The procurement process is a complex series of workflows that spans various systems, departments, and operational business units. Because of this complexity, it can also be prone to errors, risks, and costly inefficiencies. And that’s where smart procurement comes in.
Smart procurement is the use of technology to improve efficiency and help build more agile procurement processes. The benefits include cost savings increase, better decision making and risk management.
What is smart procurement?
Smart procurement is the use of advanced technology, such as AI, automation, and RPA to optimize procurement processes and relieve professionals from monotonous tasks in order to achieve greater efficiency.
Smart procurement leverages data to reduce risks across all procurement processes and identify opportunities for long-term and continuous forecasting and optimizations. This also leads to more efficient and strategic procurement.
Artificial intelligence plays an important role in the popularization of smart procurement for its ability to track and analyze data faster than ever before. Other technologies commonly used are IoT, business process automation (BPA), and blockchain. While these tools can lighten workloads and improve agility and decision-making, they can’t operate without the input of humans.
Smart procurement can leverage automation for processes like contract management, vendor management, request management, and procure-to-pay. The goal is to reduce manual work and therefore reduce errors and time-consuming tasks.
Following global disruptions that halted supply chains and shifted business models from reactive to proactive, smart procurement is essential for:
- Navigating business challenges
- Increasing transparency.
- Making more agile and accurate business decisions.
- Maximizing operational efficiency by lowering costs related to mismanaged or disconnected processes.
Smart procurement vs. intelligent procurement: is there a difference?
Smart procurement and intelligent procurement are synonyms and therefore there are no substantial differences between them. They both refer to the use of technology to make manual, labor-intensive procurement processes more efficient.
Smart procurement technology
Examples of smart procurement technology include:
AI and machine learning (ML)
AI and ML are used for solving various challenges and improving operational efficiency by utilizing automated statistics. Some of its usages in the procurement sector are spend classification, SLA tracking, vendor matching and inefficiency detection.
RPA
Robotic process automation gives the ability to automate repetitive tasks and processes, relieving the workload so employees can focus on strategic activities.
Advanced data analytics
Analysis of data through the process of organizing, interpreting, discovering, and sharing patterns or trends is essential. Advanced analytics assess procurement data and draws meaningful insights and identifies risks, inefficiencies, and opportunities to streamline or optimize procurement workflows for better, more data-driven business decisions.
Internet of Things (IoT)
IoT refers to the global network of smart devices that collect and share data. By facilitating communication between all systems, data reliability is improved. This leads to more accurate data collection and reliable data analytics.
Blockchain
This is a form of database that provides a secure and transparent way of tracking valuable or sensitive information. Because procurement processes handle a lot of confidential and sensitive information, having a secure flow of information is necessary.
Benefits of smart procurement
A recent Pipefy’s survey of business and IT leaders found that for more than 50% of all respondents, the leading benefit of applying AI to existing process automation initiatives was better use of employee time.
But the benefits of smart procurement go far beyond. In detail, main benefits of smart procurement range from better use of employee time to greater cost savings and risk management.
More time to focus on what matters
One of the biggest goals of smart procurement is to reduce the amount of human intervention required to perform routine tasks. By automating lower-value and repetitive activities of the procurement process, employees have more time to focus on what matters – higher-value projects and strategic goals.
Greater cost savings
Smart procurement increases cost savings by optimizing work hours, reducing total expenditure, minimizing supply chain risks and maximizing ROI. More efficient procurement processes mean less maverick spend and expensive errors.
Better and faster decision making
Smart procurement leverages data to support better decision making. For example, with the analysis of supplier performance data, purchase managers can make decisions that benefit the company faster and more accurately.
Enhanced risk management
Through a data-driven approach, smart procurement is able to predict possible risks so the business can be proactive about taking action.
By leveraging a tool that provides data dashboards and AI capabilities, gathering and analyzing the necessary information for minimizing risks is made easier, as is ensuring compliance and alignment with larger business strategies and goals.
How to implement smart procurement in your business
Best practices for implementing smart procurement include automating and streamlining repetitive and manual procure-to-pay tasks via process automation software. Once a solution has been implemented, make sure employees can work with it easily and continue to adjust the system and goals as time goes on.
Follow the steps below to implement smart procurement in your business.
Start small and scale
A big challenge in implementing smart procurement is feeling overwhelmed by the changes before the changes are even implemented — and especially so if a process is being completely redesigned.
This attitude can affect tool adoption and results. Limit the number of initiatives being considered for implementation, and start at a smaller scale before taking on larger improvements. Begin with a single process or workflow to test, or wherever the most attention is needed.
Also, making sure your processes are scalable is a very important step. As the business evolves, your procurement will also evolve and it needs to be ready for fast adjustments and to grow with the company. For this reason, it’s important to choose a tool or software that allows for agile process customization.
Map and analyze your procurement process
Mapping your process includes identifying the sequential steps in each workflow, in addition to mapping the people, work, and tools necessary for completing each step.
This is necessary to have visibility and find improvement opportunities, so it’s the first step in implementing smart procurement. Once the people, processes, and work have been mapped, analyze each step and workflow for inefficiencies, repetitive tasks, or irregularities. In order to implement smart procurement effectively, it’s best to begin with a “cleaned up” procurement process to ensure that changes and optimizations are successful.
Clean, centralize, and categorize your data
Data is at the core of smart procurement, so begin by gathering, categorizing, and analyzing organizational records. This will illuminate any trends, gaps, or opportunities, in addition to providing a full picture of company patterns by team, department, or business area.
Don’t forget to create a record of the raw and visualized data as well to share or refer back to later on in the process.
Automate manual and repetitive workflows
Workflow automation refers to the use of software to complete work activities. It improves the accuracy and consistency of workflows and powers more efficient processes. Most importantly, it streamlines manual processes and minimizes the amount of labor required to produce a specific result.
Some great candidates for workflow automation include:
- Purchase request intake and review,
- Purchase orders,
- Invoice approvals,
- Contract and compliance management,
- Supplier performance management, and
- Work handoffs between teams or processes.
Leverage software integration
It’s best to opt for procure-to-pay software able to easily integrate with existing tech stack. Consolidating all procurement activities in one place will provide a seamless experience for employees and suppliers. This will also prevent spreadsheet sprawl, missing information, or errors as a result of manual, human intervention.
Invest in procure-to-pay software with AI
Technology is essential for your procure-to-pay. According to the 2024 Procurement Data Report by Amazon Business, 98% of respondents reported having plans for investments in analytics and insights tools, automation, and AI for their procurement operations in the next few years.
Pipefy is a no-code business process automation solution that can help your organization automate your end-to-end procurement processes and significantly increase your efficiency, productivity, and output.
With Pipefy, teams can:
- Communicate more efficiently with stakeholders, vendors, and requesters.
- Streamline the P2P processes through automation.
- Get accurate data to measure, control, and improve business cost optimization.
- Reduce errors, redundancies, and costly processing and sourcing mistakes .
- Reduce the possibility of financial losses or delayed payments.
