Digitisation vs. automation: Why purchasing should automate and not simply digitise its processes
Digitisation and automation have increasingly become disruptors in today’s industry. As a result, a new technological age, which many consider to be the 4th industrial revolution, has dawned. Industry leaders refer to this development as Industry 4.0. This trend has been mirrored in purchasing through the development of Procurement 4.0. But what is the difference between digitisation and automation? And why is it not enough for purchasing to simply digitise its processes? Find out how high degrees of automation can be achieved through automated document processing with the Netfira Platform.
Industry 4.0 refers to the progressive digitisation of industrial production and the intelligent networking of machines, systems and processes. The 4th industrial revolution and digital transformation are important for purchasing teams. Based on the term Industry 4.0, experts frequently refer to Procurement 4.0 to describe procurement’s new role and function. The increasing complexity of digitised business processes and the resulting data volume require intelligent approaches. Cutting-edge technologies like advanced robotics, Internet of Things (IoT), Blockchain, Artificial Intelligence and cloud computing fuel Procurement 4.0 and have a transformative impact on purchasing and supply chains.
What is digitisation?
Digitisation describes converting non-digital information, like a hard copy, into digital data. For example, digitisation means turning printed communications into electronic mail (e–mail) or converting hand-drawn schematics into CAD (computer-aided design) drawings. In purchasing, digitisation is often the first step towards automation as information needs to be available digitally to any automation technology before it can be automated. Initially, digitisation meant the conversion of analog formats into digital data to be processed with the aid of computers. Today, digitisation also means the digital networking of processes and products in real-time with the growing size and complexity of data structures.
What is automation?
Automation, on the other hand, improves processes that are already digital. It relies on a series of rules to accomplish tasks without human intervention. Automation means using information technology or machines to take on repetitive processes and tasks while freeing humans to do other tasks. Find out in our blog article whether Robotic Process Automation (RPA) or Artificial Intelligence (AI) is more suitable for automating operational purchasing.
Digitisation vs. automation: Digitisation as a first step towards automation in purchasing
The digital exchange of data and B2B documents needs to work automatically to make purchasing more efficient and future-proof. The digitisation of information is a crucial but not sufficient step towards achieving real automation.
Even today, many purchasing departments still rely on paper-based processes and manual data entry and comparison. Optical Character Recognition (OCR) is one method of making data available for digital use. The technology converts documents into a digital format by scanning and digitising information from printed documents, images or handwritten text. However, it lacks the data quality, flexibility and reliability of more sophisticated technologies. Moreover, OCR is highly limited in its use and error-prone, which can increase manual workload, preventing true automation.
Electronic Data Interchange (EDI) does not focus on text recognition because, in the EDI process, data is readily available in digital form. Instead, EDI describes an interface for data exchange between two ERP systems. Companies adopting this complex technology face long implementation times, non-compliance from supplies and other barriers that prevent fully automated B2B workflows.
Automation in procurement: More than just intelligent data extraction
Automatically extracting data from procurement documents with a software solution is not enough for companies to achieve automation and noticeable relief. Intelligent data extraction can help businesses digitise their processes. Automation, however, requires automation tools to not only extract but also understand, compare and validate data. This level of automation means users only need to be involved when discrepancies occur and action is required.
How the Netfira Platform achieves a high degree of automation in purchasing
Automating the processing of documents does not just mean extracting information like price, quantity, delivery date etc. from a document and exporting it into downstream systems. True automation occurs when purchasing can automatically process previously defined deviations between B2B documents. For example, the Netfira Platform automatically processes pre-defined deviations between purchase orders and purchase order confirmations. This applies when purchasing requests an order to be delivered on a fixed date, but the supplier confirms a calendar week. If purchasing cannot process these deviances, true automation cannot be achieved because buyers will face many discrepancies that they must process manually.
Automated processing of order confirmations with the Netfira Platform
The Netfira Platform achieves an unprecedented degree of automation because it reduces manual activities and the need for human intervention to a minimum. How it works can be demonstrated through the automatic processing of order confirmations. The platform automatically extracts data from transactional emails, for example, and compares it with the purchase order. If the confirmation matches the order, the information is automatically entered in the buyer’s ERP or downstream system. The Netfira Platform allows organisations to achieve nearly 100% automatic processing of order confirmations where there is no deviation. On the other hand, deviations can be identified quickly and easily in the familiar ERP environment. The platform directs the buyer to parameters that need to be checked. The structured and standardised process for handling deviations saves the purchasing department time and reduces stress in the approval process.
Digitisation vs. automation: Automate and not just digitise operational procurement
Simply digitising the data and document exchange is not enough to achieve noticeable benefits. Buyers need to be relieved of manual activities to save costs, time and resources. True process optimisation can only be achieved by fully automating purchasing processes. Moreover, simply extracting data with a digital automation tool is not enough to enable automation. High degrees of automation can only be reached if the software solution understands, compares and validates the data based on pre-defined specifications. Only then the need for human intervention and corrections can be reduced to a minimum. If purchasing smartly combines the potentials of digitisation and automation, it can meet the requirements of Purchasing 4.0.