Sara Ross, Procurement Business Unit Manager at Destiny e-commerce, examines the traditional predicament of procurement versus the substantial value-adds and bottom-line benefits to be gleaned from so-called `e-purchasing`.
The average white-collar professional spends between 10-40 % of every working day searching for or waiting for relevant information. According to statistics from Business Week, this statistic has not changed significantly since the 1940`s.
Even more disturbingly, white collar productivity apparently peaked between 1950 and 1973, long before the advent of the PC.
Considerations such as these throw a pall over traditional, non-automated organisational procedures, including that of procurement.
Non-automated purchasing effectively means that buyers may spend up to 70 % of their time on clerical activity, and as much as R200 - R300 per order, if one takes the overall cost of placing the order into account.
Furthermore, in the paper-based procurement process, some 35 % of a company`s expenditure somehow `slips between the cracks`, bypassing the purchasing function completely. This practice frequently results in `maverick buying`, where staff make random purchases from individually favoured suppliers who are not on the company`s list of preferred suppliers.
In the case of organisations with a turnover in excess of R300m, who typically purchase more than R200m in goods and services annually, these sorts of `slip ups` are hard to imagine, particularly when one considers the size of the average dedicated buying department.
The business problem in a nutshell, then, amounts to the misuse of purchasing skills, gross inefficiencies in forecasting and control, process cycle time in the supply chain and business processes that remain ungainly and inefficient as they are misunderstood across the organisation.
What are the drivers for change in this situation ?
CEO`s around the world are pushing for purchasing to make a greater contribution towards the costs of the business as a whole.
Automating purchasing processes achieves this goal through the provision of fast, efficient information and a quicker and easier method of purchasing.
General e-purchasing benefits include:
Process reduction of 10 - 40 %
Cycle time reduction of 40 - 80 %
Processing cost reduction of 50 - 80 %
Staff productivity improvement of 20 - 30 %
The ROI (`return on investment`) is typically 12 - 18 months, and is worth waiting for, considering that, according to a recent study in Fortune Magazine, purchasing exerts far greater leverage on earnings than anything else. Typically, shrinking the bill by 5 % can add as much as 15 % or more to profits.
Share
