Digital Procurement Platforms and the Limits of Automation

Digital procurement platforms are very good at a certain kind of purchase, in which the item is standard, the specification is fixed and it has been bought before. Price and lead time are the only things that vary, so a system can compare quotes, raise the order and match the invoice with no one touching it.

For that spend, automation is nearly all gain, being faster, cheaper to run and less prone to clerical error, and buyers are freed from paperwork.

Other purchases are different in kind, such as a critical piece of equipment, a custom component or a first order from a new supplier. Here the quoted price is one input among several. Can the supplier meet the specification, have they delivered on time before, and will they support the product in service?

An experienced buyer weighs these, and a platform set up to pick the lowest compliant bid does not. If every purchase goes through the same automated path, the system is tuned for the easy category and applied to the hard one.

Exhibit 1: Sorting purchases into those to automate and those to route to a buyer.

Platforms that perform well are built around this division on purpose. Routine, high-volume categories run end to end without intervention, while purchases that meet defined triggers are sent to a person.

• →Triggers are explicit: value above a threshold, a critical category, a new supplier, a non-standard specification.
• →The buyer sees relevant history in one place, including past quality and delivery problems.
• →The system records the reason for the award when it is not the lowest price.
• →Categories are reviewed periodically, since items move from complex to routine as they mature.

Automation changes the buyer's job, since less time goes on processing and more should go on the purchases where knowledge of suppliers makes a difference. That only happens if the organization keeps those skills and uses them.

Some companies automate and then cut the buying team to match the reduced paperwork, and find later that nobody is left who knows which supplier to trust on a difficult order.

The complex categories are usually where concentration risk sits as well, a link explored in vendor consolidation versus diversification.

• →Sort last year’s purchase orders into routine and complex, and count each.
• →Check which workflow your platform applies to the complex ones today.
• →Define the triggers that send a purchase to a human buyer.
• →Make sure supplier history, including quality and delivery issues, is visible at the point of decision.