April 18, 2017 Procurement at Half the Cost: When Bots do the Buying

Trim supply chain costs and spur innovation by transforming your procurement organization for the digital world.

By: Tom Papa, Managing Director, Accenture Strategy

We’ve seen automation transform and accelerate many business and supply chain operations, though its potential to reshape the process of procurement is only beginning to be realized. By seamlessly integrating automation into procurement processes, companies can dramatically speed up “non-strategic” and routine tasks – mainly transactional and operational procurement activities – while freeing up time for procurement teams to focus on strategic management and value creation.

Today’s evolving procurement landscape provides the ideal setting for automation to thrive. Procurement teams, saddled for years with outdated systems and capabilities, are now leveraging digitally-enabled services that can be funded by suppliers. As the market moves toward a source-to-pay, subscription-based model, amplified by new business services that execute procurement processes, procurement professionals will be able to devote time to driving value in new ways – such as by scouting for new, innovative suppliers, capturing intelligence and real-time market insight, and focusing on innovation creation.

Accenture Strategy research predicts roughly half of the future procurement workforce will be devoted to these types of strategic activities, compared with just eight percent today. Accenture research on procurement suggests that removing rote tasks from a procurement team’s plate frees up as much as of 40 to 60 percent capacity for that team to ratchet up impact by focusing on strategic growth initiatives.

And that’s not all – thanks to technologies including cloud and cognitive computing, robotic process automation (RPA), the Industrial Internet of Things (IIoT), and predictive analytics, the future cost of running procurement can decrease by 40 to 60 percent as well.

For example, a global energy company is seeking to revamp its procurement function. By automating more than 100 procurement, finance and accounting processes, the company saved upwards of $2.5 million annually, all while driving a 67 percent decrease in manual average handling time.

The impact on procurement’s operating costs

Automation will ensure procurement teams optimize the buying experience and deliver on the top business priorities. Accenture research shows this new digital procurement model can reduce operating expenses for procurement by 40 to 50 percent, mainly due to reduced labor costs. Plus, companies can expect an IT cost reduction of 10 to 20 percent by restructuring their IT footprints and shedding less cost-effective tech applications.

The time and money saved by this change can be reinvested in the new business model for innovation. For example, a global life sciences company was able to generate savings via implementation of a digital procurement function. Procurement leadership reinvested 10 percent of the savings generated by reallocating headcount, dedicating them to strategic supplier relationship management.

We are already seeing automation deliver high value in areas spanning spend analytics, catalog management, purchase order creation, invoicing and end-user support. Now, it’s time to take it a step further by trading one-off investments for an end-to-end approach to automation. Not only does a holistic automation model avoid data losses, reduce total cycle time and alleviate process and data redundancies, but it also requires less labor, overhead and capital to support.

However, companies must be strategic in their path forward. For those companies leveraging automated procurement processes for the first time, mistakes in implementation can come at a high cost.

There are three pragmatic steps that all companies can take to avoid high-cost mistakes and fully capitalize on automation to build a dynamic, digitally-powered procurement function:

1. Manage the entire supply ecosystem: Segment the work performed and rebuild your procurement strategy to focus on managing the entire Partner to Pay ecosystem. Develop stronger business partnerships, scout the supply market to create innovation opportunities for the business and develop your supplier partnerships.
2. Become leaner and more strategic: Shift your team’s focus beyond cost reduction and toward value-creation. Begin staffing skills differently, knowing that procurement activities are becoming commoditized in the cloud, and purge routine operational activities that eat up time and money.
3. Create an easy buying experience: Put the end-user at the center of all design and technology decisions in partnership with an as-a-service provider. Finally, move away from on-premise technology and toward a digitally-enabled system through an outside service provider as a subscription service.

There is a significant opportunity for today’s procurement leaders to leverage the value of automation and robotics to build a more strategic workforce, reinvest in innovation and unleash new value across the business. If approached thoughtfully and strategically, digitally-driven procurement functions can come to give businesses a true competitive edge by transforming into a vital driver of future growth and value creation.

Tom Papa is a managing director in Accenture Strategy and is the global lead for the Life Sciences Procurement practice. He specializes in the area of procurement transformation and has more than 22 years of procurement and supply chain experience, both as a practitioner and a consulting professional. Tom holds a B.S. in Economics from Rutgers University in New Jersey.

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