eProcurement can cut your office supplies bills

Citation

(2002), "eProcurement can cut your office supplies bills", Work Study, Vol. 51 No. 7. https://doi.org/10.1108/ws.2002.07951gaf.006

eProcurement can cut your office supplies bills

eProcurement can cut your office supplies bills

Procurement is a key factor in business viability. It is also at the forefront of the eBusiness revolution. eProcurement is rapidly’becoming a major factor in improving’value-for-money associated with business-to-business (B2B) transactions by allowing organisations to automate, speed up and simplify purchasing transactions and processes. This is particularly true in the market for office supplies.

The word "procurement" normally conjures up images of paper invoices, files, paper-based purchase orders, and accounts departments. In such an environment, the challenge has been to find a solution that could provide an increased level of control and reduce the operating costs associated with the entire procurement process for office supplies.

American Express cites research that indicates the average "traditional" purchase order costs around £36 to process; under the eProcurement model this figure shrinks to around £10. This is why a quiet revolution is taking place in businesses around the globe as they recognise the impact Internet-based process control solutions can have in the office products purchasing environment.

Boston-based AMR Research estimates that business conducted on the Internet, while accounting for $43 billion in sales in 1998, will, in 2003, be $1.3trillion! The figures for office products procurement will undoubtedly form a significant component of this figure. The exact figures are immaterial – the sums involved are large!

The move to eProcurement is highlighted in a recent research project undertaken by Romtec. The survey of some of the UK's top 50 businesses reported that, of the two thirds of respondents who rated eProcurement as a high priority, 68 per cent wanted a solution that would enable assets to be transferred and tracked, while another 63 per cent wanted internal service requests to be fulfilled.

As more companies have embraced Internet-based technologies for conducting internal and external business, so they have also adopted eProcurement for online purchasing requirements. Yet online procurement is not new – large organisations have been using EDI – or Electronic Data Interchange – since the 1970s to automate their procurement processes. It is the rise of the Internet – and more specifically, the Web – that has brought viable eProcurement solutions within the reach of many more businesses – offering a comprehensive set of solutions that interact with suppliers, distributors, wholesalers and other key players in the value chain.

In order to simplify the procurement process and reduce the associated costs, it is necessary to eliminate wasted materials and time. The best way to do this is to integrate the procurement process back through the value chain to suppliers via electronic means, and to automate internal purchasing processes. It is this model – known as "buy side processing" – that is radically transforming the way businesses are buying goods and services such as office products.

This is important! "Maverick", "rogue" or "ad hoc spending" costs businesses dear. The Gartner Group estimates that somewhere between 40 per cent to 50 per cent of cheques are not paid to purchasing departments' preferred suppliers.

To the ordinary office worker, raising a purchase order for their personal choice in office products may not be viewed as an issue. However, to a corporate purchasing officer the costs are clear. Additionally, purchasing is not being conducted by those trained and experienced in negotiation and purchasing procedures, and the purchases are being made without the benefit of a focused strategy. Centralised purchasing and procurement policies have a direct impact on the bottom line as a result of bulk buying and negotiated supplier agreements.

Time is also a factor – the largest but sometimes hidden cost to a business. According to the US publication Purchasing Magazine, managers in a purchasing role can spend up to a third of their time just chasing paperwork. Add to this the impact of ad hoc and unauthorised purchasing, and the real hidden cost of procurement to an organisation makes itself clear.

eProcurement is already an excellent tool for businesses purchasing regular office products. This becomes apparent as tactical procurement managers can use the Internet to place orders directly with a dealer, enable transparency into the overall supply chain, and at the end of the process ensure payments are issued.

eProcurement software solutions should offer an organisation the chance to improve its processes around both internal and external purchase requests. The implementation of a new system should allow time for reflection on the overall approach to purchasing. The aim should be to make the process both more effective and more efficient – to move from a situation where the purchasing process is costly, slow, inefficient, involves considerable internal resources, and fails to provide comprehensive cost allocation, reporting and authorisation processes.