The impact, in numbers, of eProcurement systems on operational costs
Many companies have invested significant sums implementing enterprise resource planning (ERP). But many mid and smaller-sized companies are at a disadvantage because the financial constraints do not permit large investments in such systems. As a result, the work becomes redundant, the working time becomes very lengthy and the productivity and efficiency are lower than desired.
The construction and implementation of a central, unique purchasing system, also based on clear rules and procedures, transparent to the organization, is a process not only essential but also affordable. Unfortunately, the value of such a system is recognized only by a few decisional people, especially those that understand the necessity of an information system for tracing the expense efficiency within a company with complex heterogeneous structure. In recent years, software solutions providers have developed highly efficient systems that reduce the acquisition processes inefficiency and are specialized in all fields and adapted to each company.
Standardization and automation
Through a procurement management information system, a company can standardize and harmonize the procurement needs between various departments or business lines, thus controlling easier the process. By consolidating the purchasing requirements from section or department level up to organization level, on a period of time based on historical and business development forecast, the procurement officers have the advantage to negotiate large volumes, for which they can obtain discounts, and thus savings in the procurement budget.
One of the major advantages of an e-procurement platform is the easier imposition of procurement rules within the company, which often results in better specifications and an increased focus both on costs and suppliers. Thus, any acquisition enters a standard process of quality or shipping criteria approval, imposed by the company’s acquisition politics, enabling a perfect transparent competition for the buying company officers.
Dynamic and real-time acquisition platform
An e-Procurement system requires an online platform that allows companies to conduct daily activities related to procurement, from budget structure, administration of expense requests, management and development of relations with suppliers up to contracts finalization under the best circumstances.
Most are based on cutting-edge technologies to streamline and automate the procurement processes, to connect buyers and sellers, for fulfilling orders and concluding quickly profitable businesses.
Concrete and justified e-procurement platform benefits
Improves productivity by:
- Automating manual processes and reducing paperwork, resulting much more time for managing vendors and negotiating better deals;
- safely and controlled delegation of activities by end users, leaving more time for company administration and supervision;
- Shortening and standardizing the procurement workflow.
Increases efficiency by:
- Eliminating manual processes and paperwork, reducing thus human errors, inaccuracies and reworks.
- Shortening the time necessary for an acquisition request completion;
- Access to a unique data base of suppliers, incidents and events such as delays or quality that does not meet the specifications, allowing thus a fast decision making regarding the contractual relationship.
- Streamlining the procurement process, from RFQ initiation, at the acquisition request or auction type actions, up to the conclusion of the contract with the supplier.
Saves costs by:
- Avoiding splitting the company’s budget, thus ensuring a permanent framing in the planning and approval system;
- Reducing the effort involved in the acquisition request completion;
- Shortening the time between the order demand and fulfillment, forecasting more correctly the stock necessary for the company;
- Grouping various requests or products to negotiate better deals.
The justification for such an information system to automate and simplify the procurement process varies from one organization to another, depending on both the growth dynamics and organization structure or internal processes. Thus, according to these criteria, the impact of purchasing tangible costs reduction (x contract cost reduction x compliance with specification) is:
Perhaps the most important benefit that an information system might bring to the purchasing departments is the possibility to ensure an efficient project management for delivering the necessary purchasing requirements in terms of time, cost and quality agreed with internal customers. Thus, the system provides a complete transparency on cost savings made on certain periods of time, degree of standardization of specifications, supplier base, or the level of synergy between various business units. Thus, the return on investment can be calculated very easily and pragmatically. Whatever the chosen e-procurement system, the economic environment pressure on companies of all sizes, especially in the context of austerity measures faced by Romania, makes is essential to have an IT solution that traces the procurement processes, monitors contracts with suppliers and reduces internal costs.