In recent years, more and more companies have invested in eProcurement systems. What they are looking to achieve by employing one such system is automating the usual manual procurement process, while at the same time achieving a better suppliers management, maximize efficiency and cut down labor costs.
The business world is challenging. It is also very dynamic where one mistake can have a domino effect on a large scale. eProcurement systems have proven to be effective for avoiding errors that could’ve been easily avoided if they were acted upon timely.
eProcurement’s Impact on ROI
Return on investment (ROI) is probably the most important terms used to measure if your decision was justified. When it comes to eProcrement systems, the numbers clearly indicate that investing in one such system is a safe bet.
According to a survey done on 200 companies that opted in for an eProcurement software, the ROI has surpassed by far the initial cost of employing one such system. Namely, for every $10 spent on supplier costs, they saved $38 that would’ve been spent on manual procurement. The total ROI? Even 720% the initial cost!
It is a percentage that sounds unbelievable. It is due to the fact that such automated systems can cut down costs coming from different places.
So what makes an eProcurement system so beneficial?
An eProcurement system is a one-time cost. In contrast to procurement, the human factor here is minimal. The system does what it is supposed to do in a manner that is much quicker and much more efficient than traditional procurement.
An employee will need hours to manually search for product suppliers and shortlist them, then even more hours to review their prices, decide which option is the most profitable and then seek authorization from a manager to place the order. An eProcurement system can do that in a matter of seconds. It can find, compare, review and even automatically place an order if you decide to enable that option.
In that sense, the system will do all of the dirty work, and the employees can focus on different tasks instead of sifting through an ocean of suppliers.
It is not unknown for an employee to make a mistake and place the same order twice or completely forget to do it. Sometimes missing just a nut or a bolt can hold up the entire production process, causing the company to suffer a loss. Too much of something can also be a burden in terms of storage space.
An eProcurement system leaves no room for error. Since it operates on a sophisticated algorithm, it will be able to monitor the stock of each item. If you set reorder points, the system will automatically place an order. Forget about counting things in the warehouse – the next batch will arrive soon after the stock starts getting low.
Also, employees can often overlook certain details like obtaining or giving out a PO number, slight price increases or invalid contracts. With eProcurement, such mandatory requirements can always be prioritized and brought to your attention.
A simple example – those nuts and bolts that are crucial for the production process usually cost you $0.25. Since you forgot about them, you are rushing to place an order with your supplier, only to learn that they give you a lead time of a week. You can’t afford to stop production for a week, so you go to another supplier which sells you the item $0.50 per piece. Now you are faced with the choice of stopping production for a week or buying the nuts and bolts from the other supplier but paying double the amount.
Why must you find yourself in a lose-lose situation? WIth an eProcurement system, you can turn this into a win-win situation. By setting the parameters and pre-approving suppliers, the system can make cost-effective decisions on your behalf and ensure that you have everything when you need it.
Explore More Possibilities
You suppose that there is a cheaper supplier out there but you never had the time to do some research on your assumption? An eProcurement system can search for different suppliers and will give you more options. Depending on the level of authorisation you allow, the system can even automatically track discounts and promotions and choose to place an order with the least costly supplier.
Instead of spending your days processing paperwork and filing invoice by invoice, an eProcurement system can lift the weight off your shoulders so you can focus on the things that matter. Not only will you decrease spendings, but you will also create a more organized, more productive business environment.
Melissa Stanley is a veteran tech writer and editor who has worked in several eCommerce companies so far. She has been covering technology online for over five years. She is Client Service Manager of PCGT – PunchOut Catalogs.