Procurement—one of the integral aspects of the Supply Chain—needs to be designed strategically to ensure Supply Chain effectiveness. Procurement essentially encompasses the process of choosing the right suppliers or vendors, negotiating the best payment terms and finally purchasing the raw material from them. By setting up a well thought of procurement system, Supply Chain managers can rest assured that the business has access to high-quality suppliers at the right price, from compliant vendors. Effective procurement is vital for sustained business success.
Let’s briefly look at a typical procurement cycle. The first step, of course, is the identification of the business requirement. Once that is done, managers need to authorize the purchase request so that the particular team can go ahead and connect with the right suppliers. After approval, the team zeroes in on the suppliers who can provide them with raw material at the best possible quotation. Next comes in negotiation, and finally the selection of vendors. Next up, activities like purchase order acknowledgment and advance shipment notice are carried out. Once the goods are received an invoice is generated and matched, and then finally the pending payment is paid off.
Any business will follow the above steps, some a few more and some less. But essentially the process will more or less remain the same from identification to payment. On observing carefully, one can see that procurement involves several processes and activities that are repetitive in nature. For example, approval of the purchase request is a somewhat repetitive activity. Devoting a resource specifically for checking and approving is somewhat redundant. Businesses can, in fact, look at computerizing this activity entirely. By feeding in data on factors like the maximum limit of spend on a purchase activity or the list of products that can be procured, the approval process can be automated. Similarly, a number of other repetitive processes in the procurement cycle can be completely or partially automated. This will free resources including time, money, and manpower. Employees can engage themselves in other activities that add value. Moreover, by automating manual work businesses can ensure minimal room for error and increase the efficiency of such operations.
That leads us to the next big question? If you run a business, how can you automate procurement effectively?
It all starts with understanding your business and your procurement process. By doing an in-depth analysis of the procurement cycle, you can better gauge your areas of expertise and the areas of improvement. You need to ask the right questions, beginning with: What are the problems and concerns that your procurement experts face and how can automation help in solving them? You need to evaluate how your business is conducting processes like procurement identification, approvals, selection/managing suppliers, or generating invoices. Once you are able to zero in on how automation can help move your business towards higher efficiency, you will be able to understand the scope for automation and how to correctly implement it in the right activities.
You need to define and understand the various branches of the procurement process. By using flowcharts, you can consistently create a blueprint of sorts for the entire process and understand the areas that have scope for automation. Remember, automation is all about identifying repetitive jobs and then putting in place code that runs and gets the work done. This activity of creating a flowchart will help you identify work that can be completely automated along with work where you need to retain flexibility. Automotive supply chain solutions will help businesses to solve problems pertaining to approval of purchase requests, sourcing, and even evaluation and management of supplier base.
You can make your business operations even more effective by automating some areas of the sourcing function. Communication, management, and evaluation of suppliers are also crucial. Automation will ensure enhanced, more transparent, and real-time communication with all your suppliers. Thanks to automation, buyers will be able to respond to bids more quickly, track orders, and generate invoices error-free.
The procurement function thus involves a series of activities that can easily be computerized or automated. By eliminating redundant work and automating it, you drive your business towards accelerated growth and higher efficiency and can let your resources be engaged in high-value tasks. It is a win-win for everyone.
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