ADMINISTRATIVE SAVINGS

To reduce the total cost of procurement it is necessary to eliminate manual steps involved in the purchasing process.

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

• 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 a survey by the Aberdeen Group, Boston MA, it was estimated
that the cost of a full procurement cycle is approximately $136 (as adjusted for inflation through 2011) in administrative time.

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

By automating purchasing cycles, companies will save approximately 72%in administrative and overhead expense.
 

 

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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.