Procurement’s processes have been enabled by technology for a long time. From eSourcing to invoice management, supplier management to eprocurement, automation has played an important role in shaping the procurement function and improving – or at least scaling – our capabilities.
Automation is an increasingly popular topic in business circles. Based on the abilities of today’s providers, new markets and industries are adopting automated approaches all the time. This fresh look gives procurement the opportunity to reflect on our own technology usage – how we incorporate automation, what it allows us to accomplish, and how it changes the way the rest of the enterprise views our value proposition.
On December 2, 2015, USA Today ran an article titled, “Robo-advisers are on the march.” In this article, writer Jeff Reeves looks at how an increasing number of investment advisers and advisory firms are incorporating automation into their service delivery models. He also details what clients should expect and dispels some of the myths associated with automated investment banking – including the idea that just because something is automated doesn’t preclude it from being personalized.
What does this have to do with procurement you might ask? Quite a lot actually. Investment advisers work with clients to understand what they want to accomplish with their available assets in the long and short term. They lead conversations about current status, priorities, and risk appetite. Once the client’s preferences have been determined and articulated, advisers make recommendations about qualified investment opportunities that satisfy the client’s requirements. When you think about it, the role they serve on an individual level isn’t all that different from the one procurement plays organizationally.
As the use of automation has risen within the investment community, the role of adviser has been in flux – some service providers have done away with advisers altogether. But this is not the right model for all accounts, and the question becomes knowing which accounts can be automated and which need a more hands on approach – just like the variation procurement sees in category management strategies.
One of the methods for deciding between human and automated investment support is the value of the assets and their potential for growth. Similar to a category of spend managed by procurement, the cost to manage spend has an impact on the potential return, increasing the appeal of automation with smaller, lower margin pools of spend. Beyond this, however, you are not guaranteed the same results with humans and robots. In fact, according to Reeves, “countless studies have shown that active portfolio management, with humans trying to pick the best stocks, consistently underperforms the market in general.”
This leads to the idea of a hybrid approach – part human and part automation. If each is enabled to fill the role that they are best suited for, the results should be significantly improved. Human advisers – whether investment or procurement – can facilitate conversations and assist in the decision making process. This process and the choices that come from it can then be used to inform an automated solution that can execute the plan without variation and with consistent attention to detail.
Automation is certainly not a replacement for procurement, but we have to allow it to achieve its full potential before we can reach ours. Understanding just how much your procurement solution can accomplish for you should be seen as the starting point for procurement’s value to the enterprise, not the definition or limitation of what we can offer.