EPROCUREMENT: CUTTING COSTS, ADDING VALUE.

• Author: Roth, Richard T.
• Position: Statistical Data Included

Research from Hackett reveals that electronic procurement is proving a huge boon to companies that have embraced it.

During the current economic slump, CFOs across the globe have been looking for ways to drive out costs to satisfy earnings predictions and maintain their companies' stock valuations. After a decade of cost-squeezing in the name of efficiency, these executives don't have many options to choose from. For some top-performing organizations, however, electronic procurement, or eProcurement, is creating opportunities for time and expense savings. In fact, eProcurement is enabling them to gain both efficiencies and operational effectiveness across the enterprise, as staffs are able to invest more in value-adding components.

Spurred by the notion that they can save millions of dollars annually, executives are taking a hard look at how to better manage their spending, particularly in two areas: how they do business with suppliers and how individuals place orders. Recent data and findings from Hackett Benchmarking & Research indicate that implementing eProcurement tools can save a company as much as 2 percent or more annually.

Hackett Benchmarking & Research, a part of Answerthink, benchmarks 80 percent of the Dow Jones Industrials, two-thirds of the Fortune 100 and nearly 60 percent of the Dow Jones Global Titans Index. Its ongoing benchmarking studies evaluate finance, procurement, human resources, information technology and other key staff functions.

Top-performing procurement organizations are leading the way by reducing the number of suppliers, implementing strategic sourcing and merging purchasing and payments into a single process. In the past several years, procurement applications offering these capabilities have been introduced through end-to-end automation of traditional non-production purchasing activities. Online catalogs and purchase orders, for example, not only reduce cycle time but also cut administrative costs and maverick purchases. And by linking procurement with other departments and to back-end applications, leading companies are reducing total costs and improving internal controls.

Yet, procurement function costs remain high, principally due to the heavy focus on transaction processing. Integration of suppliers and customers will enable procurement areas to concentrate on paring expenses and improving strategic value. However, the average company still spends 25 percent more on procurement than top companies...