“Automate This” for Smarter Procurement

4 min read

How automation and process mining can improve your procurement process.

How does it feel to work in “the most complex business function”? Many organizations describe procurement that way, calling it a “fundamental enabler” for operational excellence and cost savings (Ernst & Young, 2020). 

According to a recent IBM IBV Study — Smart Procurement Made Smarter — there are five areas where smarter workflows can make the procurement function more resilient and better at creating new value. We’re going to focus one — “real-time, automated, frictionless processes” — because taking the friction out of end-to-end experiences, whether customer- or employee-facing, can produce substantial results (and perhaps take some of the complexity out of the job).  

“. . . adding automation and AI into source-to-pay workflows offers a high degree of integration and visibility that, historically, most procurement processes have lacked.” — IBM IBV Study, Smart Procurement Make Smarter, 2022

Automate like Max Mara for smarter procurement

It’s one thing to say "let’s create a frictionless procurement process," but where’s the best place to start to ensure a healthy return on automation investments? We don’t have to look further than the global fashion company, Max Mara, to see the value of first identifying where the friction exists before automating any workflows or processes.

Max Mara targeted its Order-to-Cash (OTC) process because it was affecting the buying experience. “If you imagine a ‘heat map’ of potential process improvements, our reddest zone would be the Order-to-Cash cycle, from order processing to fulfillment, payment and customer service,” explains Max Mara’s Head of Digital Operations. “And during the seasonal spikes in sales we experience (typically in July and December), those red zones get even redder.”

To improve the process, the digital ops team needed to quickly find the problems and then determine the highest-ROI fixes. They needed to be able to pinpoint suboptimal processes at a granular level — say, staffing patterns in a particular warehouse. They also wanted to be able to confidently project how specific process changes, such as fixing a process flow or automating it, would impact key operational metrics.

The team considered traditional process redesign approaches, such as relying on business intelligence (BI) systems and insights from business analysts, process owners and other stakeholders. But they concluded those methods were a partial solution. “BI systems are valuable to point out symptoms of process problems,” explains the Head of Digital Operations, “but they’re not as capable at diagnosing their root causes, which is critical to solving them.”

The digital ops team settled on process mining as a key approach to improving its OTC process and, consequently, the buying experience across its 10 brand-specific websites and more than 2,300 brick-and-mortar stores around the world.

In one noteworthy case, the digital ops team wanted to understand how proposed changes in the processing of customer post-sales support inquiries would affect bottlenecks during so-called “high load,” when volume was reaching seasonal peaks. Using an advanced process mining solution with built-in simulation capabilities, they were able to identify the parts of the process prime for automation. And by simulating the changes — including the automation of key workflows — they were able to demonstrate up to a 90% decrease in customer service resolution times, along with a 46% reduction in the average cost per resolution.

Consider another case where their order lead time in a particular geography was known to be higher, and the suspected root cause was the warehouse pick-and-pack flow. By running relevant data through process mining models, the team was not only able to support their hypothesis, but they were also able to pinpoint unexpected process impacts that were making the problem worse. “In some cases, we knew there was a bottleneck due to process deviations,” says the digital ops lead. “But we were surprised at just how complex the flow was and how few orders in the warehouse followed the ‘happy path’ process flow. That data-driven insight enabled us to design a more appropriate and effective fix for the problem.”

“Making strategic investments in process automation will be critical to delivering the high-quality digital experience customers have come to expect. With [process mining], we’ve gained a powerful tool to identify where automation will have the highest payoff, both for our customers and for our business going forward.” – Head of Digital Operations, Max Mara Fashion Group

Read the full case study for more implementation and ROI details.

Process mining and smarter procurement: What to look for

For Chief Procurement Officers (CPOs) looking to increase operational efficiency, process mining technology can help deliver maximum value at the least possible cost.

To choose the right process mining solution, look for these two capabilities:

  1. Digital twin of an organization (DTO) is like having a dynamic copy of your processes that can be used to simulate changes and predict impacts. DTO capabilities should include the following:
    • Automatic discovery and analysis of the end-to-end procurement process from transaction logs of any IT system.
    • Constant monitoring of procurement process performance and compliance by analyzing variants, bottlenecks and deviations with root cause analyses.
    • Continuous procurement process optimization through simulations of what-if scenarios with the expected ROI.
  2. Multilevel process mining enables you to analyze complex processes, like the ones in procurement. You should be able to map several processes — such as procure-to-pay’s different subprocesses (purchasing, ordering, invoicing and payment) — within a single comprehensive model, solving the limitation faced by traditional methodologies.

In sum

Procurement professionals have the same objective — find new ways to create cost savings and increase business value. Procurement leaders that can that take full advantage of process mining will be able to make more informed, cost-effective decisions by knowing where the opportunities are and testing ideas before deployment.

With process mining, CPOs can almost guarantee expected savings. Look at this automotive company’s procure-to-pay value chain with total expected savings of EUR 672,000 against five major challenges in procurement:

Look at this automotive company’s procure-to-pay value chain with total expected savings of EUR 672,000 against five major challenges in procurement:

Read this paper to learn more about how process mining can help overcome five of the most critical challenges for procurement leaders: maverick buying, deviations, rework, automation enablement and cash discount losses.

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