Automation is frequently talked about in manufacturing, but rarely in the field of procurement. Could it be the key to helping procurement achieve better outcomes?
Download GEP’s white paper on achieving P2P Excellence through Procurement and Finance alignment here.
Czech writer Karel Čapek was the first person to use the term “robot”. In his 1920 play “Rossum’s Universal Robots”, he conjured the image of synthetic humans, carrying out the tasks that original humans no longer cared to do, yet remaining largely happy in their work. For a while.
Inevitably things went South, so to speak, and the robots learned to resent their drudgery.
Stories of automation leading to unforeseen misfortune are at least as old as Goethe’s 1797 poem, “The Sorcerer’s Apprentice”. Yet automation remains a goal, if one that is not without challenges.
Automation in Procurement
Automation is often seen as a good thing, because it accelerates processes (sometimes) and frees up valuable human resources (sometimes). In the context of manufacturing, introducing automation has been hugely successful because of the requirement for a production line to continually repeat identical tasks within exact specifications. Automation is therefore understood to be just that, the effective ‘robotisation’ of a process.
In a sense this is also desirable in Procurement because a good percentage of the tasks and processes are repetitive and of the same type. However, that is not the same as being identical, and it is often less than desirable to force a range of different variants into a single model.
Thus, what we need is the acceleration of the process and the reduction in administrative overhead but still maintain the unique aspects of each event in the process. This is where automation gets tricky.
Importance of the ‘Right’ Process
From the perspective of software design, the practitioner must be able to automate those parts of the process which are identical time after time, and permit the customisation of those parts that are unique, whilst accelerating the whole.
This is where an understanding of Procurement (and associated processes) is key in the design and implementation of the software. As one of our senior project managers put it, “It is not a good idea to use automation to accelerate a broken process.”
What he means by that is this: whereas in manufacturing, the process of machining a particular widget by hand is already the ‘right’ way to do it, and automation simply repeats the task; in Procurement it cannot be taken as read that the sourcing methodology, contracting process or requisition-to-invoice workflow, are in any way the ‘right’, most efficient, or best, way to go.
In reality, then, for procurement software to provide a solution it must involve not only automation, but transformation. Using the imposition of an automating technology to review where the challenges in the current manual processes lie is a vital part of any such program. That way the eventual automation of the task will be more accurate and, ultimately, more useful.
Accounting for Whole Process
Another key consideration is best made with a manufacturing analogy again. If the entire process from raw material to finished goods is automated, then the rate of arrival of the end-product at the packing and shipping station will be considerably greater than in the pre-automation set up. If account hasn’t been taken of the impact ‘downstream’, then one can foresee the conveyor belt of products backing up and overflowing.
In Procurement this can be a real issue. Accelerating the order-to-invoice process is all very well for purchaser and supplier, but if Accounts Payable are periodically swamped with invoices to be paid, there can be significant impacts on administration overheads and, indeed, cash flow.
Furthermore, an accelerated sourcing process only works if the suppliers are on board, and a super-efficient bid-to-contract process will only work if the company’s attorneys buy in to it.
Thus automation is far from being a matter of “install software, use software, improve efficiency, get ROI”. Get it wrong and it can be a matter of “install software, use software badly, make matters worse, stop using software, can project, start again”.
But get it right and the “automation” program can see dramatic impacts on time to reach savings goals, supplier engagement and performance, and cash flow management downstream.
GEP have produced a white paper on the challenges facing the marriage of convenience between Procurement and Finance which explores these ideas further. You can download it here.