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The challenge with processing unstructured order confirmations

The challenge with processing unstructured order confirmations is nothing new. Every day, purchasing departments are met with a flood of these documents and tasked with the manual process of entering this important but often unstructured information into their purchasing system. To make matters worse, the COVID-19 pandemic has worsened the global shipping crisis and caused global delays to orders.

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In procurement, the pressure caused by this supply chain disruption has manifested itself through a backlog of order confirmations that need to be processed. Procurement managers are reporting a dramatic increase in purchase order confirmations as the ongoing disruption is forcing suppliers to provide multiple order confirmations for each purchase order. Not only are the volume of order confirmations increasing, but also the number of discrepancies and variances that require action. The need for business leaders to future-proof their processes against disruption in an uncertain and interconnected world comes into focus. Purchasing needs to implement intelligent solutions enabling automated processing of order confirmations to mitigate risk, handle discrepancies and improve supplier relations.  

Purchase order, purchase order confirmation and invoice – what is the difference?

Purchase orders, purchase order confirmations and invoices are central documents in procurement which need to be processed on a daily basis. They serve different functions and play an integral role in the B2B communication as they provide better visibility into the purchasing processes, include basic order details and provide a legal basis.

The difference between structured and unstructured documents

Documents like purchase orders and invoices are classified as semi-structured or structured documents. While there are several styles of invoices, for the most part they all contain the same information such as company name, address and phone number, invoice number, due dates, line items, total amount due etc.  Moreover, information is assigned to certain columns and positions in a clearly structured way. That is why OCR software is often used to digitally capture the information on invoices. The same holds true for purchase orders. These documents specify the quantity, quality, unit and total price of goods or services that suppliers must provide.  They also state the general terms and conditions such as delivery terms, price, payment terms, payment means etc. Because of the structured nature of invoices and purchase orders, these documents are relatively straightforward and easy to process – either manually or automatically. Purchase order confirmations, on the other hand, are unstructured documents. What kind of information and how it is confirmed mainly depends on the supplier creating and sending the document. 

The challenge with processing unstructured order confirmations

For purchasing, checking, comparing and processing incoming purchase order confirmations has always meant laborious and error-prone manual work. The greatest challenge with order confirmations certainly lies in its unstructured nature. In contrast to invoices and purchase orders, for example, purchase order confirmations are unstructured documents.  Unstructured means that the supplier confirms specific components as they see fit. Therefore, it often happens that order confirmations from different suppliers have a different structure. For instance, this can apply to the delivery date. On order confirmations, there can be a desired delivery date and an actual delivery date. The information is considered structured if data is contained neatly within its designated column. However, information often bleeds into the column next to it. The challenge here is to find out which information is the desired delivery date and which is the actual delivery date. This lack of structure increases the manual workload for procurement teams significantly. Therefore, digital automation solutions which are capable of processing this kind of unstructured data reliably and quickly come more and more into focus.

The challenge with too many order confirmations

Recent events have made comparing and processing all incoming order confirmations a near on impossible task for many procurement teams. Due to unforeseen changes and supply bottlenecks, many suppliers are forced to generate and send a new purchase order confirmation to the buyer whenever a detail of the order changes. Consequently, the buyer receives up to ten order confirmations for one purchase order which he or she must check each time. Thus, the non-transparent and unstable supply chain directly affects operational procurement. COVID-19 has revealed and intensified the fragility of complex global supply chains with existing or impending supply bottlenecks drastically increasing the volume and inconsistency of purchase order confirmations which need to be processed.  

The benefits of automating unstructured order confirmations

Given the increase in documents and evidence that uncertainty is here to stay, procurement urgently needs to automate the processing of purchase order confirmations with intelligent digital solutions which reliably process unstructured documents. Buyers can benefit immensely from automated processes and workflows which relieve them of time consuming, error prone and mentally draining tasks. Moreover, automated order confirmations make purchasing more efficient by increasing productivity, reducing errors and freeing up more time for value-adding activities. Buyers do not need to input data manually and repeatedly anymore. Automated order confirmations facilitate better production planning thanks to smart platform solutions that can identify delivery volume discrepancies and potential delays right away and source other suppliers or adjust the planning as needed. This foresight enhances compliance and quality and allows for flexible risk management. On top of that, automated processes provide transparency of the supply chain and help spot discrepancies faster. Buyers are in control of the processes at all times and can react to unforeseen and spontaneous changes. Thus, smart automation solutions optimise and future-proof purchasing processes for present and future challenges. 

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The global shipping crisis and procurement: why automate order confirmations?

The two-week closure of China’s Ningbo-Zhoushan Port south of Shanghai in August, following a dock worker’s positive test for COVID-19, has exacerbated the global shipping crisis. The pressures caused by this supply chain disruption have been relentless and, in procurement, it’s quickly being defined by significant delays and a subsequent backlog of purchase order confirmations that need to be processed. In Europe, businesses are reporting a dramatic increase in order confirmations as the ongoing disruption is forcing suppliers to provide multiple order confirmations for each purchase order. This challenge presents an opportunity for businesses to build long-term and sustainable resilience within their purchasing processes. By automating order confirmations with the Netfira Platform, businesses are able to ensure end-to-end transparency and allow employees to focus on value-adding tasks.

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Procurement and the uncertain new world

COVID-19 has caused unprecedented global disruption to businesses and consumers alike. The pandemic led to a drastic shift in consumer demand for certain goods. This demand was met with widespread lockdowns, causing many workers to remain at home, and has resulted in a massive shipping backlog and a global shortage of key materials and components. In May 2021, container ships were estimated to be spending an average of 33 hours anchored due to port congestion, up from only 8 hours in May 2019. This disruption has been felt by businesses across the globe, regardless of size. In September, for example, Toyota announced a 40% reduction in car manufacturing in light of a computer chip shortage. However, the pandemic alone is not to blame for the current global shipping crisis. In March 2021, a 400-meter-long container ship was blown off course by strong winds and caused a 6-day blockage of the Suez Canal, a vital passage linking Europe and Asia. The Suez Canal blockage is estimated to have cost $9 billion per day and highlights the need for business leaders to future-proof their processes against disruption in an uncertain and interconnected world.

What makes purchase order confirmations so important?

Purchase orders are legally binding contracts between the supplier and the buyer, but that legal protection is not valid until the purchase order confirmation is issued. If the purchase order is not confirmed and accepted by the supplier, it is not a contract. Moreover, without the purchase order confirmation, it is impossible to know whether or not a supplier actually received the order and is in the process of fulfillment. As soon as the supplier confirms the purchase order, the buyer receives a confirmation number by e-mail he or she can reference in the event that there is an issue with the order. Purchase order confirmations are also vital because the confirmed date will be taken into account when the system checks the material availability. Consequently, purchase order confirmations serve a legal as well as an operational function ensuring smooth procurement activities.

Why purchase orders and purchase order confirmations need to be compared

Documents that do not match perfectly represent different expectations for buyer and supplier and expose both to the risk of litigation. In addition, important details such as delivery dates are confirmed in a purchase order confirmation, making this transaction crucial to smooth business operations. Therefore, it is important that the buyer checks the confirmation against the purchase order, and contacts the business partner in case any discrepancy is found. 

Automated order confirmations in response to new challenges in an uncertain world

Manually processing, comparing and checking purchase order confirmations has always been time-consuming and error-prone. But with the COVID-19 pandemic exacerbating the global shipping crisis and leading to a significant shortage of materials, the workload has increased excessively. Buyers are confronted with an increasing backlog of purchase order confirmations. Today, it is not uncommon for up to 10 purchase order confirmations per purchase order to be generated due to changing situations and circumstances.

Whenever the price, quantity or delivery date changes because of unforeseen events or backlogs, a new purchase order confirmation must be created. The buyers, in turn, need to check and compare the new order confirmation against the purchase order. That is why purchasing needs to implement intelligent solutions allowing automated processing of order confirmations.

How the Netfira Platform automates purchase order confirmations

The Netfira Platform automates operational processes and the data and document exchange. For purchase order confirmations without deviances, the Netfira Platform offers fully automated processing thus completely erasing the need of manual work. In case the Platform finds a discrepancy, the system offers the buyers a guided standardised process. That way, buyers can process a high volume of order confirmations quickly, efficiently and correctly.

Future-proof processes through the automation of order confirmations

COVID-19, the shipping crisis, and the global shortage of key materials and components have significantly disrupted the supply chain. Purchasing must deal with an unprecedented level of uncertainty. Since uncertainty is inevitable and will always be a part of procurement managers’ lives, purchasing departments need to optimise and future-proof their operational processes to meet the challenges of an uncertain world and to deal with supply bottlenecks quickly and efficiently. By automating mundane work like processing purchase order confirmations, businesses can increase the reliability of their processes and achieve a competitive advantage. The Netfira Platform relieves buyers quickly and reliably, reduces manual workload and future-proofs procurement for present and future challenges.

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