Net savings

Citation

(2005), "Net savings", International Journal of Productivity and Performance Management, Vol. 54 No. 1. https://doi.org/10.1108/ijppm.2005.07954aaf.002

Net savings

E-procurement is the process of using the internet to replace traditional purchasing processes with online transactions. It can be used for a wide range of goods and services that are bought on a preferred supplier basis from companies able to provide an end-to-end service. Office supplies, particularly stationery, are an obvious candidate for this type of sale, but it can extend from PCs and peripherals to printing and even travel. It offers real benefits in terms of cost cutting and improved efficiency, for both buyers and sellers, but to date, its take up in the UK has been relatively slow. That, however, may be about to change.

e-Procurement saves organisations money by providing access to cheaper supplies and lowering administration costs. The average cost of placing one paper-based order is said to be around £64, and with average order values estimated at £85 the idea of buying online to cut costs begins to make sense. It decreases the number of suppliers, which saves money and allows the business to focus on its core activities.

However, e-procurement in itself should not be seen as a cure for all ills. A recent survey by Saville Rossiter-Base found that while many organisation are using the internet to make purchases, most commonly office supplies and computers, most of them have little idea whether it is saving them money or not. A few even suggested that they knew it was not saving them anything but were doing it anyway. Taking a bad purchasing chain and automating it will not provide a solution.

Using an e-procurement system means that all budget management, authorisation, goods received paperwork and even payment is electronic. Once a negotiated list of products has been created between customer and supplier it can be used to control who buys what, when and at what price. The best office products suppliers will be able to adapt their e-commerce offerings to meet the needs of different businesses, and should be able to offer a one-stop-shop solution to all its office needs.

The worst-case scenario is where companies have any number of people throughout the organisation ordering from an unlimited basket of products. That means no reporting functions, no cost analysis and no control.

Authorisation is important in any system. You need to decide who the orders need to be authorised by, whether that means creating an approved list of people or deciding that just one top-level person has the responsibility. You can set a system where orders up to a pre-decided price threshold can be self-authorised and those above that value require further authorisation and other parameters should be defined in terms of what access is allowed.

This is simple stuff – yet often gets overlooked in the rush to adopt technology. Used effectively, the technology should support – and enhance – effective purchasing.