MAKING A CASE FOR PROCUREMENT AUTOMATION
Calculating Current Procurement Costs & Potential Savings is The 1st Step to Make a Case for Automation
by Salim Khalife – Founder, President and CEO
As you may have noticed, many technology leaders in 2019 are discussing how AI and business learning will play a major role in enhancing business processes and operations and providing data that offer new insight into current business strategy, operations, processes, and improvement opportunities. According to Deloitte insight, AI-fueled organization will likely be more than a strategy for success—it could be table stakes for survival. In procurement, to capitalize on AI, a business must first transition its procurement process from manual into automated. Making a case for procurement automation, however, can seem like a daunting task. Procure-to-Pay (P2P) professionals must find clear, compelling ways to communicate the potential savings and benefits of P2P automation to their organization’s decision-makers. In a conversation with Levvel Research, I explained that the first step organizations should take when considering automation is “to make sure that their house is in order” by ensuring internal adoption and management buy-in—but how can this be done?
One persuasive argument for automation lies in the potential savings organizations can achieve using a robust procurement solution. Any system that takes the burden away from all the touch points should be able to give you at least 50 to 60 to maybe 70 percent savings on the cost to process a requisition or a purchase order (PO). Procurement professionals should first assess their organization’s current procurement state and costs, then demonstrate the savings that can be delivered by P2P automation. To this end, Paramount WorkPlace and Levvel Research have collaborated to develop the Procure-to-Pay Calculator.
The Procure-to-Pay Calculator is a simple tool to help organizations measure the total cost of processing POs and invoices. This calculator factors in all the variables contributing to a company’s estimated cost per purchase order (CPPO) and cost per invoice (CPI), such as the time procurement and AP professionals spend on all activities across the PO and invoice lifecycles. After entering some basic information, companies can quickly estimate their current costs—and also see how those costs could change by automating processes.
For example, a mid-market organization processing 1,500 requisitions and 3,000 invoices per month may have three purchasing agents, two AP clerks, and a manager in each department. Using the Procure-to-Pay calculator, organization leaders can clearly see their current estimated CPPO and CPI; they can also view the potential savings they can achieve with automation—up to 52 percent per year.
Demonstrating the staggering amount of savings that can be achieved with P2P automation is an excellent way to catch the attention of decision-makers, especially when presented alongside the other benefits of a procurement tool. Other significant advantages of these solutions include the ability to manage all procurement and order management tasks under one platform, reduce paper and manual processing, enhance communication among departments, and cut back on staff time spent on low value-added tasks. Some key functionalities of Paramount WorkPlace’s solution, including multi-company purchasing, project-based requisition down to the activity level, and the elimination of maverick spend.
I recommend involving a variety of stakeholders when building a business case, including purchasing managers, users from different departments, and controllers or a chief financial officer. These stakeholders will be able to clearly see the potential benefits and help guide an organization as it identifies automation goals and researches potential solutions. Identifying how a company can benefit in many ways—financially, operationally, and strategically—strengthens the case for automation, and helps decision-makers truly understand the impact that a procurement tool could have across the entire organization.
Professionals considering an automation initiative should consult The Ultimate Guide to Building a Procure-to-Pay Business Case for more ways to drive change and implement new processes. The benefits of a holistic procurement platform are also described in further detail in Levvel Research’s Integrating Purchasing and Payables report.
About the author:
Salim Khalife is the founder, president and CEO of Paramount WorkPlace, a technology company that develops, sells, and supports advanced web-based and mobile requisition, procurement, and expense software solutions for mid-market organizations. The company introduced its first cloud-based SaaS requisition application in 1997 and continues to innovate and expand its partnerships and integrations ever since. Learn more at www.paramountworkplace.com.
About Levvel Research
Levvel Research is a research and advisory firm that operates within the IT consulting company, Levvel. Levvel Research is focused on many areas of innovative technology, including business process automation, DevOps, emerging payment technologies, full-stack software development, mobile application development, cloud infrastructure, and content publishing automation. Levvel Research’s team of experts provide targeted research content to address the changing technology and business process needs of competitive organizations across a range of verticals. In short, Levvel Research is dedicated to maximizing returns and minimizing risks associated with technology investment. Levvel Research’s reports, white papers, webinars, and tools are available free of charge at www.levvel.io.