If you aren’t embedding RPA into your procurement, plan your retirement

Most of the deployments of robotic process automation (RPA) in procurement currently center around transactional procurement. At HfS, we believe RPA can be immersed in more complex areas of sourcing and procurement to deliver value: here’s why.

Automation is native to modern procurement platforms but does not address all relevant processes

Automation has taken many different forms in procurement processes over the last decade. The emergence of procurement platforms, such as SAP Ariba, Coupa, Tradeshift, as well as service provider solutions, such as SMART by GEP, Infosys’ ProcureEdge and Accenture’s Radix, have had tremendous impact on procurement, in terms of driving both value and productivity gains.

These platforms have automated processes that previously were in disparate systems or were manually processed. For activities not (fully) addressed by these platforms, RPA is proving to be a valuable tool, such as requisition management and invoice processing. Beyond these transactional processes, areas of upstream procurement –  strategic sourcing, category management, contract management, and vendor management – can benefit from using automation. Request for proposal (RFP) management, for instance tracking and scoring of RFPs, spend analytics, tracking of savings and handling large amounts of category intelligence from multiple sources come to mind.

Thirty percent of procurement-as-a-service (PaaS) contracts signed between 2013 and 2018, and tracked by HfS Research, include RPA in scope (see Exhibit 1, below).

Exhibit 1: Percentage of procurement as-a-service engagements with RPA embedded

Source: HfS Research, 2018

95% of today’s RPA deployments focus on transactional procure-to-pay (P2P) and technology management

The high number and large volume of repetitive tasks and processes in P2P make it a fertile ground for use of RPA. RPA is most often used in procurement to speed up a process, to eliminate human intervention in transactions, and to release employees from repetitive and time-consuming tasks, allowing them to focus on more strategic work.

When it comes to automating procurement processes, the large majority of RPA deployments are in transactional procurement, followed by technology management (see Exhibit 3, below). Within transactional procurement, two process areas are dominant: requisition management and invoice processing. The high level of invoicing and procure-to-pay (P2P) automation can be associated with organizations’ strategic initiatives, such as standardizing and centralizing accounts payable and other shared services.

Exhibit 2: RPA deployment across the source-to-pay (S2P) value chain.

Percentage of Procurement-As-a-Service contracts with RPA in scope by value chain segment:

Source: HfS Research, 2018, n=177 procurement-as-a-service contracts with RPA component

RPA for requisition management

By automating requisition management, buyers can purchase goods and services by using online catalogs containing the items from suppliers with whom procurement has already negotiated prices and other contract terms. This reduces the time-consuming, typically email-based, manual processes and automates them into a more seamless procedure. Ideally, the purchase, payment, and approvals can be done from any device, anywhere and anytime, creating a better customer experience for all stakeholders and addressing the age-old problem of procurement compliance (also known as rogue or maverick spending).

Case in point: Accenture is embedding RPA, market intelligence, and analytics in the P2P process. A great example of a 2014 fire in a Chinese DRAM chip factory, which resulted in a 25% decrease in the global supply of DRAM chips. Via its RPA, intelligence and analytics, Accenture’s procurement function learned about the fire shortly after the event, giving it time to respond, which enabled its clients to secure their orders up to 24 hours prior to the price increase caused by the reduced supply.

RPA for invoice and payment automation

Multi-stage internal processes slow down or delay payments to suppliers. Automating payments and automated invoice recognition and reconciliation can enhance suppliers being paid the right amount and at the right time, addressing a challenge everyone that has either bought or sold a service or product has experienced—haggling about invoices and chasing payments, a source of frustration and re-work.

Case in point: IBM Procurement automated its blocked invoice process by implementing a BluePrism RPA solution. To prepare for the solution, IBM completed a time and motion study for each step of the process to gain the insights required to design the most viable solution to drive stakeholder value, efficiency, and productivity. Since implementing the RPA solution, IBM reduced human intervention by 95%. Blocked invoice resolution time has fallen from 32 minutes per invoice to 90 seconds per invoice. This provides better control, improved quality, and increased traceability. This example represents a true optimization of the end-to-end transaction: existing process experts were shifted to focus on value-add activities and the robot-managed process has been virtually error-free.

When automation can unleash value from upstream sourcing and procurement—this is an untapped opportunity

There is a significant potential for automation not only in transactional activities, but also in upstream procurement – strategic sourcing, category management, contract management, and vendor management – where there are time-consuming tasks that take up a lot of human worktime.

There are many upstream procurement processes with a lower level of RPA adoption, where HfS sees ample opportunity to create value. Strategic sourcing, category management, supplier management, and contract management are still virtually untouched by RPA. These processes are reliant on judgement, interpretation, analysis and (human) interaction. Pure RPA—focused on mimicking repetitive tasks as opposed to the cognitive activities of self-learning, self-remediation and interpretation, and ultimately to think—is not as fitting for these upstream processes. These require more intelligent automation, involving cognitive AI tools such as natural language processing, machine learning, and advanced analytics. A good way of thinking about the required level of intelligent automation in upstream procurement is HfS’ Triple-A Trifecta (Exhibit 3), depicting the convergence of automation, analytics and artificial intelligence.

Exhibit 3: The HfS Triple-A Trifecta: automation, analytics, and AI

Source: HfS Research, 2018

There are, however, some upstream areas in which RPA is currently deployed. In RFX management, large bidding events can be supported by bots, taking tasks in RFP tracking and bid analysis out of the hands of professionals, freeing them up for decision-making tasks and negotiations – or negating the need for procurement professionals in these processes at all?

During the contracting process, contract red-lining is another rule-based process RPA can be used for. Post-contracting, the contract implementation has a high potential for use of RPA. In contract governance and management, RPA is very useful in spend analytics, compliance reporting, supplier reporting, savings and benefits tracking, and reporting on end-to-end process (S2P) performance—processes dependent on pulling together and aggregating data from multiple sources.

When the process of sourcing and evaluating suppliers is more automated, suppliers are enabled to respond more quickly to bids and orders. Automation is also used to bring together and increase access to contracts and other information relevant to the order. For example, supplier track-records, pricing inconsistencies, and recognition of situations when volume discounts are applicable or negotiable. In such ways, automation will help in identifying and comparing the most cost-effective and efficient suppliers within a network. Furthermore, an automated sourcing system can keep track of stock levels and automatically place re-orders, thus reducing inventory expenses and delays caused by low visibility of inventory.

The bottom line:
 
RPA is fundamentally transforming procurement.  Embrace it now to reap the benefits and enhance your career, or you may get left behind

A previous PoV, The Procurement Dilemma – Fixing the basics with an eye on the future, highlighted the the fact that many procurement organizations are still struggling with transactional procurement processes, getting invoices processed with intelligent character recognition (ICR) and optical character recognition (OCR), and matching invoices and purchase orders correctly in one go. They simply don’t have the time or bandwidth to focus on “the future”.

The reality is that deploying Robotic Process Automation is now part of ‘the basics’. If you haven’t introduced RPA in transactional procurement yet, you are lagging behind. You need to get ready for the future of procurement. So, it’s time to embrace automation and get out of the limbo.