Key Takeaways
- Acquiring, deploying, and integrating the right tools for your sourcing process is a pervasive challenge in procurement.
- Integration remains one of the largest pain points for procurement leadership and teams.
- We’ve identified four digital tools that can aid your digital transformation efforts and integrate automation into your processes.
There’s no question that automation and artificial intelligence are at the heart of procurement’s digital transformation efforts.
Deploying these tools makes businesses faster and more efficient with greater scalability, providing real-time strategic insights based on market data and trends. Despite the value digital tools can bring, procurement departments are still tasked with considering how best to integrate artificial intelligence and automation into their businesses.
“Having a litany of solutions that don't work in concert with each other only increases costs, bloats processes, and creates unnecessary headaches for you and your team instead of streamlining your sourcing activities.”
- Thomas Larson, Global Product Manager, ProcurementIQ
Why is automation in procurement so difficult?
One of the most common challenges of procurement is the need to deploy the right tools effectively. Procurement must therefore devise strategies and goals across each department to deploy automated systems with a cohesive plan.
Some businesses may shy away from such technologies due to a lack of clear return on investment, especially during times of economic hardship like recessions, where companies look to cut costs rather than deploy new and expensive processes, platforms, and software.
It makes sense. It’s also the wrong perspective to take. According to McKinsey research, “nearly 70 percent of the top economic performers, compared with just half of their peers, are using their own software to differentiate themselves from their competitors.” Times of economic hardship are exactly when automation, AI, and digital solutions should be leveraged to mitigate the negative impacts of rising costs and lower profits.
How do digital tools assist procurement in weathering recessions?
- Reduced labor costs: Digital tools allow businesses to automate repetitive tasks and cut costs, allowing workers to concentrate on higher-value tasks and more thoroughly analyze data to make informed decisions.
- Improved efficiency: Digital tools improve efficiency by streamlining processes and automating menial tasks that would otherwise take an employee away from higher-priority duties. Digital tools can improve productivity, thereby reducing labor costs and allowing your business to stay competitive during tough economic times.
- Greater flexibility: By analyzing data in real time, digital tools help businesses quickly identify trends and adjust for changes in the market before their competitors.
What are the challenges of integrating custom digital tools into your procurement process?
Despite the many benefits of automation and digitization, there are several major pain points for procurement departments incorporating digital tools:
Automation and integration strategies require a cohesive deployment plan, which means your organization must devise strategies and goals across many departments to ensure automation systems meet everyone’s needs and are rolled out effectively.
But there’s a difference between custom-built integrations and off-the-shelf tools. While customized tools are designed to meet a company’s needs, there are a number of drawbacks that associated with building solutions from the ground-up that may make them unsuitable for your business.
- The risk of error is always present when integrating custom systems and tools with each other, which may cause unforeseen delays that disrupt business operations and require time to fix.
- Integration requires testing and quality assurance to ensure that the systems are working as intended, which raises costs.
- Any customized tool will require ongoing maintenance and support; updates, patches, and fixes add to the total cost of ownership.
- Future changes to algorithms or data structures will require more significant changes, including total redevelopment of the tool.
Customization and integration may also require the development of custom codes, APIs, and integrations with other systems, which can be prohibitively expensive and lead to other issues.
When should you use off-the-shelf tools instead of custom-built solutions?
Deploying the right tools is crucial. Though deploying many different tools that are best-in-class might seem like the right move, if they don’t work in concert with each other, they can lead to ineffective, bloated processes.
Off-the-shelf software solutions are built to meet the common requirements of most companies and are usually available at lower costs. They’re also more often easier and faster to implement because they require less development time, fewer resources, and can be integrated with other software tools.
However, pre-made software may not be tailored to meet your exact needs, especially as your business grows. Ultimately, digital tools should create value by efficiently integrating business functions and processes that are part of the same workflow. Bridging the gap between custom-built tools and off-the-shelf solutions is half the battle.
To help you identify which solutions could be right for your workflows and needs, we’ve identified four unique, proven tools that range between custom-builds and off-the-shelf solutions to help you integrate automation into your procurement processes.
Coupa
Coupa is a cloud-native business spend management platform that automates procurement tasks from start to finish. Coupa shows all spend activities on a single platform. This alleviates the need to use several different systems to track spend on goods and services independently from one another, which often leads to poor spend visibility and budgeting decisions.
Coupa allows users to automate invoice matching and manage supplier payments using supporting documentation, providing instant reconciliation and automatic payments. Coupa’s spend analysis not only helps to automate payments but also flags suspicious transactions.
Coupa’s inventory management software provides users with visibility into their inventory availability in real-time, helping you identify and reduce wasteful spend by limiting overbuying and stock buildup.
Perhaps Coupa’s most unique feature, however, is its App Marketplace. Coupa is a market leader at integrating its spend management software with other third-party technology companies. From the Coupa App Marketplace, you can add other companies’ integrated solutions to Coupa’s spend management platform seamlessly.
With this structure, Coupa does the integration heavy lifting for you, which can be an invaluable factor in cutting costs and streamlining workflows. You won’t need to leave the platform to accomplish many different tasks, especially when you’re utilizing the Coupa App Marketplace to its fullest.
IBM Supply Chain Intelligence Suite
The IBM Supply Chain Intelligence Suite uses artificial intelligence to help procurement with supply chain management. IBM’s suite monitors all types of events that could impact the availability, quality, and costs of goods and services, prompting users with smart alerts and suggestions to avoid stockouts and late shipments. In one central dashboard, users can search and filter critical information pertaining to their supply chains, providing them with the information they need to make better decisions. Since this tool looks at your company’s specific supply chain needs, IBM’s Supply Chain Intelligence Suite requires a custom-built solution to effectively implement.
If you’re unsure of an event’s impact on your supply chain, IBM provides actionable insights to help guide your decision-making process through analytics-based predictions and recommendations. This can help you refine your supply chain process flows in ways you may not have considered previously.
Icertis
Icertis is a contract lifecycle management platform that uses AI technology to help procurement departments more efficiently manage contracts. Icertis establishes a single system of record for all contracts and contract data, minimizing the administration of contracts by digitizing processes relating to intelligent contract setup, contract operations, governance, risk, compliance, reporting, and dashboards.
According to Icertis, poor contract management erodes 9.2% of a contract’s value. By turning contracts into on-demand data, Icertis leverages the power of AI to accelerate time to revenue, reduce cycle time, and increase negotiation effectiveness by providing visibility into historical, ongoing, and future contracts, helping users maximize the full value of their contracts.
Icertis can be acquired off-the-shelf. Icertis also offers pre-built integrations with Coupa, SAP Ariba, Salesforce and more.
HICX
Supplier management platforms such as HICX create supplier portals that act as a gateway for users to access all suppliers with accurate and updated data. HICX automatically collects data to ensure risk profiles are updated, and suppliers adhere to compliance programs. Users can issue certification requests, track responses and follow-ups, and store documentation in a single location.
HICX onboards suppliers with dynamic forms that automatically take relevant information and populate required fields into ERPs. This allows users to eradicate processes that are inefficient, as one case study demonstrated that HICX reduced the average time to onboard suppliers by as much as 86%.
HICX offers low-code customization intended to bridge the gap between custom-built software and faster pre-built solutions.
Choosing the Right Procurement Solution
"Two-thirds of survey respondents are prioritizing significant change to procurement digitization in the next one to three years, with half aiming for complete transformation. "
2022 Global EY Chief Procurement Officer Survey
The best time to invest in procurement tools was five years ago; the second best time is now. When finding the right solution for your procurement transformation, the only wrong choice is not choosing a solution at all.
Significant change to procurement digitization is necessary if procurement is going to meet current and future challenges head-on. It also can be difficult, time-consuming, and expensive. Not every business is going to completely overhaul their digital transformation efforts overnight. For most, this is a multi-year process that harbors the danger of going too big too quickly.
You don’t need to accomplish this process overnight, and not every need requires a custom-built solution that takes years to develop and thousands—if not millions—of dollars to build and implement.
Even Microsoft chose to use Icertis for its contract management software instead of building the solution itself. Identifying when to opt for the custom software and when to purchase a tool that’s ready to implement is the crucial element of successful digital transformation.
Whether you opt for pre-built tools or customized software, using digital solutions to streamline your business processes can and should be part of the future of your business.
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