Current and Future Prospects of Robotic Process Automation (RPA) for Procurement organizations

By Suchismita Dhal

March 31, 2018 at 1:32 PM

RPA Today and Its Prospects in Procurement:

The adoption of Robotic Process Automation or RPA is at an all-time high across multiple horizontal processes in different organizations across the world. It is currently considered as one of the biggest technological change levers to reduce manual effort. Amongst industry-agnostic RPA applications, the procurement (purchase to-pay) function has great potential to generate significant value for organizations through automation. RPA offers an opportunity to create improvements to the procurement function that will translate into real cost savings and efficiency improvements, through automating time-consuming manual tasks which are best suited for bots and for allowing better utilization of scarce procurement resources. RPA has been implemented in multiple areas of sourcing and procurement processes, starting from procurement cycle reduction, invoice generation, payment processing, bidding, and contract negotiation. Currently, bots are able to support both buyers and sellers in the procurement domain.

Following are examples where robotic process automation is being utilized in the domain of procurement:

  •  E-Procurement and self-service procurement systems - RPA can be used in eRFX creation, data entry for PR to PO, e-procurement, shipment tracking, consignment creation, warehouse inbound and outbound, order entry and many more generic procurement processes.  At present, companies are using chatbots coupled with back-end process orchestration, which has emerged as a key tool for buyers to raise purchase requests while chatting with bots and avoiding multiple back end processes. Bots have also proven to be very efficient and accurate in account payable functions. Dedicated procurement bots can digitalize the invoice through image scanning, perform several checks for mandatory information and pass it through user-designed workflow to obtain approvals, and process payment. These bots can help reduce invoice reconciliation errors that can at times lead to remittance errors and an annual savings of up to 0.1 percent rate of spend. It can save up to USD 1 million for annual spend of USD 1 billion in an organization. 
  • Contract management - Advanced procurement bots can help review contracts and compare them against best-in-class templates and flag terms and conditions that are non-standard. It also helps in addressing a large set of contracts that are tactical or non-strategic in nature, reducing the cycle time for contract review. This automation can help the procurement resources to use the additional time to exercise a greater level of scrutiny and oversight on strategic contracts and negotiations. Bots can track contract use over time to identify and collect on rebates, pricing details, and other discounts, remuneration changes or penalties related to service-level agreement issues. Bots can also proactively adjust invoice payments to account for reduced payments, as well as issue supplier notifications and address supplier questions or disputes
  • Category management - Machine learning and fuzzy logic bots can be programmed to support spend analytics and category management initiatives. Procurement bots can classify procurement transactions into designated categories with higher accuracy. This also results in quick, efficient and timely analysis of spend. Predictions can be made based on spend and supply data from internal and third-party sources. Machine learning can support vendor matching and consolidation efforts, spend classification, price and pay anomalies, and price projections for better category management.
  • Supplier relationship and risk management - Bots can be utilized to collect data from multiple sources to evaluate/ track supplier details and performance. They can also build automated dashboards to support better decision making. Supplier onboarding and enablement processes are often manual, repetitive, and lengthy. Procurement bots can automate many of these tasks, including background checks, supplier document review, and supplier follow-up in cases of missing information or documents.

Dhal article 3-2018.pngThe use of big data and sophisticated analysis tools enable procurement teams to identify and fix many underlying factors in terms of forecasts, planning, and life cycle costing and to make more informed procurement decisions. RPA also promises opportunities for better skill management by engaging the digital workforce in mundane jobs and freeing human talent pools to focus on areas that require human intelligence. It helps in minimizing operational errors and enabling workforces to focus on more cognitive and strategic work. The requirement of automation can be to reduce cost, increase scalability, improve quality and boost speed and improve utilization of skilled workforce.

The Future Road Map

RPA implementation is considered as the first stepping stone towards digitization of businesses. It promises substantial process improvements compared to legacy systems. Cognitive RPA widens the application of RPA to process activities using unstructured data, with the addition of machine learning, natural language processing, chat-bot technology, speech recognition, and computer vision technology. Natural language processing (NLP) functioning along with an RPA robot can understand a free flow of sentences and then process it. Machine learning allows the robot to identify and learn patterns, contexts, through repetitive exposure to a series of inputs and outputs. Chatbots with machine learning that mainly act as the interface between humans and other generations of robots, can learn from conversations and actually improve over time. The following figure depicts the progression of cognitive RPA and AI applications for procurement processes in the future.

Dhal article1- 3-2018.pngArtificial intelligence enables robots to mimic human intelligence. Unstructured data capture, pattern recognition, non-routine cognitive work and decision support are all areas of focus for AI. It is expected that AI robots will be able to autonomously manage the earlier generations of robots. Though such processes which need human intelligence are estimated to be less than 10% of the volume of automated process activities of a company, it has potential to deliver the highest value of all the generations of robots. The future is going to provide the opportunity for man and machine to interact and cooperate seamlessly, driving new levels of efficiency and productivity.

AI can help Procurement from an “Enabler” to a “Trusted Adviser”

Dhal article 2-3-2018.pngAI has already started playing a significant role for Pharma industry. There are many success stories of IBM Watson applications for drug development and clinical research for players such as Pfizer, Teva, GlaxoSmithKline, and Novo Nordisk. AI will further emerge as a viable solution for patient diagnosis, patient relationship management, disease detection, and compliance reporting. besides aiding in R&D operations. Though the adoption of AI in procurement organization is at a nascent stage, it is expected to rise in the next 5-7 years along with growth of multi-geographic sourcing model.

Dhal article 3-3-2018.png

No “One fit All” solution for Intelligent Automation

Organizations vary in size, scale, type and in their requirements for business processes automation. Although RPA is a recent trend and organizations are at different stages/maturity in their RPA journey, the real breakthrough is expected to occur through AI and Cognitive Automation. The major concerns during RPA implementation are scalability, security and sustainable way to code and maintain software. Users can introduce RPA to processes which can provide most of the automation benefit and then slowly move onto more complex processes, based on the results achieved. If implemented correctly, RPA will not only optimize time and resource requirements, but also will increase utilization of skilled workforce for developing growth strategy and other initiatives.

The Road Ahead:

The intelligent automation market is predicted to gain significant traction in near future. One cannot ignore the fact that, with the advent of intelligent automation (IA) and robots as a part of the virtual workforce, the expectations have been focused on increased speed and value creation. Enterprises will have to integrate IA for their own benefit and survival, with the numbers of such entities growing steadily. RPA initiatives are just beginning a transformative journey that will leverage artificial intelligence to solve business problems and requirements. Automation does not stop at putting bots to work. It takes the system one step forward towards a whole new world of digitalization (i.e. big data, analytic tools, internet of the things (IoT), and artificial intelligence (AI) implementation). The potential benefits of deploying these technologies include faster implementation with less effort and faster ROI.  The most important message for an organization looking for transformation is to think big from the start.

Tags: Procurement AI procurement machine learning Robotic Process Automation Procurement RPA
Category: News Article

Suchismita Dhal

Suchismita Dhal is a Senior Procurement Consultant and an author specializing in sourcing and procurement consulting related to indirect spend categories, specifically capital equipment and MRO services. She has worked along with many fortune 500 organizations across globe, for multiple industries such as metal and mining, oil and gas, construction, pharmaceutical, chemical, and CPG.

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