/NDA documents are created in one system to be integrated in real-time to operational documents in another system. This will ensure that while sharing the operational documents with the supplier, these legal and NDA documents are always incorporated if needed It will be visible in the supplier portal through links integrated into the document or sent as attachments in email communications to suppliers
  • Single approval app for all types of procurement documents to provide a harmonized user experience
  • Communication tools like Skype or MS Teams to be integrated within procurement apps for better collaboration

This tight integration enables the business to benefit from all the systems.

Automation

Automation plays a crucial role in reducing redundant tasks and shifting focus more on the critical job. When automation integrates with smart algorithms and Machine Learning, end-to-end business processes can be completely automated.

  • One of the examples of the process that can be automated is for the stock material. Clients generated a massive volume of documents with values in billions of euros. The complete process can be automated with the help of machine learning. Once purchase requisition is auto-created, the best price can be picked up from catalogs or contracts based on a complicated algorithm followed by purchase orders creation and auto ordered based on business rules. If no price is found for material in a purchase requisition, the auto Request For Quotation (RFQ) process can be initiated, and once suppliers respond to RFQ, auto awarding can get accomplished.
  • Another example can be an automatic update of contracts. For some raw materials, a portion of the raw material price is periodically adopted according to agreed contractual fixed rules. This portion of the price is modified automatically by coupling it with price in the international market. Therefore, once this portion of the price is determined from the international market, contracts that consist of that raw material can be automatically updated to incorporate new prices.
  • Automation for Vendor Invoice (Account Payables): RPA (Robotic Process Automation) can be used to auto-process vendor invoices. Processing structured data is not an issue. In unstructured data, machine learning can be used and integrated with RPA to efficiently capture accurate data and ensure minimal human interference.

Easy to use

Business users are looking for a persona-based tailored user experience, and therefore it is required:

  • All the transactional apps are tightly integrated with business cards, factsheets, and dashboards to provide essential information of suppliers, users, or parts across the application to the business user for quick reference
  • Graphical representation to support KPIs, and decision making
  • Configurable apps need to be developed that are easy to use, giving the business administrators flexibility to carry out specific changes without reaching out to the development team. For example, a PDF layout app for purchase orders or contracts sent to suppliers. Business administrators can change the PDF layout and content based on different legal entities or plants. It will help in eliminating development efforts involved in each change

With the current trends and innovation in technology, the new business model should be flexible to absorb them. The ingenious procurement must ensure that the industry incorporates the latest features using the current technology and benefits from them.

Author Details

Joginder Ganesh Saini

Joginder has 16 years of experience in the procurement space. He has worked with a leading organization and digitalized procurement processes for the last five years. He is a technology expert in SAP, and his prime focus is to provide solutions and advice customers in the transformation Journey.

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