Procurement Automation

What Procurement Functions Have Become Automated?

PurchTips Edition #425

Automation has been a business pursuit for decades. And it is a pursuit that continues strong, with no signs of stopping.

Automation of procurement functions is also something that has been continuing for decades. Here’s a look at some of the procurement activities that have been, are being, and will be automated in the future.

  • Replenishment. One of the earliest examples of procurement automation in practice is the use of what is commonly called “Auto-PO.” Auto-PO, short for automatic purchase order, is a simple, logic-based process. A computer system monitors inventory levels and, when the inventory level for an item drops below a reorder point, the system will automatically transmit to an approved supplier a purchase order for a pre-determined quantity of that item.
  • Requisition Approvals. With the dawn of eProcurement, the electronic routing of requisitions on their paths to becoming purchase orders replaced the old way of physically passing around a paper requisition for signatures. Once requisitions are entered into an eProcurement system, a contracted supplier is assigned, and routing rules forward the electronic requisitions only to those whose approval is required. In many cases, those rules allow for pre-approval by the procurement department, allowing some orders to be automatically generated to suppliers.
  • Proposal Comparison. With eSourcing, when buyers request bids from multiple suppliers, they no longer have to manually aggregate bid details and enter them into a common document for comparison. Instead, suppliers submit their bids into the buying organization’s eSourcing system and the system provides a summarized – sometimes analyzed – output of the bids to facilitate supplier comparison and selection.
  • Guided Buying. As part of the emerging artificial intelligence usage in procurement increasingly called “cognitive procurement,” technology providers have begun offering capabilities that enables end users to determine appropriate procurement courses of action without human involvement from the procurement department. This is called “guided buying” and is in its early stages. However, it is likely to continue to grow and mature in the immediate future.

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Copyright 2018. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By Charles Dominick, SPSM, SPSM2, SPSM3

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