March 25, 2020 Last updated April 2nd, 2020 985 Reads share

RPA: The First Step for Procurement Automation in SMBs

Image Credit: DepositPhotos

Picture this: The product design is finalized, and it’s time for procurement to get to work.

Your team keys in the specifications of the required items into your sourcing software, and it sends out the RFQ all by itself.

The software has chosen suppliers based on past data and even added more new suppliers that fit your criteria from scouring the internet.

After the quotes come back, your software evaluates the quotes and gives you a report, complete with suggested ideas for negotiations.

Even better — it monitors your suppliers’ performance, ensures that they comply with contract terms, and pays them automatically, too.

This may seem like a distant dream, but Artificial Intelligence (AI) is already bringing this close to reality.

Technologies like Robotic Process Automation (RPA), Natural Language Processing (NLP) and Machine Learning (ML) are transforming how source-to-pay processes are being done.

Given the many constraints facing small and medium-sized businesses (SMBs), it may seem like a lofty goal for your business to implement AI.

If you’re not ready, you don’t have to go down that route (for now), but there are smaller steps — like RPA — that you can take to begin your procurement automation journey.

Once you have taken this first step with RPA, you can further broaden your digitalization roadmap to include more complex AI tools like NLP and ML, for procurement and beyond.

Most Automatable Procurement Tasks

McKinsey found that 56% of source-to-pay tasks are actually fully automatable, or largely automatable using existing technologies.

Of these, as you would expect, tasks that are highly transactional, such as payment processing and placing and receiving orders, are the ones that are most automatable. In fact, for these categories, around 90% of the tasks can be automated.

In the procurement process, there are many tasks that are manual and time-consuming — contract management, supplier relationship management, category management, to name a few.

If you have not looked into automating at least these transactional tasks, there is no better time than now.

These tasks are essentially the low-hanging fruit of procurement automation and can be done easily by SMBs and large corporations alike.

Are your staff members generating the same report month after month, doing the same processing steps to prepare data? Are they manually looking through contracts and making sure that suppliers are compliant?

RPA May Be Your Solution

RPA software lies on top of your original IT system and manipulates your applications in the same way your workers use the applications to complete their tasks.

Essentially, RPA bots emulate human workers.

They learn and repeat the tasks your workers do, perfectly and lightning-fast. So, RPA’s best value is in carrying out repeatable, predictable and stable tasks that your human workers are doing over and over again.

What kind of tasks are these? How do you find out which processes you can automate with RPA?

These are some of the traits you can look for:

  • Highly manual and repetitive
  • High-volume
  • Requires little judgment to execute
  • Stable and requires little to no exceptions management
  • Requires collation of information from several sources
  • Non-ambiguous i.e. can be broken down into simple rules

In procurement, it’s likely that you’ll find many tasks that fulfill these criteria. These will form a good shortlist of activities for further evaluation.

Benefits of RPA

Increased Efficiency and Accuracy

Since you have already chosen non-ambiguous, rules-based tasks to be performed by the bots, you can be assured that RPA will perform with top-notch speed and accuracy.

Unlike human workers, these bots will not make mistakes while duplicating data, can perform rule-based work much faster, and don’t need to sleep.

Meanwhile, you can train your existing staff members to manage exceptions flagged by the bots and to carry out tasks that require judgment and interpretation.

You can also assign more staff members towards more strategic efforts that require the human touch, such as procurement strategy formulation, contract negotiation, and relationship building.

The results of a recent survey by Deloitte are consistent with this. Respondents see benefits of RPA adoption materializing in various aspects: improved compliance (92%), improved quality/accuracy (90%), and improved productivity (86%).

Cost Reduction

Another immediately obvious advantage of RPA is that you can scale up your business without adding headcount.

Think of what just one extra headcount costs — salary, healthcare, benefits, and more — and you’ll find that your investment in RPA pays for itself in no time.

According to the Institute for Robotic Process Automation & Artificial Intelligence, RPA robots cost around one-fifth the cost of onshore full-time workers and one-third the price of offshore full-time workers.

Deloitte found that companies see payback at less than 12 months.

Minimal Disruption

RPA, being a standalone software that lies atop your existing IT infrastructure, is simple and relatively cheap to implement.

It also does not disrupt your existing processes in an invasive way, so it is quick to implement. Using RPA, you can reap almost immediate rewards from automation.

Overcoming Obstacles to Successful RPA Adoption

Difficulties Getting Staff on Board

Information Services Group (ISG) found that resistance to change was one of the most prominent impediments to RPA adoption, in Europe at least: 33% of respondents said that this was the main barrier to increasing RPA adoption.

This could perhaps be due to the misconception many people have that AI and robots are here to replace humans — to take away their livelihoods.

To counter this, communicate openly with your employees. Do some internal marketing to let them know that RPA is here to eliminate low-value work so that there is more capacity for human employees to carry out more purposeful work.

Not only will productivity increase, but they will also grow more in their role and enjoy a more satisfying career.

Difficulties Choosing the Right Processes to Automate

According to The Shared Services & Outsourcing Network, 38% of automation initiatives did not match clients’ expectations because wrong processes were being chosen for automation.

To identify the best processes to automate, you must first be clear on your company’s vision, strategy, and objectives.

You can then prioritize processes that align with your business’ objectives, making sure you will get the most impact out of your automation project.

Over to You

No doubt there are some obstacles you need to overcome before you can reap the benefits of RPA in your procurement process.

But the cost of implementation is relatively low, and the advantages in terms of increased efficiency, increased compliance and reduced costs are many.

RPA adoption is expected to explode in the years to come — in fact, it’s expected to be ubiquitous in less than 5 years. So, all your competitors are likely to be looking at them too. And when they do implement these solutions, they will gain a competitive advantage over you.

It’s time for you to start your digitalization journey and jump on this productivity bandwagon before all your competitors do.

Don’t get left behind.

business process concept -DepositPhotos

Winnie Mina

Winnie Mina

Read Full Bio