Why Procurement Teams Struggle (And What They Can Do With Automation)

Nearly 52% of procurement teams have adopted automation technologies to improve speed, efficiency, and responsiveness, says a recent survey of CPOs.

But this also leaves the remaining 48% procurement teams struggling with traditional, time-consuming processes.

Procurement organizations in the latter group need to deploy technology to replace manual tasks with automated workflows. It’s not that they aren’t aware of the benefits of automation. But, in many cases, organizations seem to overlook these benefits. 

Why do these organizations struggle to implement technology projects and leave value on the table? Why do they continue working manually when the need of the hour is automation?

More importantly, how can they overcome some of the initial challenges? Let’s find out.

What is Procurement Automation?

Procurement automation involves the use of advanced technology to automate procurement processes. Technology can handle routine procurement tasks such as purchase requisitions, supplier selection, order placement, contract creation and management, invoice processing and payment.

Automation digitalizes and centralizes procurement data. Automated workflows route data and information to the right people at the right time. 

Automated procurement works with a wide range of technologies. These include artificial intelligence, machine learning, natural language processing and robotic process automation.

Procurement automation aims to enhance efficiency, reduce costs, and accelerate processes. 

Need for Procurement Automation 

Why does procurement need automation? What could happen if procurement continues working in the traditional way? 

To thrive amid growing uncertainty in the business environment, businesses need all internal teams to work strategically. Procurement must evolve from a transactional function to a strategic business unit that can add more value and do more with less resources. 

By automating routine tasks, procurement can work more efficiently, lower costs and track supplier performance. Instead of getting entangled in manual tasks, it can focus on value-adding tasks such as mitigating risks and building strong vendor relationships.

Challenges of Procurement Automation 

Here are the biggest challenges in automating procurement.

1. Legacy systems

In many cases, procurement teams are stuck with ERP systems that weren’t built for automation. Data is scattered across different systems, spreadsheets, making integration almost impossible. If different data and tools cannot sync, automation looks like a patchwork of fixes. Poor integration can lead to data mismatches and workflow disruptions.

2. Data quality issues

Vendor data is often in bad shape. Contracts are poorly cataloged, and spend data is inaccurate. There is fear that automation may just amplify these problems. Cleaning up data can be a huge challenge.

3. Complexity of procurement rules

Procurement isn’t simply about buying goods at the lowest price. There are compliance rules, contract terms, approval hierarchies, and risk assessments. Incorporating all these rules into an automated system can be tricky. For example, rules may state that supplier X can be used for a category only if the spend is over a certain limit. Automation may struggle with these nuances unless it’s highly configurable.

4. Upfront costs

Like any other project, procurement automation requires businesses to make upfront investment. Procurement teams may find it difficult to justify the costs of this investment, especially when the current process seems to work fine, even if it’s slow.

5. Loss of human touch

Procurement is not just transactional. It involves building strong relationships with vendors. Leaders worry that automating RFPs, vendor communications, and contract management may kill the personal touch needed to build strong relationships.

6. Resistance to change

People tend to resist any change in the workplace. In the case of procurement, professionals are often comfortable doing things a certain way. They have always relied on paperwork, spreadsheets and manual approvals. Automation requires change of habits, and not everyone is on board. Some people believe technology cannot handle complex tasks such as vendor negotiations and contract management.

7. Supplier collaboration issues

Automating procurement isn’t simply about your team. It’s also about getting your suppliers onboard. Many suppliers may still rely on emails or phone calls. If they can’t integrate with your procurement portal, you end up with half-automated processes that still need manual intervention.

AI-Powered Technology is Key to Transforming Procurement 

Procurement technology can now do more than just automating tasks. It can collate data generated from different systems, analyze it, and decode meaningful insights.

AI-powered procurement software can:

• Aggregate, cleanse and normalize spend data from different sources for accurate spend analytics
• Provide real-time visibility into cost-saving initiatives
• Identify, evaluate and qualify new suppliers to streamline sourcing events
• Create, manage and monitor supplier contracts with ease
• Track, measure and optimize supplier performance with scorecards and alerts
• Boost adoption and improve compliance
• Manage all source-to-pay processes on the go with a mobile-native design
• Facilitate greater collaboration between procurement, finance, suppliers and other key stakeholders

Where to Begin

The most successful procurement automation projects start small. Begin by identifying key pain points and automating one process first. Get supplier buy-in early and involve internal teams in the transition.

Procurement leaders know that automation is inevitable. But jumping in without addressing challenges can lead to frustration. Start with small-scale pilots and gradually scale up to full-scale implementation. The key is to align technology with the human workforce.