PROACTIS Blog

Procurement Automation: A Corporate Black Hole

Charlotte Sutton
Charlotte Sutton,
PROACTIS
No one questions the strategic importance of procurement, yet of all the corporate business processes procurement has most stubbornly resisted modernisation. This failure is costing the largest of companies millions of pounds each year in needless administration and is putting at risk supply chain management and other corporate initiatives.
Few organisations have computerised the procurement process and integrated it with other financial processes. At the other end of the scale, many continue to rely on entirely paper-based procurement.
 
Procurement can account for as much as 70% of a typical organisation’s overall costs, according to independent estimates. At the same time by using IT to eradicate the inefficiencies in the process, a third or more of the cost of procurement could be saved.
 
Among the main reasons for the low penetration of effective procurement systems are:
  • Monolithic ERP and supply chain systems have failed. The software is either too expensive, too difficult to implement, too difficult to use or too broad scope to suit the needs of individual organisations
  • Discrete products do exist but can be difficult to integrate with other business systems
  • There is a perception that automation will entail big system replacement, retraining and other costs.
  • The IT department has little interest in providing a solution, partly because it regards procurement as unglamorous and partly because of other priorities.
  • Procurement has only recently come to be regarded as a strategic function rather than as a corporate overhead
  • The procurement process is more difficult to automate than some other business processes.
Furthermore, many companies do not know what the procurement process costs. This is not entirely surprising. With no system in place to measure performance, some organisations will never know how much they are wasting and how much they could save.
 
To learn more, download the PROACTIS whitepaper:“Yes You Can… Deploy Effective Spend Control Without Replacing Your ERP System”