e-PROCUREMENT SAVINGS

e-Procurement
savings result from reducing processing expense, as well as from
the cost of goods. Studies by the Aberdeen Group (Boston MA.) conclude that approximately 60% in administrative expense can be saved by automating labor intensive steps within purchase order cycles (requisition to invoice payment).

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Reducing administrative cost requires the reduction in manual labor. Even with retail web ordering (shopping cart programs), employees are still spending time involved in the following:

  • Collecting product request lists from staff, then preparing a consolidated requisition and forwarding it by E-mail to the Purchasing Department, or
    as an entry in a vendors shopping cart program;

  • Upon receipt of a requisition, Purchasing staff reviews, questions, modifies,
    or rejects items before they are approved and eventually sent to a vendor in a qualified Purchase Order;

  • Once delivered, the employee who requisitioned the products, must check the items against the vendor's Packing Slip, and then forward it (with back orders or damaged goods / returns noted) to the Purchasing Department;

  • The Purchasing Department then waits for days until the vendor's invoice arrives. It is then checked for the correct delivery of products, noting returns or back orders, and verified for price accuracy as designated in
    the negotiated contract price list;

  • Purchasing then forwards the Packing Slip, Invoice and any notes to Accounts Payable, where a check, or ACH payment is made to the vendor.

e-Procurement systems reduce approximately 60% of the manual tasks required in processing a complete purchasing cycle. Depending upon employee salary levels, the average hard dollar savings per Purchase Order cycle is approximately $35.

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Reducing product cost requires increased buying power and price competition among vendors.

To focus on negotiating prices for high usage items is not sufficient. Vendors set gross profit margins based on prospective client's total annual spend. Items 'on sale' are designed to open a relationship that provides access to a wider market basket of products, in which the loss of profits on 'sale' items are offset.

To obtain real time net savings requires a database system that compares multiple vendor pricing contracts. This would allow for the efficient choice of 'best buy' pricing without vendor conversations and extensive processing time.

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  •  Reduce 'maverick' spending;

  •  Increase budget control;

  •  Reduce the cost of supplies;

  •  Reduce manual paperwork;

  •  Increase employee productivity;

  •  Reduce invoice payment 'errors';

  •  Increase Audit control;

  •  Reduce Accounts Payable check
     processing time.
     

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