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Automate procurement - save big bucks

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Automation of procurement can bring big wins. It can reduce costs, increase productivity and maintain high level of operational effectiveness. Business benefits achieved from automation are worth every penny spent on implementing the cost of new technology.

In the current economy, organizations are seeking ways and means to conserve resources and cut costs.  Organizations can save a lot of time and money by automating procurement, or the buying and sourcing of goods and services, according to some analysts. In a new report, The Hackett Group mentioned that "world-class" procurement executives--those rated as most effective and efficient--invest substantially more money in IT than their peers, while actually spending less overall and operating with a smaller staff. World-class procurement organizations are more than twice as likely as other companies to make high use of sophisticated reporting tools for spending analysis, said Christopher Sawchuck, senior business adviser at Hackett, in an interview with eWEEK.com. They also use online tools to communicate requests for information, proposals or quotes 78 percent more often than other organizations.

Monetary savings: Automation of procurement can deliver big savings by reducing administrative costs and shortening procurement cycle. An automated approach enables to drive down the cost of supplies as a result of supplier rationalization and identifying preferred suppliers. It also ensures only preferred suppliers are used across the organization.  In organizations, where purchasing responsibilities are spread over several departments or locations, automation can maximize buying power by consolidation of processes thereby reducing per transaction cost and achieving higher volume discounts. Ariba, Emptoris, Infosys ProcureEdge, Procure+, ebuy 4, Oracle iProcurement, PeopleSoft e Procurement are amongst the top procurement tools generally used by world class organizations.

Time savings: Automation saves time as goods and services can be procured quickly. Processes done manually used to take hours or days can just be done with few clicks. Procurement staff will not waste time over transactional processes like invoice matching, generating requisitions/purchase order, etc . Time spent on administrative tasks like contract creation, creating RFx, vendor management, etc will also reduce.  Procurement staff will spend time effectively in more strategic activities than transactional and administrative activities.

Increased accuracy: Automation increases accuracy as electronic capture of data will leave no scope for clerical errors, order mistakes. Automated processes will provide better, deeper and timely visibility to both procurement and management on spend patterns, status tracking, contracts, etc.

Enhanced negotiation: Better visibility of procurement pattern (volume, price and frequency of purchase), spend pattern - procurement personnel's will be geared better to effectively negotiate with suppliers in terms of  price breaks, volume discounts and favorable payment terms resulting in cost savings.

Increased compliance: Automation brings transparency to management. As the procurement processes are standardized, enforcing buyers to follow a single standard of buying a certain product across. It delivers greater control over spending by eliminating maverick buying or purchasing items outside preferred systems. Centralized tracking allows procurement to monitor off- contract buying and ensures better contract compliance.  Manual processes are error prone. Automation can ensure procurement is carefully managed and risk of fraud is reduced.

So automation of procurement can bring big wins. It can reduce costs, increase productivity and maintain high level of operational effectiveness. Business benefits achieved from automation are worth every penny spent on implementing the cost of new technology. Organizations having automated processes report savings in the range of 5 percent to 15 percent -- through efficiencies as well as direct cost savings on their automation investments.

Comments

Good article Shubhra. Straight, plain and universal facts. I would add that right automation and utilization of all its features eventually is the key to achieve all benefits you stated. Else, the investmens on procurement applications underperform or give poor returns for most of the firms.

Indeed automation is the need of the hour where Sourcing and procurement efficiencies are required to be enhanced and enabled. However one caution would be that a deeper analysis into the IT systems is an absolute must and a single/combination of compatible technologies suiting a business's buying landscape should be chosen.

E-procurement is the new age procurement and has many advantages over old procurement service

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