Realizing the Promise of Electronic Procurement

Automating your organization's procurement functions offers significant potential benefits, including better spending control, lower acquisition costs, and improved supplier and customer relationships. However, to realize these benefits, you must perform some planning and process optimization before implementing the online procurement system.

Start with a thorough analysis of your current data, business model, and procurement processes. Do you have efficient procurement workflows? Are you experiencing acceptable turnaround for different types of purchases? Could you consolidate suppliers in certain areas to enjoy bigger volume discounts? It's important to evaluate your organization's entire purchasing cycle — from requisitioning, selecting suppliers, pricing, and issuing purchase orders to confirming deliveries, inspecting and receiving orders, and processing vendor invoices and payments.

Then, map out how you want to do business based on the new system's functionality. This will help you identify where and how to optimize processes for reductions in costs and cycle times as well as improvements in data accuracy and access. Only then will your organization be positioned to realize the full potential of procurement automation technology. Consider these impressive results of upfront analysis and planning:

A manufacturer realized a 2% cost reduction — equaling $3 million — by consolidating direct material suppliers for a product line. They reinvested the substantial savings into R&D, which enabled them to be both the price leader and quality leader in the market.
A public sector organization reduced the cost of processing a purchase order from $180 to $120 by eliminating data entry and approval redundancies. This translated into a monthly cost avoidance of approximately $300,000, or $3.6 million annually.
By utilizing online receiving for both direct and indirect purchases, an entertainment enterprise cut annual procurement costs by $125,000. These savings were previously unrealized due to matching discrepancies between receiving and invoices, purchase orders and invoices, and so forth. Online receiving eliminated these discrepancies — and the operational delays, late payment penalties, and missed discounts they triggered.

It's critical that you have the right partner for both the planning and implementation phases of your procurement automation initiative. You'll need one with the functional and vertical market expertise relevant to your organization. One that's experienced at dissecting and optimizing processes within the entire procurement cycle. One that offers insights on how to best leverage the electronic procurement system's functionality to meet your specific needs.

CherryRoad offers such experience and insights. To learn more about how we can help you maximize your organization's procurement practices, contact us at info@cherryroad.com.