Dig Down to Deeper Insight with Process Mining Tools
Process mining helps organisations capture and evaluate information from enterprise systems in order to deliver insight to managers into the performance of key processes. According to the research firm, Everest Group, process mining is an emerging market for service providers, which grew at around 140-160% from 2018 to 2019 to reach US$230-US$250 million.
This growth is being fuelled by the many benefits that this relatively new and innovative approach can offer organisations, especially during these difficult times where for many organisations the ability to deliver process efficiencies is more important than ever. Unlike business process management, which is typically conducted using process workshops and interviews, process mining focuses on existing data available in corporate information systems.
The approach enables processes that follow non-standard procedures to become visible, and measures deviation from the standard. Also, it can often provide specific actionable recommendations for problems including bottlenecks, machine utilisation and accurate production planning. Process mining offers organisations a raft of benefits including the ability to quickly and cost-effectively understand current processes and where there are inefficiencies within them, in turn allowing the business to focus on priority areas for improvement.
How process mining applies to procurement
Process mining helps improve business compliance, ensuring employees are following the correct steps. In this context, one area where it can bring real benefits to organisations is in improving the procurement process, both in identifying potential issues and in enabling businesses to proactively address them.
Procurement is a critically important function within many public and private sector organisations today. Poor procurement practices can have a significant impact on the bottom line, particularly in relation to costs incurred. That’s why procurement is often earmarked as a focus of process mining activities. Process mining can help organisations understand and control their procurement spend, and it does this by helping to tackle common shortcomings of procurement processes. Here, we identify some of the specific areas where process mining can help both in understanding and identifying some of the issues and in proactively addressing them.
Eliminating the pitfalls
The use of inaccurate data is common in procurement. Data may need to be continually corrected throughout the process which is time consuming and costly. But the most important pitfall – and a growing problem for many businesses - is maverick buying, where purchasing is conducted outside of standard procurement processes. This can often manifest itself by organisations receiving an invoice before a relevant PO has even been created.
There are a wide range of drivers for maverick buying. Employees may believe they are saving the company money by finding better deals than the agreed purchasing contracts currently offered. The business’s existing procurement processes may be ineffective and time-consuming, causing employees to find alternative ways to purchase.
Whatever the precise driver for maverick buying, however, it is likely to have a number of negative consequences for any business where it has been allowed to take root. It could lead to everything from significant cost impacts to contracts being broken, or from the introduction of incompatible or insecure technology to an increase in security risk or risk to the business more generally. Maverick spend holds particular risk, if, as is often the case, there is no specific contract in place with the supplier. In this eventuality, if the supplier were to go out of business during a project, the company would have no legal protection and may be liable to pay any remedial costs.
Gauging the Benefits
Given the potential negative consequences outlined above, it is important for any business to get a handle on incidences of maverick buying and, where possible, put a stop to them altogether.
Fortunately, process mining is very effective both in identifying cases and ensuring compliance to the correct procedures.
But it is not just about compliance: one particular benefit of process mining in this context is in helping procurement departments or operating units within organisations manage their expenditure more efficiently. In this context, it can help to ensure adherence to payment terms and to enable organisations to take advantage of early payment discounts. It can also help to identify where data accuracy is causing manual rework, which could lead to organisations starting to think about the right data management processes or solutions to put in place to address these issues.
In summary, process mining can help drive significant benefits in organisations’ procurement processes and help make procurement departments more efficient. Not only can it drive individuals to ensure process compliance, it can also help organisations to achieve much tighter control over their procurement budget and overall expenditure. For organisations wanting to exert tighter control over their procurement spend, process mining offers a great route forward.
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