By Dr Marcell Vollmer, Chief Innovation Officer, Celonis
Across all industries, procurement leaders are seeking significant and measurable productivity gains. New technology, based on machine learning and artificial intelligence, is driving the digital transformation of the procurement function to deliver value, driving supplier innovations, performing risk management, securing a sustainable supply chain and, of course, managing budgets.
For procurement professionals, affordable, efficient and compliant processes are essential. This applies whether they are selecting products, issuing a purchase order, buying, giving the green light for payment or any other essential task. Without careful management of these processes, business operations can quickly deteriorate.
Despite the need for efficiency, companies rarely begin change with a targeted re-assessment of all processes. Instead, managers rush to plug in new software or look for minor changes that may deliver basic improvements. Their procurement units have traditionally been too narrowly focussed on how they aim to address process inefficiencies. With maverick buying and other problems within processes, many firms still tend to be so driven in one area of change that they miss the big picture. When performance is inevitably impacted, businesses bring in consultants to shape digital transformation – often at great cost and while relying on outdated information.
How can procurement affordably and quickly achieve better outcomes?
A more sophisticated approach is to use an automated, objective assessment of current business operations, called process mining. Process mining provides full visibility of any enterprise processes, including the source-to-pay process at any time. This powerful technology enables companies to precisely identify the problems that are occurring within their processes, to remove hidden inefficiencies and to take corrective action that avoids problems from occurring in the future.
Celonis conducted a study to examine process knowledge amid change. It found that 82% of business leaders do not consider processes before embarking on digital transformation. In addition, 66% said better visibility would give them the confidence they need to effectively execute digital transformation. According to the CPO Survey 2020 by the University of Mannheim, 80% of procurement executives believe that digital transformation will affect their function more in 2020 compared with 2019.
As part of the digital transformation drive, process mining must not only visualise live processes, but also deliver a full analysis and clarify how to drive change. It must plug directly into a company’s own large data sources in multiple formats and rapidly construct a comprehensive picture of how procurement process flows are happening in real-time. From there users can identify the most troublesome frictions and present clear recommendations for actions that address root causes. Those recommendations can easily be automated for repeatability.
Vodafone has seen an enormous impact (after implementing process mining), with a procurement volume of nearly 800 000 purchase orders and five million invoices annually. The costs per purchase order have fallen with more than 10%, while the proportion of perfect purchase orders has soared from 73% to 96%.
Siemens has also been using process mining since 2011 across multiple business units. “Process mining shows us all activities and variants we have”, says Dr Lars Reinkemeyer, Global Process Mining Lead, Siemens. That transparency then allows teams at Siemens to optimise their processes according to their goals. In their purchase-to-pay process, process mining helps to reduce manual changes in price or quantity, and to immediately act on payment term deviations and late deliveries, with the ability to target specific suppliers.
Process mining becomes ever more important as companies of all sizes expand and as they gain more operations and procedures that they need to manage, protect and improve. Many weaknesses are hard enough for businesses to spot without advanced technology and they become ever more obscured as companies acquire other firms or take on more staff and customers.
Process mining is available to all companies, from the smallest to the largest. To find out more about how your procurement department can increase productivity, optimise working capital and reduce risk, visit www.celonis.com.