Daily Archives: November 6, 2017

Where is the Procurement Innovation Today?

Last week, in They Terk Er Jerbs!, we noted that the age of robots (and software assistants) is here and there’s nothing we can do to prevent it now that they are roaming the floors of Walmart. We also said, especially in our follow up post on how they They Terk Er Jerbs! Good for them. that this can be a good thing since the jobs these robots are best suited for are boring, repetitive, relatively simple jobs that sometimes even suck your willingness to live.

And by doing these jobs, they can free you up to do more complex, creative, and value-generating jobs, including those jobs that couldn’t be done before.

Of course, we have the problem that most organizations only see the cost savings that result when you eliminate 20 paper pushers with automated invoice processing software that can automate 95% to 98% of the work, leaving only 2% to 3% of invoices that need manual intervention. Yes this is a savings, and yes it is significant, but it’s a one time savings. What do you the next year? Competition still increases. Costs still rise. Margins still fall. Not only is your place on the Fortune 1000, or Global 3000, threatened (or your possibility of ever getting there), but maybe even your business viability.

You get year over year savings by identifying value year over year. At the end of the day, it’s all about keeping a healthy profit, defined as Sales – Costs. You can only increase sales so much in a given market for a given product. At some point the market is saturated and your position is maximized. You can only decrease cost so much with just an RFX or Auction … all that does is take the fat out of the margin.

To find real savings, you have to figure out how to take cost out of the product — either out of the production process (lean initiatives or component substitution or design improvements), the transportation (through carefully amalgamated global shipping), the packaging (through package redesign), or even the margin through appropriate product consolidation with the right supplier (who can operate at a lower margin for higher volume). This doesn’t happen without a lot of investigation, analysis, exploration, and relationship building and management and the creative personnel to do it. Machines can’t do this. (While they can analyze the data and identify the best potential opportunities, they can’t realize them.)

The only way to truly find savings (and maybe even more value through better aligned value-added services) year after year is to have a team of people who can analyze the supply chain for them. This means that the best way for an organization to succeed is to employ invoice automation to free its people up from tactical invoice processing to, possibly after appropriate training, pursue more strategic opportunities and programs that will take identify additional value year over year without any additional overhead (since the invoice automation pays for itself and the team pays for itself).

So, the true Procurement Innovation today comes when organizations use automation not to replace headcount, but augment headcount to allow them to find more value than they would otherwise have time to find. And indirectly achieve an ROI from the software automation that is far higher than just the ROI from the automation alone.

And the great thing is that since these AI’s aren’t truly intelligent, they don’t mind doing the same mind-numbing task to infinity and beyond.
So let ’em take our mind-numbing soul-crushing jobs. We’ll keep our soul, and fly in the clouds while they dig in the mines.