Plans for Procurement Automation
Many organisations recognise the need to automate procurement processes. Most appreciate that the introduction of some form of electronic procurement system will lead to major cost savings.
The most commonly mentioned reason for implementing an electronic procurement system is “greater overall efficiency” in terms of seeking a dramatic reduction in paperwork, reducing time wasted by staff in non-core duties and reducing administration.
A sizeable majority of companies state “cost savings” as the main attraction of an electronic procurement system. The savings that result from reduced processing costs are a one-off. Organisations also expect to reap on-going rewards by using electronic procurement system to strengthen corporate procurement policy. The ability to negotiate – and enforce – contracts at global, divisional or local levels may deliver strategic benefits as well as long term cost savings.
Although direct cost savings are the most important drivers for an electronic procurement system, there are other significant factors. Improved budgeting is often high on the agenda and Procurement managers are understandably keen to eliminate the nasty surprises that turn up in the form of unauthorised spending. Even where purchases have been sanctioned or can be approved after the fact, management information is incomplete or appears too late to be of use. These problems are particularly acute for managers responsible for monitoring day-to-day business performance, forecasting or setting of budgets.
Next to cost savings, improved process management is the main driver of an electronic procurement system with many organisations targeting the elimination of unauthorised spending and improvement of cash flow. It is not uncommon, to hear organisations admitting that before introducing an electronic procurement system 40%+ of all purchases were unapproved when the order was placed. Accurate budgeting in such circumstances is impossible.
Image of Procurement & Finance
A high number of organisations believe that “improved image” is an important factor in moving to an electronic procurement system. By this they mean mainly the image of the procurement/finance function projects within the organisation. Procurement managers are conscious of the need to fulfil their roles as enforcers of corporate policy without imposing unnecessarily onerous restrictions on the rest of the organisation.