CPOs and other procurement professionals are under constant pressure to improve process efficiency and eliminate maverick buying, both of which help improve the bottom line.
This is not new. What is new is the addition of digital capabilities—like mobile, social, cloud and analytics—and the ways in which they can help optimize procurement processes.
Sure, any business will benefit from implementing e-payments or automating singular procurement tasks. However, point solutions are limited and don't capture the additional benefits offered by end-to-end integration of data and process steps into a modern, digital platform.
What do digital capabilities bring to the table? Individually, mobile capabilities or social collaboration might help improve one or two steps along the procurement chain. However, it’s when you combine digital capabilities—mobile access, plus social collaboration, plus embedded analytics and access from anywhere, plus tailored reporting—that you achieve game-changing results.
Automation eliminates manual tasks, which reduces errors and saves time and money. The savings can be big, such as at CyraCom, a growing provider of language interpretation services to businesses.
The company was able to completely automate the accounts payable invoice matching process—to the point where only exceptions require human intervention. The accounts payable system in Oracle Procurement Cloud uses a matching algorithm that compares line items on purchase orders and invoices to automate reconciliation. Only exceptions, where something doesn’t match up, are flagged and routed to a human being for review.
Data integration is also key. Once data goes into Oracle ERP Cloud, all functions can draw on it. This is also a crucial part of seamless mobile extension.
By eliminating manual processing and duplication of data entry into multiple systems, CyraCom was able to eliminate 2,000 man-hours of work. CyraCom also implemented purchasing controls that reduced their annual spend by 12 percent.
Another upside of automation is that it frees up financial professionals to work on more strategic, high-value activities.
"It takes away a lot of the time that I was spending on non-value-add activities," said Steven Van Houten, CFO of real estate developer Rancon Group. "I don't have to worry about how to get reports out to my management team or get information to investors. We can largely rely on the system to take care of that for us, and we can focus on making good decisions."
Email has proven to be a highly inefficient way to collaborate. Some estimates put the average number of email transactions (sending and receiving) per employee at more than 120 daily. Multiply that by the number of managers and subject matter experts who must review RFPs, contracts, requisitions, approvals, purchase orders and invoices, and you get an idea of how slow "electronic" procurement really is when it’s email-based.
Social collaboration that streamlines authoring and review of documents is the antidote. Social conversations are embedded into Oracle ERP Cloud, and each conversation is associated with a particular transaction or document. As someone is authoring a document, others in the organization can review and provide feedback as comments, or edit the document directly. This collapses the back-and-forth cycle of reviews and can even enable sequential, collaborative authoring.
Efficiency goes up, of course, but faster cycle times also can reduce costs by allowing Accounts Payable to take advantage of cash discounts for early invoice payments and enabling quick-response strategic sourcing when vendors make short-term discounts available.
The source-to-pay cycle is full of repeatable tasks and ripe for standardization. Most of the time, someone is reinventing the wheel every time he or she prepares an RFP or contract. Digitization eliminates the need to do this because standardized documents, contract clauses, requirements and other data can be stored in the application’s clause libraries and drawn upon repeatedly.
Standardization also improves management and accessibility of procurement-related content. All documents and records are in one database, are secure and backed up, are easily searchable—and because they are in the cloud, they are accessible from anywhere with the proper security credentials.
Another way in which standardization improves procurement performance is by strengthening spending controls. When an organization strategically sources supplies with projections of a certain amount of savings but does not have control of employee spending, those savings can be diminished.
Standardizing on a self-service procurement application can prevent this. Employees can log into the system and search for what they need from a catalogue of approved vendors. When they make a choice, the system automatically routes the request to the right approver. Once the approvals are captured, the solution automatically triggers a purchase order and sends it to the supplier.
Prior to using Oracle Procurement Cloud, CyraCom lacked a formal approval process for employee purchases. Now, with automated, self-service systems for requisitioning and approvals, the company has control over “maverick” spending and a standardized, efficient process that all employees must follow.
The bottom line for procurement leaders is that digitization offers indisputable benefits for lowering operational costs and controlling enterprise spend. But, these benefits are greatest when using a comprehensive solution that integrates source-to-pay functions and data, offers mobile and social capabilities in the cloud, and automates tasks that slow down processes and suck away valuable strategic resources.
For a more in-depth look at the business reasons to digitize procurement, I encourage you to read the Spend Matters paper, "Connecting the Disconnected Dots of Risk, Return and Compliance in Strategic Procurement."