You probably think you need a procurement department to really do procurement right. Procurement is the process a company follows to acquire services and supplies. It’s a process that has a lot of moving parts, and requires strategic thinking. When successful, procurement creates systemic controls that can reduce costs and mitigate the risks inherent in conducting business with multiple suppliers and vendors.
Historically, procurement is a complex and time-consuming endeavor, filled with necessary but repetitive tasks and hours of manual effort. The procurement process is so involved and so important, it can often feel like it’s just too much for one person to tackle.
Or is it?
Today’s companies can take advantage of artificial intelligence (AI) advances that allow workers across industries to automate repetitive tasks. AI is reshaping the future of procurement and simplifying the procurement process so any business can do it — whether you’re just one person or you have a dedicated procurement team.
Choose the Right Procurement Technology With This Decision Matrix
There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.
AI automates cost comparisons, helping businesses save money
AI automates the cost-comparison process, which saves your employees time and your company money.
Without AI, cost comparisons are time-consuming and inefficient. Manual cost comparisons and strategic sourcing — i.e., sourcing supplies in bulk or bundling supplies with other products in order to reduce costs — require hours or even days of employee time. With AI, cost comparisons can happen almost instantly. AI automates strategic research that compares costs and identifies savings opportunities, so you can find the best price without wasting your team’s time or risking the possibility of human error.
Moreover, if multiple departments are making purchasing decisions, procurement teams can have a hard time sourcing strategically and reining in spending. By using a single automated system, companies avoid duplicate, unnecessary, or over-budget purchases and add controls to the procurement process.
Mediaplanet used Order.co’s AI to save an average of 8.8% on the products it purchased, in addition to countless hours of time saved for employees who no longer needed to perform manual cost comparisons. Order.co automatically scanned sites for vendor and product substitutions that could save the business money.
AI makes vendor relationships easy to manage
AI automates the vendor management process, keeping information up-to-date, products reordered, and invoices completed. Automating the process allows the procurement team to focus on higher-impact areas.
Without AI, vendor management requires frequent attention. Procurement teams must keep all vendor-related information organized and up-to-date, reorder products when supplies run low, and record and pay invoices on time.
AI-driven vendor management systems allow teams to automate orders, so they don’t need to manually order supplies each time. This saves team members time and ensures the company never runs out of needed products.
AI can also automate the invoicing process, which can save hundreds of hours of time per year. A recent Censuswide survey found that 72% of finance teams are spending almost 520 hours per year (10 hours a week) on accounts-payable related tasks that could be automated. From invoice processing, supplier inquiries, and supplier payments execution to PO matching, new supplier registration, and payment reconciliation, teams are wasting time on needlessly manual tasks.
By automating these tasks, team members can reallocate their time to higher-impact projects that require their particular expertise and strategic thinking. According to this same survey, of the CFOs who automated some or all of their finance processes, 40% noted an improved supplier experience.
ZeroCater used Order.co’s AI to streamline invoices from 200/month to three or four/month. Before using Order.co, the company’s IT and operations manager spent one to two full days each month manually recording and paying receipts and invoices. By automating, he was able to focus on other tasks, and the company added tighter cost controls to save money in the long run.
Choose the Right Procurement Technology With This Decision Matrix
There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.
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AI performs spend analytics, so teams can measure vendor success
AI gathers data and gives automatic insights so that teams can assess the success of their vendor relationships in a more agile way.
Spend analysis — i.e., the process whereby companies analyze their procurement spend and identify opportunities to decrease costs and increase efficiency — is incredibly important to the procurement process. According to APQC research, organizations with spend analysis programs have more efficient and less costly procurement processes. In addition to cost-savings, spend analysis programs result in faster responses from suppliers, a more streamlined procurement process, and a more efficient procurement staff, among other benefits.
Without AI, spend data takes a lot of time to recover and organize. When a spend analysis program is manual, procurement needs to work with multiple teams, dedupe multiple spreadsheets, and manually manipulate the data in order to derive actionable insights.
AI that tracks spend data can automate reports and present near-instant analysis. This saves time for team members and uncovers opportunities for further cost-savings and efficiencies. Identifying such opportunities more quickly increases a company’s agility — aided by AI, employees can make real-time cost-saving decisions and realize immediate benefits.
For example, NY Kids Club uses Order.co’s Analytics page to assess where it spends the most money and where it can save. Real-time analytics allows the company immediate insight into its vendor spend, so it can make adjustments that save money.
AI simplifies the procurement process, but it can’t do it all
An effective and efficient procurement process is essential — and with AI, it’s attainable for companies of all sizes and all resource levels. AI simplifies the procurement process and, in so doing, identifies time- and cost-saving opportunities for businesses. AI can’t realize these opportunities on its own, however. To add true value to a company, AI needs to team up with the company’s employees.
While AI automates much of the procurement process, operations and finance teams still need to oversee the technology to effectively guard against risk. For example, AI may be able to identify vendors that offer lower prices, but human workers still need to decide whether an affiliation with a particular vendor could tarnish the company’s reputation or lead to a potential security issue.
AI can do a lot, but it can’t do it all. When you use tools like Order.co, you can empower your employees to leverage AI smartly and strategically — in a way that saves time for them and cuts costs for you.
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Are you paying six figures for your procurement solution system and still using emails and spreadsheets to conduct purchases? You’re not alone.
Many businesses invest in a procure-to-pay solution, only to be disappointed when procurement inefficiencies like high spend and time delays remain unresolved.
Failure to automate and streamline purchase and supply chain systems affects spend management. Manual and siloed systems make it difficult to track expenditures across the company. These systems are prone to errors, inconsistencies, and duplications that inflate spending. Companies using such systems also lose opportunities to negotiate on bulk orders, foregoing direct savings.
While a procure-to-pay solution has many benefits, a company must choose the right system based on its needs, objectives, and stakeholders. This article highlights the main pitfalls companies fall into when investing in a procure-to-pay solution. It covers what to do to avoid these problems and ensure the successful implementation of the right procurement system.
In this article, we’ll dive into:
- Why a procure-to-pay solution can fail
- The best procure-to-pay solutions of 2022
- How to best implement P2P software
Download the free ebook: The Procurement Strategy Playbook
Why do procure-to-pay solutions fail?
The most common culprits in a failing procure-to-pay process are lack of visibility and lack of process. Establishing a repeatable review, approval, and documentation process allows organizations to capture vital information on each purchase and integrate that data into the accounting and reporting process.
No management validation
Like any other important organizational decision, purchase-to-pay solution systems must have the approval of the company management. Unfortunately, many companies do not prioritize supply chain processes.
As such, related technology upgrades can encounter opposition from the top. Failure to convince senior managers of the need to change supplier management systems results in a lack of validation and cooperation when implementing new processes. Instead, they stick to old systems.
Poor onboarding processes
The managers, employees, and vendors who use P2P systems determine their success or failure. Without proper training, sensitization, and support, your colleagues can sabotage a new P2P system.
Additionally, a Tungsten report shows it’s normal for employees and suppliers to resist change—especially if new solutions are introduced without sufficient preparation.
Poor user interfaces
Many employees and suppliers fail to use their procure-to-pay solution because of complicated software, poor system interfaces, and bad user experience. Most of the creators of SaaS programs tend to be technical professionals concerned with the complexities of different systems. If left to create a P2P system on their own, such professionals are less likely to consider the technical and knowledge gaps of the intended users.
Lack of automation and integrated systems
In many large organizations, different departments and external suppliers have independent operating systems and tools in place. Various departments manage requisition, sourcing, procurement, and accounts payable processes. Furthermore, departments might work with different suppliers that use their own independent systems.
Many departments, vendors, and suppliers insist on sticking to their established processes in scenarios such as when introducing a new ERP system. The widespread use of paper invoices and manual systems further exacerbates this.
Unless all the departments and vendors involved streamline their processes and use a unified automated system, enforcing a single P2P solution is practically impossible. Non-integrated systems ruin the essence of purchase-to-pay solutions because they create room for confusion, delays, and inflated purchases.
Spend visibility and reporting challenges
The unintegrated and manual systems discussed above make tracking spending difficult and prevent access to real-time data. Such outdated systems and processes mean that reports must be obtained from diverse sources and compiled later.
Many procurement systems lack built-in reporting functionality and spend visibility. This limits employees’ use of the system and forces them to generate reports manually. Such systems make it difficult to get accurate, real-time data or conduct analyses.
Companies also sometimes avoid procure-to -pay software that has an automated system and produces auto-generated reports because of pricing factors.
The Procurement Strategy Playbook for Modern Businesses
Download the ebook to learn how to modernize your procurement strategy and realize the benefits of tech-enabled procurement.
Top procure-to-pay tools of 2022
If you’re looking for the right solution to automate your procurement process, check out these top-rated options. To learn more about each, read our full review of today's top 7 procure-to-pay tools.
Order.co
Order.co combines simple, intuitive design with powerful back-end features to create a platform everyone in your organization will value. It offers purchasing through a streamlined catalog with dynamic spend permissions and guidelines. Order.co is great for companies of any stage or size, with capabilities to support multiple locations using centralized, automated functionality.
PRM360
PRM360 gives buyers using the platform for e-procurement a visible, streamlined process. It features real-time reporting on bid processes and automated payment solutions for quick, spend-optimized procurement. The platform is best for mid-market and enterprise customers.
Coupa
Coupa is one of the largest solutions for enterprise customers looking to automate the procurement process. The platform offers a guided buying process with vendor management, inventory management, and other features. Coupa is a component of the Coupa digital management suite for end-to-end enterprise resource planning (ERP).
Zycus
Enterprise users choose Zycus because of its compliant, guided buying options. The tool uses an AI engine to enable and automate the procurement process. It offers robust integrations that allow users to extend the platform for controlling and monitoring spend and risk.
JAGGAER
Billed as the world’s largest independent spend management tool, JAEGGER serves clients across all market segments with procurement management and processing. The tool integrates with other top-quartile business management tools to enable automated P2P.
The keys to the successful implementation of procure-to-pay software
Despite the challenges some companies face when buying and implementing their procure-to-pay solution, the ability of these systems to reduce maverick spending and save time cannot be ignored.
In order to select and properly implement the right P2P system for your company, bear the following things in mind:
Start with a needs analysis
A SaaS or SAP solution will only work if it addresses your company’s needs. Knowing your current purchasing process and P2P process helps determine whether you need a sourcing system, purchasing tools, vendor management system, or a full P2P system. It also reveals budgetary issues, gaps in business processes, supplier relationships, strategic sourcing, and spend management.
Knowing the current problems and the proposed procurement system’s potential solutions gives you more leverage when bringing your management and team on board. Moreover, a needs analysis enables you to identify the best individuals for implementing your new procurement solution and helping the team adjust.
Move to a pilot phase and continuous evaluation
Based on your needs analysis, choose a user-friendly system that fits the capacities of your organization, employees, and vendors. Then conduct a pilot phase to test whether your software solution is feasible and compatible with your transaction needs and lifecycle. Once implemented, you will also need to evaluate your P2P solution periodically to ensure that you are reaping the intended results and conducting data-backed optimization.
Continue with stakeholder education and involvement
Apart from conducting a pilot phase, also educate and involve your employees and the vendors or suppliers who will be using your P2P solution. Involving all the relevant teams helps you get important user feedback and suggestions for the system.
Training and providing necessary information through videos, handbooks, and FAQs reduces challenges for colleagues, vendors, and suppliers as they adapt to the new system. This empowers them to adopt and implement your P2P management solutions quickly.
Choose full automation and integration of purchase requisitions
If you really want to reduce inefficiencies through a procure-to-pay suite, opt for an automated and integrated solution. Access to data will make it easier for your employees to avail reports upon request. Ensuring every department in your company and external team uses the same procure-to-pay software will fast-track its implementation and improve your procurement processes.
Automation should include a mobile approach to allow all relevant stakeholders to access the system anywhere they have an internet connection. This reduces delays in decision-making and approval of requisitions. In addition, your automated P2P solution provider should advise on the best way to migrate and store your data when transitioning to the new system. Given the sensitivity of data, ensure migration and storage are secure.
When done correctly, automation and integration enhance transparency and cut out bureaucratic delays. It facilitates timely payments and deliveries while giving employees time to focus on other important duties.
The Procurement Strategy Playbook for Modern Businesses
Download the ebook to learn how to modernize your procurement strategy and realize the benefits of tech-enabled procurement.
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Appoint a P2P system manager
A good procurement system is only as efficient as those managing it.
Unless you appoint specific people to be accountable for properly implementing your P2P system, you will end up with poor implementation and blame games amongst employees and different departments.
If your organization has no supply chain department, allocate this task to the finance team or outsource management services, preferably from your procure-to-pay solution service provider. Alternatively, hire an in-house team or form a department tasked with handling all your e-procurement matters, depending on your needs.
Plan compliance and policy reforms
Regardless of how well you prepare your employees, vendors, and suppliers, you will still encounter some form of resistance during the implementation of your new procure-to-pay solutions. Some suppliers and vendors might insist on using their own system, while your employees may struggle to adapt to the new way of doing things.
This calls for compliance and policy reforms compelling everyone to adhere to your new contract management and procurement process. If anyone comes with a non-purchase order invoice, refer them to the new invoicing and three-way compliance requirements.
If you compromise on this, you risk failure and the possibility that your P2P system might never be used. The best way to introduce these reforms is to communicate them to all the relevant stakeholders and employees at least three months before they come into action.
Start looking for the spend management system that fits your needs
Choosing a needs-based procure-to-pay solution and involving both your team and external stakeholders ensures the success of your new procurement management system.
Order.co is a user-friendly, intelligent spend management system that works for your entire organization by:
- Giving your finance and operations teams full visibility into tracing and managing all their purchasing needs
- Providing other departments with easy traceability of their spending
- Allowing users to make purchases and pay for goods on one platform
The time to automate your process and close cash gaps is now. Begin by choosing the right software to enable your organization. Check out our guide, Choose the Right Procurement Technology, to start your search.
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Sustainability, once considered a “nice to have,” is now standard practice for most businesses. Procurement is leading the way in promoting sustainable operations and supply chains. Already, major global brands like Bain, Bayer, and Air Liquide, are pledging their commitment to sustainable procurement.
How can you be sure you’re increasing the stability and sustainability of your supply chain? How can you partner with vendors that align with the environmental standards of your brand?
As we discuss the basics of developing a more sustainable procurement process, you’ll learn:
- What is sustainable procurement?
- The benefits of increasing procurement sustainability
- Why companies are moving toward sustainability
- How one top brand makes sustainability a competitive advantage
- Steps to build a sustainability strategy for your brand
What is sustainable procurement?
Sustainable procurement refers to purchasing goods and services produced using more environmentally responsible sourcing and manufacturing practices.
Though “sustainable” is a vague term covering many practices, it can be understood as any practice that intends to preserve the natural world, conserve resources, conduct environmental stewardship, and reduce negative environmental and social impacts.
Here are some examples of sustainable actions businesses take:
- Reduction of water use or water pollution
- Use of renewable raw materials and natural resources
- Ensuring human rights and safe working conditions
- Reduction of all sources of greenhouse gas emissions
- Production of lower-carbon and recyclable goods
- Localized production to reduce transportation impacts
- Avoiding the use of toxins (for instance, PFAS and other “forever chemicals”)
Sustainable procurement requires companies to conduct due diligence and vendors to make their sustainable procurement strategies transparent. The goal is to ensure that chosen suppliers—both your direct vendors and those upstream and downstream in the supply chain—proactively seek ways to minimize waste and reduce carbon footprint.
Operations leaders must follow suit to future-proof their businesses. The best way to do this is to procure goods and services from environmentally conscious suppliers and vendors.
Choose the Right Procurement Technology With This Decision Matrix
There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.
Benefits of sustainable procurement
Sustainability is about more than appearances. Yes, customers connect with the idea of brands acting as environmental stewards as the average person begins to focus more closely on the conditions we create for future generations and the near-term habitability of the planet.
Implementing sustainable procurement practices in your organization also has its own internal benefits.
Here are some ways sustainability drives cost savings and value creation:
Better cost efficiency: As it turns out, saving the planet can also translate to saving cash. Because part of sustainable practices is conservation of resources, sustainable brands generate less waste and therefore save money. Strong ESG credentials drive down costs by 5 to 10 percent as these companies focus on operational efficiency and waste reduction.
Early compliance adoption: As the world warms and governments take notice, legislation will enter the sustainability equation. Get ahead of legislation and implement sustainable practices now (versus awaiting some future mandate). This way, you build a more adaptable business that avoids obstacles as new laws come into play.
Increased brand reputation: Companies that champion sustainability efforts gain recognition in the market. By becoming proactive about sustainability, brands are more likely to connect with impact-minded consumers. In turn, this extends their market reach and strengthens positive brand association.
Why sustainable procurement is important
Sustainability drives operational and cost benefits, but brands should remember consumers will opt into your brand (or out) based on your perceived ESG commitment.
Brands take a stand on sustainable products and processes because they know the stakes are high. Consumers and investors want businesses to prioritize sustainability, and they’ll favor those that do.
Research from IBM shows that close to 80% percent of consumers say sustainability is important to them. Of those, 60% percent would even be willing to change their shopping habits to reduce environmental impact. With Gen Z shoppers leading the way in this consumer shift, these numbers will only grow.
Climate change is a reality consumers and corporations can no longer ignore. One hundred- and even 500-year outlier events such as fire, flood, drought, and superstorms occur more frequently, making environmental impacts part of the daily news cycle.
Consumers literally can’t avoid the conversation on sustainability. Gen Z (who, along with Gen Alpha, will bear the brunt of climate change over the next 50 years) views it as the most important global issue.
Much of the environmental crisis is the result of commodity production. Almost 90% of global deforestation is related to the expansion of agriculture, such as production of key commodities like timber, cattle, palm oil, and soybeans.
Consumers that make that connection change their behavior—they vote with their wallets. Following last year’s cattle-ranch-related fires, for example, some consumers took a stand by becoming vegetarian.
These trends will continue as the next generation becomes more aware of the risks commodities and consumer goods production has on the environment.
Investors care about sustainability, too
Investors increasingly move their capital to funds related to Environmental, Social, and Governance (ESG) matters to guard against risk—both from disillusioned consumers and from business-continuity issues. If companies don’t respond to these shifts, they put their share price in jeopardy. Companies should take heed or risk sinking their share prices.
ESG assets are set to expand exponentially, rising to $53 trillion dollars by 2025, according to data analysis from Bloomberg. BlackRock even went so far as to say the firm would avoid investing in companies that pose sustainability-related risks.
“I believe we are on the edge of a fundamental reshaping of finance,” Larry Fink, CEO of BlackRock, wrote in an annual letter to chief executives.
Companies have a duty to their shareholders to respond to this shift, and sustainable procurement is one of the most straightforward ways to do that.
It doesn’t require you to invest years into building wind turbines or reducing your emissions—although these things are also important. You just need to take a strong stand and eliminate suppliers that expose your business to environmental-related risks. After all, guarding against risk is one of procurement's primary objectives.
Choose the Right Procurement Technology With This Decision Matrix
There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.
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Sustainable brands are already winning
The data is in, and it shows that brands prioritizing sustainable procurement will outperform those that don’t.
ESG investing is already paying off. Higher ESG-rated companies fared better than lower ESG-rated companies when markets tumbled at the start of the COVID-19 crisis, and BlackRock believes this trend will continue.
In a recent report, the firm said, “We believe companies managed with a focus on sustainability should be better positioned versus their less sustainable peers to weather adverse conditions while still benefiting from positive market environments.”
The evidence from successful companies concurs. One example to consider: Patagonia.
Patagonia is a champion for sustainable initiatives, even encouraging consumers to repair their old gear before purchasing something new. In 2011, their famous ad in the New York Times told customers, “Don’t buy this jacket.”
The ad was a hit. Patagonia saw a 30% increase in sales.
More recently, the company went so far as to change its entire value proposition. The company website now features, as part of its core values, items like “build the best product” to reduce waste and prolong usability and “cause no unnecessary harm” in the operation of its stores and manufacturing. The brand also strives to “use business to protect nature” by identifying and solving social problems. As Patagonia is a privately held company, exact growth figures related to their corporate social responsibility efforts aren’t publicly available. However, given the positive response on social media, we have to assume their strategy is working.
Whether you’re a privately owned company with just 100 or so products, or a publicly traded behemoth owning more than 400 brands, sustainable business practices can win for you too.
How to create a sustainable procurement plan
Building sustainability standards for your business is a long-term, thoughtful process. It presents its own unique challenges and requires strong change management. When considering moving to a sustainable procurement strategy, start with these six steps:
1. Identify and align sustainable goals
Knowing the outcomes you’d like to achieve is the first step in crafting sustainable development goals for your organization. There are a few common goals organizations look to achieve when implementing sustainability:
- Reducing waste in internal manufacturing processes
- Reducing water usage and impact
- Minimizing carbon footprint or emissions
- Increasing vendor diversity and equity
- Increasing use of fair market suppliers and products
Take time to interface with the various stakeholders and departments involved in this process, from the executive team and finance department to legal and manufacturing.
2. Establish sustainability standards
Build a framework to evaluate potential new suppliers and move toward sustainability within your current supply chain. Using the goals identified in step one of this process, create a baseline for your sustainable supply chain. Identify standards across the value chain and commit to incremental improvements toward your end goals.
Focus on a few standards to look for in new and existing vendors:
- Carbon emission reduction reports
- Utility and energy consumption
- Waste reduction and recycling targets
- Freight distance and logistics practices
- Supplier diversity metrics
3. Assess your current supply chain
Once you have standards in place, take a look at the current state of your supply chain. How many of your vendors (if any) meet the standards you’ve set? Take time to interface with your suppliers. Conduct due diligence into their internal sustainability goals, and use that information to inform future contract decisions and negotiations. Where possible, consolidate vendor lists, which can reduce secondary sources of emissions by ordering from fewer sources.
4. Implement a sustainable procurement policy
With goals and standards in place, put your baseline plan into action. The idea to keep in mind here is “progress over perfection.” Begin with a small-scale deployment. Identify opportunities to improve sustainability as contracts come up for renewal. Add to your plan as your understanding of desired outcomes and objectives improves.
5. Educate stakeholders
Driving sustainable change is a top-down measure. Educate your buyers and other stakeholders on the new practices in place. Be sure to pair your program with a strong procurement process that enables end-to-end visibility in all of your purchases.
6. Measure and refine
Sustainability requires long-term maintenance to be successful and ensure the continued strength of your sustainability partners. Once your first iteration of the program is in place, commit to regular vendor lifecycle reviews to ensure your vendors meet your sustainability and performance benchmark. Conduct internal audits to ensure your brand is meeting its sustainability goals.
How Order.co supports sustainable procurement
Procurement platforms help create visibility in the procurement process, a key condition to improve sustainability in your purchasing. Using Order.co, companies increase the efficiency of their supply chains and streamline their order process to reduce issues like redundancy and ordering errors.
Order.co allows buyers to take control of their purchasing process through:
- Buying from preferred vendors and curated selections
- Understanding usage trends to make better purchasing decisions
- Reducing waste and unnecessary spending in the procurement process
If you’d like to learn more about driving efficiency in the procurement process, take a look at our free resource, The Operational Efficiency Handbook. It offers even more ideas to increase the efficiency and visibility of your purchasing process.
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