I have tackled a bit the usage of IT in procurement in my previous article on digitization and digitalization, which you can read here. Let us this time dig deeper and discuss how the daily operations of procurement can be digitized. Here is an example of a completely digital Source – to pay process. And here you can read more about S-2-P.
You can see this in more and more companies. Instead of sourcing suppliers, they let suppliers come to them. The company sets up a web page, where interested companies can register themselves and include contact details. Also, they will have the possibility to define the product categories they can supply. When the buyer needs to send out the RFQ, the supplier database is already there. The biggest benefit of this kind of supplier registration is that the supplier keeps his contacts up to date at all times. This then expands into an online board where suppliers can see active RFQ’s and participate in the bidding.
I have written in length about e-tendering and e-auctions in the article digitization of procurement. The process of getting quotations is the tendering process. Further negotiations with the supplier that meet the criteria are then done through e-auctions.
Contract signature and management
Even Office 365 has an option to include an electronic signature on the document. Yet, we still print, sign and then scan the paper. And this gets done for every signature. When you think about it looks silly, isn’t it? There are plenty of software solutions that allow you to set up the sequence of signing and approval. They send out reminders and share the final document with multiple recipients. The thing I like the most is the audit report. You can see exactly at the time of document signing and from which IP address. The stakeholder can no longer claim that he had signed it “long ago”.
Once the contract is signed, the system keeps the electronic version in the cloud. Some contract management modules in ERP will remind you in advance when a contract is about to expire. Plus, a good system will extract the data from the contract and assure future LPO’s are created with the correct data
Submission of invoices and payment
The goods arrived, and the stores’ guys sign off the GRN (goods receipt notice). Now the supplier can upload the invoice to the customers’ system. Or better, they connect their systems and data exchange occurs automatically at the moment of goods receipt. Science fiction? No, some multinational companies do it with their major suppliers.
Now the payment module compares the contracted terms, LPO and GRN. If everything is matching, the payment is planned automatically as per the payment terms. Since most of the companies use e-banking, again everything is automatic. There can be a person overlooking the process and eventually stopping the payment in case of quality or other issues.
Seems that systems will take over the job of the procurement professional, doesn’t it? Well, computers will indeed be able to do most of the “junior” tasks. Procurement will focus more on working with stakeholders to add value to the business. Humans will negotiate the deals. A handshake will still close the deal. E-procurement will take away the repetitive boring tasks. Giving us more time to work on the win-win scenarios we all are looking for.