By Guest Editor
Imagine a procurement organization free from repetitive manual processes. While it may be a stretch to remove all repetitive manual processes, many companies are making strides in that direction in the form of purchase order automation. American Productivity & Quality Center’s (APQC) Open Standards Benchmarking in procurement indicates that 82 percent of responding organizations use e-procurement, 6 percent plan to adopt it within the next two years, and 12 percent have no plans to engage in e-procurement. As Sourcing and Procurement’s role continues to evolve from a reactive, tactical measure to a more strategic role within their organizations, purchase order automation is just one of the many ways companies are reinforcing that shift – allowing resources to focus on providing strategic value.
Today, purchase orders are key documents utilized by companies for the exchange of good and services. In many cases, buyers are writing these purchase orders by hand and submitting them to the suppliers to obtain a product or a service. As a result, companies with multiple locations and/or departments may find it time consuming and difficult to constantly be issuing purchase orders. In addition, ensuring compliance of the preferred supplier, of the product to be purchased, and the of contracted price is also time consuming. When processes become burdensome, company profits begin to suffer and therefore the process needs to be analyzed and adapted for improvement. One such way the industry is beginning to see improvement in purchasing with POs is through automation - allowing companies to not only perform better but also serve their customers more effectively.
As purchase order automation grows in popularity, it’s important to really understand what it is and how it can be applied within an organization. While purchase order automation can be utilized in a variety of different categories (really any category where you might use a purchase order), there are some categories where this type of automation process is more applicable, specifically Maintenance, Repairs, and Operations (MRO) – a category in which buyers issue purchase orders on a repetitive basis. In order to gain additional insights on this topic, MRO sourcing expert, Tom Kieley, co-founder of purchase order automation software SourceDay, answered a few questions.
Let’s start with a little bit of background into the technology -what does purchase order automation actually offer?
Kieley: Purchase order automation is accomplished with the use of technology that extends ERP platforms to streamline and automate a supply chain. Automation in the Purchase Order process turns direct purchasing into a source of strategic value and increased cash flow by driving efficiencies and accuracy to real-time supply chain data.
Croasdale: Purchase order automation can streamline the purchasing process. If your organization deals with hundreds, or even thousands of purchase orders, managing all these documents is expensive and burdensome from both a time and financial standpoint – not to mention potential for human error involved with data input mistakes and the storage needed for traditional paper records. Through PO automation, companies can benefit by data cleanliness and the creation of a centralized repository. Along with this automation is the ease of reorder.
Do you see clients moving toward it?
Kieley: With increased competition and requirements to reduce costs, purchase order automation is rapidly becoming a strategic addition to all manufacturing and distribution procurement initiatives.
Croasdale: Within MRO, some clients aren’t using a Purchase Orders at all, they are using P-Cards, emails, or credit card transactions, but it does depend on the type of purchase and dollar amount and most often the purchase is executed manually.
In situations where a company doesn’t solely rely on Purchase Orders, are there still benefits to automation technology?
Croasdale: Absolutely, automation technology is still worth exploring with its ability to drive consistency across an organization.
Kieley: Automation offers centralization management of PO lifecycle for buyers and suppliers, increased on-time delivery, reduction in costly errors, and increase in predictive analytics on vendor performance.
There’s no doubt adopting automation in purchasing has its benefits, but will it work within your organization? In the second half of this conversation, our experts explain how companies can leverage PO automation to drive strategic decisions within Procurement, as well as the major considerations for implementing the technology within your enterprise.
About the Author
Nicole Mahaffey is a Senior Project Analyst at Source One Management Services, LLC. In her role, Nicole is adept in executing strategic sourcing initiatives; conducting comprehensive research, vetting suppliers, and developing RFPs with great attention to detail. She is a proven asset in providing detailed financial analysis and creative solutions for client cost savings.
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