How IoT Can Transform the Procure-to-Pay Process
For many C-suite executives and key decision-makers, the IoT revolution, at least for the time being, might seem limited to smart homes, smart refrigerators, smart cars, thermostats, and smart bulbs. The underlying intent behind most of these products is one or more of the following – saving the user time and money or improving efficiency. While this may seem true if we consider the media frenzy created around these products, there is a silent revolution in the making for the application of IoT in areas previously unimagined. Research firm IDC forecasts that the spend on IoT will reach $1.1 trillion in 2021
It has undoubtedly unfolded the scene for the procure-to-pay process of the future. Looking at the disruptions all around, one can’t help asking if the days of conventional procure-to-pay processes are over. We need not stretch our imagination too far for an answer to this question. Reimagining or redefining an organization’s Procurement function would necessarily involve the evaluation and exploration of emerging technologies.
Before we dive into the future, let’s look at how a procure-to-pay process looks like today. Consider a scenario of purchasing office supplies for your firm. In a typical scenario, your procurement specialist would compare a list of vendors for the specified product, select the most appropriate vendor and request a quote. Depending on the quote submitted by the vendor, a negotiation might take place for a better deal either for price or quantity. Once the contract is agreed upon, the supplies and invoices are sent. Your Finance department would validate the invoice and pay the vendor for the supplies.
In the above scenario, some of the steps involved in the procure-to-pay process might have been automated because it’s humanly not possible to manually manage all the steps for each supplier your firm works with. However, it’s worth reflecting on whether you’re harnessing all technological possibilities and advancements to build a world-class and future-ready Procurement function.
One of the common drawbacks of most existing procure-to-pay processes is the inability to track spending in real-time. While many firms suffer the budgetary impacts of unconventional spending, some others suffer from departments spending over the budget. The bottom line is that all procure-to-pay problems impact critical areas such as auditing, reporting, and processes. This is where the Internet of Things (IoT) can play a pivotal role in the transformation of procurement functions across businesses.
What Can IoT Do for Your Procurement Function?
Procure-to-pay is one such area where IoT can make a significant impact. Nowadays, mobile devices are frequently used in the procurement process to gain instant access to analytics, order data, and requisition and invoice approval. Coupled with IoT, this can transform several aspects of the procure-to-pay process, including traceability and analytics.
Let’s look at some of the benefits that you can harvest by introducing IoT in your procure-to-pay process.
- Traceability of Materials:
The application of IoT will enhance the traceability of products and materials across the entire supply chain. Instant access to data regarding the location of products or materials at any stage throughout the supply chain will be necessary for organizations to remain competitive.
IoT technologies can be leveraged to enhance the traceability of products in the supply chain by recording the location, state and quality of products as they travel from the source to the factory or from the factory to the consumer. IoT platforms are equipped to read data from various devices, including smart tags (Barcodes, Near Field Communication or NFC, RFIDs, and Bluetooth Low Energy) that are attached to individual goods. It enables the IoT system to track and monitor sensory data such as temperature and humidity, speed of the vehicle, geolocation and so on.
This applies to several industry sectors, including but not limited to manufacturing, pharma and life sciences, healthcare, construction and real estate, logistics and more. In many industries, the tracking of materials used to manufacture a finished product could be a compulsory regulatory requirement in the near future.
Analyzing data is critical to the success of any organization as it increases the ability to generate insights, leading to better decision making. IoT makes it possible for organizations to gain access to more rich data than ever. For example, a manufacturing firm can enhance the efficiency of the procurement process by deploying sensors and tracking devices on their delivery trucks to notify a truck break down or identify a potential failure before it occurs. Sensors can offer real-time information on the condition and need for repair of vehicles. IoT also allows procurement teams to improve visibility and better understand their supply and equipment usage.
- Improve Productivity of Procurement Teams:
IoT provides firms with an opportunity to automate tasks that free up the time of employees. For example, in supply chain scenarios, RFID-labelled goods can be automatically inventoried and handled by robotic forklifts, reducing the need for human intervention. In fact, to harness the real potential of IoT, procurement leaders need to shift their approach to hiring and retaining new talent to focus on digital skills.
Big Data, IoT and Procure-to-Pay
The critical underlying component in all the IoT-driven transformation will, however, be the role of big data. IoT will increase the volume and improve the quality of the data available. It will then be left to organizations to process the data available and generate insights to derive the most significant benefits.
In any procure-to-pay process, paper documents or their digital counterparts often act as a bottleneck to process efficiency because these records need to be stored and retrieved manually. One needs to manually transform the details into actionable data, using a computer keyboard and mouse as the interface. For the most part, companies are looking at innovative ways to bridge the gap between the physical and digital elements.
So, how does IoT change this scenario?
Looking at the procure-to-pay process through the IoT lens, purchase orders, invoices and receipts are “things” that can be transformed into the data sources and are an opportunity for automation. With Robotic Process Automation, organizations can already reliably transform paper or digital documents into actionable data, which in turn informs a set of predefined rules to match documents and route invoices for approval. When paired with IoT, the same technology can intelligently identify process exceptions that are handled today by human workers.
Thinking about IoT, what comes to mind is the interaction between humans and “things” (paper, products, appliances, and so on). The question to ask is how sensors and machine intelligence might make it possible to do things differently; that is, without human intervention. In the procure-to-pay process, probably over 90% of invoices can be handled without any human involvement.
Intelligent process automation systems can automatically translate paper and electronic documents into structured data. Subsequently, this data is exchanged with Enterprise Resource Planning (ERP) systems for the validation and matching of invoices, along with the routing of approvals and entry of transactions.
Furthermore, for procurement teams, IoT will provide increased visibility of organizational spending and an enhanced understanding of equipment supply and usage. This, in turn, will help them improve catalog content and spend management by analyzing what is being used and what is needed. The ability to make accurate predictions will also significantly bring efficiencies in budget and contract management.
Possible Use Cases of IoT in Procurement Processes
Now that we have a fair idea of how IoT can potentially transform a procure-to-pay process and system, let’s discuss some of the potential use cases.
- Smart Shelves and Automated Stock Fulfillment:
IoT-enabled product shelves, also called Smart Shelves, can help track the real-time status of the availability of products on the shelves. This, in turn, can help the staff to refill the designated areas on the shelves immediately. What’s more, the purchase orders can be placed automatically on behalf of particular products to ensure they do not run out of stock. With RFID tags, information can be collected from the products and then transferred through a communications interface, such as RFID reader, to an IoT platform where the data can be stored in the desired format and subsequently analyzed for decision making.
Smart shelves can help save productive hours for employees, allowing them to focus on work that creates more value for the business.
- Estimation of Demand and Supply:
In a store setting, retailers can pair up IoT with Point of Sales (POS) and historical sales data to optimize product placements and shelf management. With the application of IoT technology and sensors, the connected devices can be transformed into smart devices to enable massive and meaningful data generation. The data thus generated can allow retailers to gain visibility into their spend patterns as well as identify their consumer’s consumption patterns. This supply chain data can be monitored and analyzed to derive insights for the estimation of demand and supply statistics, leading to better-informed decisions.
- Predictive Equipment Maintenance:
With smartly-deployed IoT technology, sensors can be used for managing energy, predicting machine failure, or detecting other store-related issues. Each of these aspects can potentially initiate an action in the procure-to-pay process. For example, supermarkets and department stores deploy complex equipment such as refrigeration units. When these units are coupled with sensors, one can forecast maintenance issues related to power consumption or monitor electricity or temperature fluctuations to ensure food quality. Such smart equipment can automatically detect a malfunction and initiate the procure-to-pay process by scheduling a repair with an empaneled vendor depending on the type of issue.
- Transport Tracking Optimization:
The efficient transportation of goods and merchandise is one of the critical goals of smart transportation applications. IoT can transform this space with the tracking and maintenance of transport and optimization of the route. Logistics departments are already using GPS to track and route vehicles. With IoT, one can gain a higher degree of accuracy in understanding how close a shipment is to a given destination. It is no longer mandatory to have high-end IoT devices to identify the location of shipments. When IoT is combined with GPS systems, it is possible to track the location of a shipment at a granular level.
- Warehouse Streamlining Processes:
With IoT technology making inroads into the procurement process, the integration of procure-to-pay and supply chain management becomes inevitable. In the warehouses, IoT solutions produce inventory data that help procurement teams maintain stock levels. Because RFID tags and sensors enable the capture of data and the identification of goods at the item level, IoT-enabled warehouse platforms provide a constant flow of real-time updates on inventory levels and location.
Other benefits of implementing IoT in this space include the prevention of loss or damage to inventory, forecasting demand based on realistic data, and so on.
No doubt, the application of IoT in the procurement process is still at a nascent stage. In addition to fast and optimal decision making based on real-time data, environmental conditions, and existing stock levels, IoT can also reduce the procurement lead time, minimize costs, ensure a faster time to market for the right product based on demand and current needs, improving the overall profitability.
It is perhaps too early to predict the breadth and spread of the influence IoT will have on procurement operations. Organizations that can afford and are ready to transform their existing procurement systems and processes to make way for IoT would be able to automate much of their manual processes. This, in turn, will help create valuable bandwidth for their teams, enabling them to adopt a more strategic approach.
Such a situation will also call for Human Resources teams to focus on re-training their employees on big data and analytics because IoT will bring in a massive influx of data into the procure-to-pay systems. The real catch will then lie on whether procurement teams can analyze the data and convert it into meaningful and actionable insights that help better-informed decision making. This entails the real transformation that IoT will drive for the procure-to-pay systems across all industry sectors.
All information will be kept confidential.
Casper Network is the first real-time Proof-of-Stake (PoS) blockchain, promoting global adoption of the blockchain technology.
NFT Ticketing is set to completely transform the way event ticketing works by storing NFT-based tickets on the blockchain.
Using IPFS, we can set up the decentralized data storage for NFTs and store all the data related to NFTs on that storage.