How Digitization is Reinventing Procurement
Vendors expect digitized, transparent agreements
Companies of all sizes from every industry are simplifying procurement interactions and reducing costs by moving from paper-based agreements to a fully digital process. As technology automates repetitive, time-consuming workflows, procurement teams are creating new value by executing contracts faster, reducing risk, lowering cost, ensuring compliance – all while increasing visibility for everyone involved.
If your procurement team hasn’t already made a move to modernize your agreement technology, it’s time to focus on creating a modern procurement agreement workflow.
Below we discuss specific aspects of the procurement process and examine how digital tools can change the way organizations manage new purchases. As you read through, consider how a seamless digital workflow can impact your procurement team’s relationships with internal parties, external vendors, regulators and more.
Successful agreements = successful procurement
As much as technology has driven changes in the modern commercial landscape, the central focus of procurement, supply chain and vendor management has remained constant: agreements. These documents are crucial to every interaction between an organization and its external stakeholders.
Agreements are part of the initial vendor selection process (quotes, RFPs, NDAs, MSAs, etc.) all the way through to final payments. The easiest way for a procurement team to do its job—securing the right goods and services at a fair price—is to optimize each stage of the agreement process that facilitates clarity about the delivery of goods, services and payments.
Vendors expect simple, transparent experiences
Consumer technology has raised the bar for business transactions. Those expectations carry over into the workplace for both vendors and internal stakeholders. In a world you can watch what you want on television, order dinner or call a car from a smartphone in a matter of a few clicks, why would a business settle for complicated, error-prone systems of agreement?
Procurement transactions usually involve a long chain of actions that need to happen in a specific order. A system of agreement that unblocks data and increases visibility for the members of that agreement chain offers a lot of value. Providing external parties with an easy, transparent way to do business is sure to go a long way toward securing the best available vendors. If organizations make it easier to do business with them, they’ll find a lot more vendors and suppliers lining up to collaborate. Increased visibility into documents also makes it much easier to work with finance, legal and IT teams.
Automation offers improvement opportunities
Like other lines of business, procurement has the opportunity to benefit from new digital technology. Automation can bring incredible speed to agreement processing while minimizing room for error and duplicate work. There are several huge benefits to moving away from outdated, costly, inconvenient paper agreements. A lot of the manual work of preparing, signing, acting on and managing an agreement is redundant and can be managed instead by technology.
Automation can also assist with contract analysis and risk mitigation throughout the system of agreement. From the start of the process, automated contracts require less analysis than manual ones because there are tighter controls on how the contract is written. Once a contract is in a review or negotiation phase, smart automation tools can be utilized to pinpoint specific parts of a contract that require additional review for risk or present a business opportunity.
Building automation into the agreement workflow lowers costs across the board and allows individual procurement professionals to spend their time managing the crucial parts of their job—maximizing the return on company investments.
Shifting regulations present challenges
Ensuring compliance across business transactions is difficult. Procurement teams are responsible to both internal stakeholders and external suppliers to ensure that agreements fit in line with existing regulations and corporate compliance. To stay on top of things, procurement teams partner with other internal teams (usually legal, risk and compliance) on a regular basis to make sure agreements do not fall out of compliance.
With severe penalties for these breakdowns, organizations need to build a system of agreement that gives those internal compliance experts autonomy to provide their guidance in a simple, repeatable manner. Every organization has its own guidelines about selecting and onboarding new suppliers. Automation streamlines this process to ensure that procurement teams can move quickly and get on the same page with suppliers and internal stakeholders.
Agreement innovators lead the way
Procurement teams that have moved to a complete agreement process with new cloud-based tools have already proven to be extremely successful, reducing the amount of time and resources necessary to do their jobs. These trailblazers are maximizing visibility into agreements, reducing risk and creating new opportunities for growth. For example, HP reported a 93% improvement in turnaround time on agreements and Toshiba reduced their agreement cycle time from two weeks to only two hours.
On top of all of that, companies that have invested in minimizing their impact on the environment are seeing drastic reductions in the amount of paper consumed by moving to a digital agreement process.
Get tips to modernize your procurement system: Building a Modern Agreement Workflow for Procurement