Procurement of Indirect Goods & Services - The Last Stronghold of Paper Based Processes
Just follow a paper requisition around a company from desk to desk. Follow purchasing professionals around when they try to answer an employee’s plaintive, “Where is my requisition!?”
Count the days and weeks it takes between requisition, delivery, and then delivery to the desktop. Ask the purchasing department how much money is being left on the table in supplier negotiations because too many suppliers are being used and there is no tracking purchases in depth – for example the by supplier, by item, cost centre, or geography. Ask them if they really know how much maverick buying is being done, or whether their figures belong in the hall of shame!
Poor processes, Scant data. Beleaguered purchasing departments. Frustrated employees. There’s nowhere to go but up.
Procurement of indirect goods and services is one of the last strongholds of paper based processes, even in corporations that are otherwise high-tech leaders. That’s because there’s so much to do with customer related systems, indirect procurement has been a function that you don’t fix ‘if it ain't broke’.
Yet it is broken. If left unchanged, the procurement department will quickly become the ball-and-chain of progress and hinder the company in its efforts to unlock value.
Here’s the potential…
Analysts report a 5 to 20 percent cost reduction is possible for products and services, resulting from eProcurement, greater control of off-contract purchasing, increased use of preferred suppliers and improved leverage for negotiating. Furthermore, up to 70 percent processing cost per order and a 50 to 70 percent reduction in time to cycle completion, from order initialisation through fulfilment is possible. Up to 20 per cent reduction in maverick spend....the savings opportunities continue.
Given the results of adopters to date, such numbers are plausible over the medium term – if eProcurement is done the right way.