Inefficiencies at the beginning of a company’s supply chain can be felt well downstream, which is why it is important for companies to stay on top of trends and opportunities to improve their systems from the first step of their process to the last. The procurement process is integral in any supply chain, and issues or delays resulting from a poorly designed or managed procurement process can create amplified issues further down the supply chain. A key sticking point in procurement is the execution of purchase orders, as this multi-step action is rife with potential pitfalls and can have a dramatic impact on a company’s production timeline.
Streamlining purchase ordering has become more feasible in recent years with the rise of SaaS companies and the helpful tools they provide, and we are now entering an even more exciting phase of purchase order improvement. As with almost every link in the supply chain, AI and automation are starting to have a major impact, and new automation technologies may soon prove to be game changers for purchase ordering. With automated purchase ordering systems, companies can avoid the stress and headaches that often accompany the process, and create a purchase order (PO) process that is more efficient, timely, and reliable. This helps both sides of the PO, with both vendors and customers benefitting from a more transparent and dependable process.
Elimination of Manual Errors
Many of the drawbacks to traditional PO processes stem from human error. When facing what can seem like a mountain of rather menial tasks to complete, it’s to be expected that employees will make some mistakes. This can happen during routine data entry or file organization, especially given the paperwork-heavy systems many companies have had in place for years. The processing and fulfillment of a single purchase order can entail a stack of paperwork that can easily be misplaced or put out of order through simple human error. With multiple people typically involved on both the vendor and customer sides, the hand-offs between employees also create opportunities for errors resulting in further delays. With automation, the paper trail becomes streamlined, sorting out the clutter and greatly reducing the possibility for error. Automated data transfer and entry makes it so that there’s no chance an employee can accidentally type the wrong number and throw an entire system askew. Software doesn’t grow tired of repetitive, menial tasks, and doesn’t produce the errors we do when our eyes glaze over. This also leads to one of the indirect benefits of PO automation.
Freeing up Employees for Other Tasks
For many companies, human capital is their most valuable resource, and giving their skilled employees the space to work on projects that can have an impact is the most effective use of their time. Reassigning workers from the monotony of data entry and paperwork filing not only prevents human error in these steps, but allows employees to put their efforts and energy into tasks that can provide greater benefit to their company. By directing human resources into projects that are not yet automated, or fully optimized by automation, companies can improve their overall efficiency in addition to the efficiency of their PO operations.
Visibility
Visibility is a key factor across every step of the supply chain, and especially important in the transactions between customers and vendors. Visibility is useful in these cases not only for internal tracking and inventory monitoring, but also to develop and maintain relationships of trust with customers. Automated PO systems let you track every step of a purchase order, from receipt, to approval, to fulfillment, to invoicing, to closure. This not only helps companies keep track of their ability to execute a PO, and fulfill an agreed upon timeline, it also lets them keep customers up-to-date and informed. Visibility can help companies flag potential issues, and take proactive measures to prevent them, or anticipate unavoidable delays and communicate accordingly with their customers. Customers are much less likely to move their business elsewhere in the face of a delay when the vendor they’re buying from communicates clearly and openly. Many of the transactional relationships of the supply chain are built on trust and communication, and by increasing visibility in the PO process through automation, trust is easier to achieve through more open communication.
Quantifiable Efficiency Improvements
The value of PO automation can be exhibited in a clear-cut numerical manner, in addition to the more qualitative feelings of process improvement discussed so far. Let’s think first in monetary terms, and the cost savings provided by PO automation. Gartner found that implementing an automated PO system can reduce relevant costs by 20%, which is particularly impactful when considering APQC’s study that found manually processing a single PO can cost over $500. Automation can not only reduce costs, but make them clearer. A study by Forrester Research revealed that 75% of companies who use automated PO systems can better track their spending and monitor their budgets. That same study demonstrated the impressive time benefits of automation as well, with up to a 60% reduction in cycle time. With striving for efficiency a maxim for every company spanning the supply chain, automation at the critical juncture of purchase orders will be a boon to efficiency efforts.
