Administrative Savings
and Cost Reduction

To reduce the total cost of procurement it is necessary to automate all the steps involved in the purchasing process. Article in NJ Bankers.

To simply focus on negotiating prices for high usage items is not enough.  Even with retail web ordering, employees are still involved in:

• Collecting product lists / needs from staff, then preparing
  a consolidated requisition and forwarding it by Fax, E-mail,
  or as an entry on a vendors shopping cart program to a
  central Purchasing Department for approval;
   
  

• Upon receipt of the requisition, Purchasing staff then
  reviews, questions, modifies or rejects items, before
  they forward it to a vendor as a Purchase Order;
   
  

• Once delivered, the employee who requisitioned the
  products, must checks the items against the vendor's
  Packing Slip, and then forward it (with back orders or
  damaged goods / returns noted) to the Purchasing Department; 
  
  

• The Purchasing Department then waits for days until
  the vendor's invoice arrives, checking it for the correct
  delivery of products, and verifies each item for agreed
  upon pricing; 
  
  

• Purchasing then forwards both the Packing Slip,
  Invoice and any notes to Accounts Payable, where
  a check, or electronic payment is made to the vendor.

Based on multiple analysis surveys by the Aberdeen Group, Boston MA,
it is estimated that the cost of a full procurement cycle is approximately
$108 in administrative time.

Acknowledging the fact that vendor shopping cart programs provide
partial automation (requisition to product delivery), of purchasing cycles,
some reduction in administrative expense will occur. However, from the
point of product delivery on, the most labor intensive part of the procurement cycle still remains a manual procedure.

By automating the entire cycle for all vendor activity, significantly more administrative savings can be obtained.
 

                            
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                 NOTE: Our client data reflects
                 that a typical cost center will
                 originate 41 Purchase Orders
                 per year.
  
                 Accordingly, a company with
                 50 cost centers will generate
                 2,050 Purchase Orders on an
                 annual basis.