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Home » Blogs » Think Tank » Transforming the Procurement Process Through Robotics

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Transforming the Procurement Process Through Robotics

Automation
July 1, 2021
Bakul Sharma & Mudit Bansal, SCB Contributors

Humans have been fascinated with automation since the Dark Ages.

The first major step toward automation in human history was the invention of the wheel, which enhanced transportation in a way that was previously unimaginable. Fast forward to the present, and automation in operations, manufacturing, finance and marketing have enabled significant improvements in productivity. So where does technology go from here? Robotic process automation (RPA) holds the answer.

In modern organizations, the supply chain consists of a portfolio of dedicated software applications that perform specialized functions. Ensuring smooth interaction among them is a common pain point. RPA can help businesses achieve touchless collaboration among key applications such as enterprise resource planning (ERP), transportation management, warehouse management, planning, procurement and product management.

Sourcing and procurement users interact with many of these systems, drawing on external data points to make informed decisions regarding product quantity, price and location. The procurement team often invests significant time in data gathering and analysis, which directly affects process cycle time. In a 2019 Gartner survey of sourcing, procurement and vendor management, critical issues in technology procurement included direct (instant) cost savings, impact of business outcomes, effective negotiation, cost avoidance, and time to process. RPA can significantly help resolve procurement challenges in all these areas.

A 2020 Gartner report on I.T. cost optimization found that the introduction or augmentation of automation can help organizations achieve 10% to 15% net savings in ongoing I.T. services project costs. Organizations can maintain their existing I.T. architecture while benefitting from increased productivity gains through RPA. The technology can sustain improved return on investment for existing digital products through optimized product strategies.

Inventory reconciliation through RPA can help multinational companies achieve more than 70% reduction in reconciliation cycle time. For example, a major global logistics company implemented RPA for operations transformation to achieve supply chain excellence.

By enabling rapid digital transformation of supply chain functions, RPA is proving to be one of the most critical tools for productivity improvement. The global market size for RPA is expected to experience considerable growth, reaching $6.10 billion by 2027, according to Fortune Business Insights. In the supply chain of a modern organization, RPA can uncover hidden value through the transformation of most processes of the procurement function. Following are some the key areas where organizations can achieve immediate RPA benefits.

Autonomous spend analysis. Spend collection and category analysis is a key area in which RPA can help, by gathering data from various sources automatically. At the organizational level, RPA can help generate detailed reports from ERP applications as well as manual files, such as PDFs and Excel spreadsheets. RPA can also integrate existing locally developed tools that a company might be using for executing procurement processes. With automatic collection of spend data, “bots” can also enable detailed automatic spend-opportunity assessments based on defined policy.

Market analysis and optimized spot buys. A bot can easily collect information from multiple websites and documents, which are updated regularly on a monthly or weekly basis by third-party data providers. A market analysis dashboard can utilize this collected information without the need to update or check source data. Procurement managers can even place spot-buy orders using bots, which identify the best available sellers and prices in the market based on market research. RPA can reduce efforts spent on searching the internet and other sources by a great degree.

Auto-benchmarking and touchless performance monitoring. RPA can enable automatic data collection to populate key performance indicator (KPI) dashboards and enable companies to conduct benchmarking exercises without human intervention. It can also help collect data automatically from multiple applications (including e-mail). If a user wants to provide data with an e-mail, RPA can help integrate e-mail inputs into the KPI dashboard and improve procurement experience and stakeholder satisfaction.

Purchase requisition (PR) and purchase order (PO) management and supplier identification. A bot can collect data from PRs and search the product catalog for available items. If an item is unavailable, the bot can search suppliers on the internet and provide suggestions for possible vendor matches. RPA can even help initiate conversations and query multiple suppliers for product availability with tentative price quotes, using e-mail or SMS text. A bot can manage the entire process for product identification, market research and supplier relationship management, liberating a significant amount of time for procurement managers. In addition to regular notifications and reports sent by the ERP for PR and PO initiation, RPA can help create custom reports at the category or product level.

Supplier auto-boarding and vendor master creation. Supplier onboarding and vendor creation is generally a time-consuming manual task in many organizations. With an RPA bot, the automatic vendor creation process can be executed without human intervention. A bot can add master data to enterprise applications at any time.

Custom supplier audit. Bots can help create custom reports for a specific supplier monitoring ongoing contracts, claims tracking and contract compliance. Based on defined policy, bots can send periodic reminders automatically via e-mail or SMS text to specific vendors. Bots with e-mail capabilities can also provide automatic updates in the mailbox or SMS directly for any set criteria or exceptions.

 

Autonomous Spend Analysis

Market Analysis & Optimized Spot Buys

Auto-Benchmarking & Touchless Performance Monitoring

PR/PO Management & Supplier Identification

Supplier Auto-Boarding & Vendor Master Creation

Custom Supplier Audit

How much % of process can be automated?

> 80%

> 70%

> 60%

> 80%

> 50%

> 60%

What can't be automated?

  • Undocumented maverick spend
  • Management guidance
  • Human validation
  • Offline seller integration
  • Performance improvement plans
  • KPI identification
  • Product quality checks
  • Lowest price guarantee
  • Supplier verification
  • Supplier authenticity
  • On-ground quality checks
  • Dispute source identification

Directly affected KPIs

  • % of total spend managed by procurement organization
  • Procurement ROI
  • Cost to source
  • Procurement operating expense
  • Direct cost reduction
  • Cost avoidance
  • Employee satisfaction
  • Contract value under active management
  • Order value variance
  • Contract risk
  • % of suppliers with certifications
  • PR to PO cycle time
  • Average PO processing cost
  • Stakeholder satisfaction
  • Master data management expense as % of total spend
  • Data record error rate
  • Contract administration time
  • Compliance rate
  • Ratio of rejection
  • Rework and scrap value
  • Supplier quality rating

*Data estimates for Stage 3 and 4 maturity level organizations as per TCS Process Excellence Framework

RPA is rapidly emerging as an integral part of the procurement organization, and will continue to evolve and mature. Once aligned with business strategy, RPA can deliver exceptional, sustainable results in a short timeframe.

Bakul Sharma and Mudit Bansal are consultants in the Global Supply Chain Practice of Tata Consultancy Services.

Technology Sourcing/Procurement/SRM Robotics

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