By Guest Editor
In Purchasing Automation vs. Manual Part 1: Why PO Automation is Taking Off, we learned from industry experts, Michael Croasdale, MRO expert from Source One Management Services and Tom Kieley, co-founder of SourceDay, the driving forces behind why companies are investing in tools for automating purchase orders. Together, they explained some of the major benefits, including improved efficiency, simplified document management, reduced errors rates, streamlined inventory management, and enhanced strategic decision making capabilities.
As a follow up to that conversation with Croasdale, we’re getting a closer look at what companies should know when considering implementing PO automation tool.
As companies begin to think about where in their organization this can be implemented, what areas of spend would this work well and which would it not?
Croasdale: Purchase order automation works well with recurring purchases that you are ordering on a regular basis as this will allows buyers to save time. Buyers could also create an open PO that they are drawing against. So typically, a good fit for this tool is Janitorial, Office Supplies, and particularly MRO.
Worth noting, there is still the manual aspect of creating a new order, but the benefit is that the system should hold the PO for you. Where you’ll have trouble implementing a PO automation tool is Professional Services or Travel and Entertainment, for example.
As you mentioned, much of MRO spend is repetitive – making it an ideal category for automation. In your experience at Source One, do you see a different in performance when working with clients who have automation tools in comparison to those processing PO’s manually?
Croasdale: For sure. Manual purchases are not the most desirable. It’s time consuming and requires a buyer to search items to add to the purchase order and leads to errors and inconsistent purchasing across an organization. You’ll also see a difference in the maturity level of Procurement organization purely based on how they make purchases. Spending too much time on the very tactical task that is processing POs can prevent Procurement teams from moving into a more strategic role within their organization. Being able to reduce the time spent on compiling and executing purchases allows increased focus on strategic initiatives, whether that be process improvement or cost reduction.
Recognizing that with any investment in technology, companies should be aware of the benefits and the challenges, what could be some of the shortfalls in the PO automation tools?
Croasdale: Specific to the MRO category: spot buys – which are common in this area of spend, can hinder the PO process and sometimes make executing these purchases cumbersome. Many times buyers can be forced to go around the traditional process and therefore would not use purchase order automation.
At a general level, companies may face implementation and adoption challenges. As with any technology, you’ll need to train employees to use the system. One of the main benefits of a PO automation tool is driving consistent purchasing practices throughout an organization so, you’ll want to make sure all employees using the tool are educated in how to do so most effectively.
Companies should also consider an auditing feature in their tool to ensure that the price you placed on the order is the price you actually paid. The system should be able to flag it for your review. You’ll also want to consider how the system integrates with the others you currently have in place. For example, the ability to put the contract pricing into the system and verify that was the purchase price.
For companies looking at their overall strategies, how would PO automation serve overarching goals in a Procurement organization?
Croasdale: Well first, the nature of software increases compliance. PO automation tools will not only allow users to select the same product without having to shop around, but also allows procurement personnel the ability to see where purchases are made, if they are compliant, and potentially how they compare in pricing to established contracts. With the right amount of training and adoption, companies will reap the benefits of a consistent approach for these purchases which especially impactful when addressing disparate purchasing practices or decentralized Procurement.
And, as I mentioned before, for companies looking to evolve their Procurement organization, a PO automation tool can relieve their resources of some of their time-consuming and mundane tasks- allowing them to focus their efforts on more strategic initiatives.
Advice for companies looking to go-to-market for a PO automation tool?
Croasdale: There’s no doubt that PO automation tools are a cleaner, more effective method to tackling purchase orders when used correctly. While these tools can save time for buyers, drives compliance, capture metrics and more, companies need to evaluate if and how the technology best fits their purchasing profile.
You need to think about if these are repeat purchases or are you typically only issuing a purchase order for a large capital expenditure project and therefore the automated purchase order technology might not be the right choice for you. Or if you have determined that these are repeat purchases, be sure to take the next step in evaluating the technology to ensure that it can sync up with all your systems.
All these questions should be factored into your decision but, as this technology is influencing procurement, it is important to recognize the trend and know what makes the most sense for you and your company.
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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