Impact of  E-Procurement on bottom line

E-procurement systems impact the prices of goods and services in three ways:

Increased preferred vendor purchases: E-procurement fosters purchasing from preferred vendors, who in turn offer volume discounts and contract pricing. A typical e-procurement system can boost preferred vendor transactions by 25%, returning substantial savings assuming a weighted average preferred-vendor discount of 7%.

Preferred vendor consolidation: As volume shifts to preferred vendors, low-volume vendors will eventually be eliminated from the supplier network, driving more purchases to preferred vendors and enabling them to increase consumer discounts.

Spot discounts: Because of the dynamic nature of on-line pricing, vendors can offer limited-time spot discounts on excess inventory. Even a one-percent reduction in purchasing expenses can yield significant savings for large organizations.

Reduced labor time/reduced transaction costs

By far, the greatest e-procurement savings result from the combination of less time required for the total purchasing cycle and the subsequent reduced transaction costs. Together, these decreased transactional factors translate into significant cost savings.

The table below shows the approximate time it takes to complete each step in a single corporate purchasing cycle, comparing manual or electronic data interchange (EDI) purchases to e-procurement.

This Table demonstrates nearly fivefold reduction in time and nearly 80% reduction in cost directly attributable to e-procurement.

Process Step

Manual/EDI (Minutes)

eProcurement (Minutes)

Product Selection

    3 

20

Availability/Price Check    10   1
Requisition Creation    11   2
Requisition Approval    21   3
PO Generation    11   0
PO Approval      3   0
Send PO to Vendor   14   0
PO Confirmation     4   0
Status Check   11   1
Receive Shipment   12   2
Match Invoice, Receipt, etc     8   5
Process Exceptions     8   3
Payment Approval     4   3
Payment Generation     8   5
Process Returns     5   3
Total Minutes/Purchasing Cycle 150 31
 

Cost/Cycle Time (Avg. $0.50/minute) $75 $15.50 Per Purchase, Savings NEARLY $60!
 

Sponsored Links

 

 

E-procurement Offers Tremendous Opportunity to Save Both
Now project your own potential e-procurement benefit by multiplying the Per Purchase Savings rate by the number of purchase orders your own organization processes in a single year. Depending on the size of your enterprise, e-procurement savings could amount to millions of dollars annually. For suppliers, e-procurement stands to yield significant reductions in inventory holding times and safety stock levels, and an overall reduction in the purchasing cycle—the time it takes from ordering an item to receiving it.

 

 

Get all the Complementary Resources below

 


Supply & Demand Chain Executive
comprehensively covers business strategies, trends and issues on supply chain management


Waste Management World is the leading free international publication for the global waste management industry


DC Velocity serves the Supply Chain field focusing solely and specifically on large Distribution Center operations


Renewable Energy Focus reports on various major topical developments in renewable energy from around the world

Get more Business, Engineering, Technology, Trade, Industry Resources here

 
 
 

Create your own banner at mybannermaker.com!

 

     
  

 

 
 
 

Check the following links too :

 

 

 

[Sitemap] [About us] [Disclaimer] [Copyright] [Privacy Policy] [Link with us] [Contact us]