How to manage business process optimization with procurement automation

When it comes to optimizing business processes, your team needs to aim big. That means starting with the part of your operations where any inefficiencies can drain resources, slow decision-making, and hurt profits. In other words, the place to kickstart your optimization efforts is procurement.

Procurement often flies under the radar as a place for strategic growth and savings, yet it plays a crucial role in your organization’s ability to work efficiently. Because it's how buyers acquire goods and services to do their jobs, it poses an opportunity to drive cost-savings and efficiency for your organization.

With modern digital procurement systems, your team can leverage technology like automation to redesign complex processes and establish a foundation for broader business process transformation.

What is business process optimization?

Business process optimization (BPO) is a strategic approach to making business workflows more efficient, error-free, and cost-effective. An effective business optimization strategy spans your entire organization, so it’s essential to start with a part that every team needs and uses, like procurement. This allows your team to implement an optimization strategy across the entire order and purchasing lifecycle. 

Along with BPO, your team may implement business process automation. While the two overlap, there is one major difference: Optimization is ongoing improvement, whereas procurement automation is a one-time change.

Where procurement creates bottlenecks

For many organizations, procurement is a sprawling business operation. However, organizations that use decentralized processes or try to scale quickly can run into more procurement bottlenecks that drain resources and lead to costly setbacks. Here’s how procurement can cause these challenges:

• Manual purchase orders (POs) and approvals: Manual procurement workflows are more prone to delays or errors due to avoidable human mistakes, slow processes, and time-consuming document matching.

• Lack of standardized catalogs or preferred suppliers: If buyers can’t quickly identify your organization’s preferred suppliers or product lists, they might stray from approved processes to find what they need, which results in purchasing policy violations.

• Siloed data between departments: Scattered procurement data means your teams are likely misaligned, which can result in duplicate purchases, order redundancies, overspending, and operational inefficiencies.

• Long invoice cycles and reconciliation errors: A procurement process with tedious workflows and constant errors forces your team to spend valuable time resolving mistakes downstream, which makes the entire process cost more and last longer.

The good news, though, is that you can map these procurement bottlenecks to the parts of your operations where strategic and data-driven process improvements can resolve them.

Key procurement process improvements

It can feel intimidating to look at your organization’s entire procurement network and decide where to start improving it. To simplify your approach and maximize its impact, try using the following checklist:

Standardize purchase requests and approvals

Without clear, organization-wide purchasing policies and procedures for your buyers, effective procurement management is near impossible. This lack of standardization often leads to maverick or tail spend, which negatively impacts your budget and bottom line. 

Your team’s simple fix for this issue is implementing a single, centralized digital purchasing process for all buyers to use to acquire goods and services.

Your digital purchase requests and approvals workflow should include things like predefined approval hierarchies and budget approval thresholds. That way, your workflow has built-in guardrails to ensure order accuracy and keep your process moving efficiently. 

Digital workflows also enable your team to leverage automation. As an example, when a purchase request meets your predefined purchasing conditions, your digital procurement system automatically approves it. As a result, your team will save time and maintain accuracy by avoiding manual approvals.

Automate purchase-to-invoice workflows

Most traditional procure-to-pay (P2P) processes handle procurement manually, which increases the risk of errors, delays, and poor visibility into procurement activities. On the other hand, automation and AI technology enable your team to streamline workflows by setting repetitive tasks to happen instantly. That’s why a P2P process that still relies on manual tasks is a prime candidate for automation.

However, for workflow automation to be effective, it must be part of an enterprise resource planning or procurement system integration. This means all your procurement systems connect to each other and form a cohesive digital network. Without robust integrations, your technology is disconnected, which prevents automation from triggering. Doing so lets automation simplify tasks across your operations, like PO creation and invoice matching.

For example, rather than use valuable time to pair invoices and corresponding POs or receipts by hand, your automated digital systems will do it instantly. If all the documents match, the system will send the invoice forward to accounts payable. But if it detects a discrepancy, the solution will instead send you a notification that an invoice needs a closer look.

By implementing automation earlier in the process to improve speed and accuracy, you can reduce the likelihood of these invoice discrepancies.

Consolidate catalogs and supplier lists

Siloed data limits how deeply you can assess and understand your procurement operations. That’s because you’re less likely to have a comprehensive dataset that provides accurate insight when data is scattered across your procurement systems. It’s even harder to contain this data if you manage multiple suppliers and duplicate catalogs.

Without these supplier and operational insights, you’ll have to make crucial business decisions with unreliable information. However, you can resolve these setbacks with one effective adjustment: consolidation.​

Supplier and catalog consolidation centralizes vendor performance, order history, spending trends, preferred vendors, and contract negotiation data in one intuitive system. Take Amazon Business as an example. The solution simplifies consolidation with Business Lists. This feature streamlines orders with customized recurring reorder lists or shopping lists so you can gradually build a cart of several products, then make one purchase and save time.

With all this information in one place, your team faces less risk of discrepancies from scattered data and achieves more control over a complicated catalog. By using a system to help consolidate this data, managing multiple suppliers becomes straightforward, or even profitable. Organized and accurate data is the information you need to strategically optimize your supply chain, negotiate for more favorable contract terms, and lower maverick spend.

Strengthen audit trails and compliance

Clear, consistent audit trails ensure you have accurate data to trace an order’s history, understand why something went wrong, address a larger issue, or simply maintain compliant purchasing practices. These trustworthy audit trails hand your team greater procurement transparency and increased control. But the key to gaining such insight lies in digital systems.

Digital procurement solutions that automate, collect, organize, and assess data allow you to accurately track procurement activity across your network. By integrating such a system with the rest of your procurement tech stack, you can feel confident that your audit trails consist of data from every corner of your operations. Reliable insights like these then encourage purchasing compliance, accountability, and fraud prevention.

KPIs that prove efficiency gains

Key performance indicators (KPIs) prove the impact of your optimization efforts. These numbers are concrete proof of your BPO strategy’s effectiveness. Yet, it’s also a good idea to focus on metrics that make sense for your organization’s maturity. That way, you set KPIs that are achievable for your organization at present. 

The following KPIs tend to be common metrics for teams tracking and analyzing their BPO efficiency improvements:

• Procurement cycle time: This metric captures the total time from purchase requisition to supplier invoice payment. Often, a decrease in procurement cycle time indicates more efficient processes.

• Cost per purchase order: Each PO includes a price tag that indicates the cost to your organization for creating and processing it. An automated PO process usually sees drastically shorter timelines.

• Percentage of automated approvals: This data point is the percentage of your approval workflow that occurs automatically. Generally, automating routine procurement tasks increases efficiency and saves on costs.

• Maverick spend rate: This KPI measures the frequency with which your buyers purchase outside the preferred order path. Low maverick spend rates mean your buyers follow approved workflows when making purchases. 

• Compliance adherence percentage: This metric measures how often your buyers follow your internal purchasing policies and procedures. Tracking compliance adherence points to the effectiveness of your current processes.

Tracking these KPIs helps your team demonstrate to leadership the success of your BPO strategy in procurement operations. This can help you gain buy-in and momentum as you roll out your strategy across the organization.

Change management for adoption

Buyers may feel resistance to a new optimized procurement process or system that will change well-known existing workflows. It’s possible they understand the practical reasons for optimizing existing workflows, but trying to learn new policies and procedures for day-to-day tasks can feel frustrating. 

If buyers don’t use the new process or system, your optimization strategy halts before it can have any real impact on your organization's finances and operations. This is why a straightforward change management strategy is crucial. Your team can focus on these enablers for effective change management:

• Get executive sponsorship: It’s helpful to have leadership on your side when implementing your BPO strategy. Their support can amplify your goals and encourage the entire organization to get behind the initiative.

• Create a communication plan: A critical part of change management is communicating the process update to your buyers and procurement stakeholders. That way, everyone can implement new expectations and procedures.

• Run pilot programs: By starting with small-scale test implementation, you can get a sense of which parts of your change management strategy work well and which need improvement. You can then iterate on your approach based on these takeaways. 

• Share ROI storytelling: To attract interest and support, you should connect data to a narrative that helps communicate the impact that implementing a new procurement system could have on operations and each buyer’s day-to-day work. 

As you go forward to implement a new, optimized procurement workflow, it’s helpful to place yourself in your buyer’s shoes. This can make it easier to cater a change management strategy to their day-to-day experiences and make sure the new process helps them access their preferred goods without jumping through hoops. 

How Amazon Business supports optimization

As a strategic partner in procurement optimization, Amazon Business helps your team transform routine procurement processes into strategic levers to drive organizational growth and increase efficiency. Here’s a breakdown of how this solution complements your strategy:

Gain visibility into your purchasing data

Amazon Business’ Spend Visibility (a Business Prime feature) empowers your team to make smart, strategic decisions that boost spend efficiency by helping uncover your organization’s current spend habits. 

The feature works by first consolidating all your organization’s purchasing data into a single place. That way, using built-in sorting features, you can then filter the data by department, category, or time period to analyze your spending down to the line item. 

Such in-depth visibility improves your team’s ability to curb financial drains, such as maverick spend, and strategize responsible purchasing initiatives. You can also zoom out to view organization-wide data for a big-picture view and analyze KPIs like total procurement cycle time savings.

Enforce compliance and procurement policies

Successful BPO relies on your team making sure buyers stick to internal compliance and procurement policies. Amazon Business can help you enforce these rules with features like Guided Buying (a Business Prime feature). With Guided Buying, you set purchasing guardrails that encourage your buyers to order from select suppliers by labeling them with a “preferred” tag. Taking compliance enforcement even further, Guided Buying also helps with budget control by inviting you to create purchase limits on a department or individual basis. 

By directing buyers to approved products and suppliers with explicit budgets, you simplify their selection and ordering processes. This kind of straightforward purchasing workflow makes buyers more likely to follow the preferred path, which helps you reduce rogue spend. And should a purchase stray from the approved workflow, features like Spend Anomaly Monitoring help you stay on top of these orders to avoid breaking policy or overspending.

Integrate seamlessly with ERP and procurement systems

The most impactful procurement BPO strategies leverage fully integrated systems. Amazon Business simplifies this by connecting with over 300 e-procurement systems. Because your team can access all these options, Amazon Business helps you facilitate a digital transformation of your enterprise tech stack.

Drive data-backed decisions

Data is a cornerstone of any BPO strategy, and Amazon Business Analytics helps your team uncover these important data points that can inform and bolster your approach. The feature aggregates data from purchases your team makes through Amazon Business. You can then use this data for in-depth spend tracking, trend analysis, and customizable reports.

Because of its ongoing data collection, Amazon Business Analytics delivers real-time, accurate insights that your team can feel confident using when making essential process optimization decisions. This data also helps you track measurable outcomes like spend anomalies, predictive procurement, and budget adherence. By using these metrics, you show real results that help you frame procurement as a continuous, organization-wide strategy for long-term cost savings. 

Procurement efficiency as an advantage

Because every department uses procurement processes to acquire the goods they need to work efficiently, it’s the ideal place to kick off your business process improvement strategy. Starting with procurement lays a data-driven foundation for efficiency and cost savings across your organization, which helps ensure all your buyers are on the same page. With this in-depth insight and control, you can effectively manage your procurement operations and transform it into a lever for operational efficiency.

But optimized procurement can have more widespread impact than just cost savings. It helps your team set the stage for long-term organizational growth by building agility, compliance, and scalability into your strategy. 

From spending insight to purchasing controls, Amazon Business can help optimize procurement operations while scaling alongside your organization.

Contact Amazon Business today to learn how to streamline your operations and build smarter, more efficient procurement workflows.