2020 was a transformative year for B2B procurement. Digitization was well underway when COVID–19 hit, but supply chain disruptions, rapidly evolving markets, and the widespread move to remote work emphasized the need for systematic integration and automation.
If digitization and automation weren’t already a priority for your organization, the events of last year have given automation-inclined Chief Procurement Officers (CPOs) an edge in their conversations with other executives. We’re unlikely to see a return to the pre–2020 norm of traditional sales processes and manual procurement, so 2021 is the year to go all-in on automation.
In this article, we’re going to explore some of the tools and processes that CPOs can leverage to improve efficiency through integration and automation.
An eProcurement Platform
You might think eProcurement is too obvious to deserve a mention in a list of modern procurement tools, but the fact is many small and medium businesses have not yet embraced eProcurement and digital procurement automation. The move from manual to automated procurement has accelerated in recent years, but a significant proportion of businesses process orders and manage spending the old-fashioned way.
Modern eProcurement platforms such as Coupa and SAP Ariba help businesses to increase procurement efficiency and begin their journey to comprehensive procurement digitization. While eProcurement was once an expensive proposition for smaller businesses, cloud-based SaaS eProcurement platforms are affordable and easy to use while providing a host of automation features that cut the cost of supply chain and spend management.
An Integration Gateway
Integration is the key to automation. To automate procurement processes, businesses must be able to exchange data with buyers, suppliers, and other software systems within their own organization. There is little point in investing in eProcurement if order and spending data remain siloed in documents and data stores the platform cannot access.
But integration poses a problem: eProcurement users have no control over the software used by third-parties or even other business units within their company. For example, a suppliers’ eCommerce stores may use incompatible protocols and formats that make it impossible to exchange data natively.
There are two possible solutions: ad-hoc custom integrations, which are costly, and an integration gateway. An integration gateway, often called an Integration Platform as a Service (iPaaS}), handles the two-way integration of incompatible platforms. A B2B buyer’s eProcurement platform is connected to the iPaaS, and it handles connections to other systems, transparently translating protocols and formats to facilitate process automation.
PunchOut catalogs allow buyers to access suppliers’ stores and products from their eProcurement platform. They also automate the transfer of order data from supplier to buyer and the creation of requisition orders. B2B buyers increasingly prefer to discover and purchase products online.
As a procurement professional, you’re aware of the trade-offs involved in online procurement. Self-serve is more efficient and flexible than phone and email-based buying, but it’s challenging to keep track of approved stores and ensure that employees are buying from them.
PunchOut catalogs leverage eProcurement integration and automation to streamline online buying. Employees select pre-approved stores in their eProcurement interface. They are automatically forwarded to the store and authenticated. When they have created an order, the PunchOut system sends the details to the eProcurement platform, creating a requisition order.
PunchOut catalogs provide a convenient interface for accessing approved suppliers, improve compliance with procurement policies, and ensure that procurement data is available to the eProcurement platform for monitoring and analysis.
Purchase Order Automation
Purchase order automation complements PunchOut catalogs. Once a requisition order has been approved, the order data is automatically returned to the supplier’s eCommerce store, creating a purchase order for the supplier to fulfill.
Combined with PunchOut catalogs, purchase order automation completes the purchasing loop, allowing buyers to access the supplier’s platform, generate a requisition order for approval, and create a purchase order. The buyer interacts with an intuitive interface, and the integrated software automates the flow of data between platforms.
Manually processing, reconciling, and paying invoices is labor-intensive, time-consuming, and error-prone. Electronic invoicing, often referred to as eInvoicing, automates the process. The supplier’s system automatically generates the invoice, which is communicated to the buyer’s eProcurement platform. Buyers can then approve payments, and in some cases the system can automatically approve and send payments, significantly reducing the cost of invoicing and payment.
Electronic invoicing has benefits for suppliers and buyers. Automation reduces the workload for both sides of the transaction and ensures that invoices contain accurate information—invoicing mistakes are costly and damaging to buyer-supplier relationships. Suppliers benefit from faster payments and fewer disputes. Buyers benefit from early-pay discounts and because all invoice data is logged in their eProcurement platform, greater insight into spending patterns.
One of the biggest limitations of manual procurement is that valuable data is often spread out across multiple software systems and locked away in documents such as PDFs. It’s possible to centralize spending data through manual data entry and document scanning, but they are labor-intensive and error-prone processes that frequently fail to provide timely and accurate access to the spending data businesses need to make cost-effective procurement decisions.
Automation via tools such as PunchOut catalogs and purchase order automation ensures that relevant data is available for analysis, and many eProcurement platforms incorporate advanced spend analysis tools that empower businesses to optimize spending. For example, Coupa offers analytics tools; predefined and custom reports, dashboards, and KPI monitoring; and AI-powered spending classification.
Other leading eProcurement platforms include a similar mix of tools, but without the basics of integration and automation, businesses lose out on the potential benefits of centralized, coherent, and comprehensive spend analysis and procurement optimization.
About the Author: Brady Behrman is the CEO and founding partner of PunchOut2Go. As an entrepreneur with experience and proven track record in building technology businesses that focus on client success innovation, Brady and his team help organizations of all sizes around the globe adapt to the ever-evolving, complex B2B Commerce & eProcurement technologies.