E-procurement has delivered measurable value to enterprises by improving cost savings, streamlining internal processes, and enhancing supplier relationships, while continuing to capture more spend under management, according to a new study published by analysts, Aberdeen Group.
The study, E-Procurement: Trials and Triumphs, is the fifth in a series of Aberdeen benchmark studies focused on e-procurement. It leverages the insights of procurement executives from more than 620 enterprises, and established that, since 2001, enterprises have significantly improved purchasing performance across key performance indicators.
As a result of their e-procurement initiative, the study found that enterprises, on average, displayed a 35 per cent improvement in spend under management, with a 41 per cent reduction in maverick spend. Additionally, enterprises, on average, reduced their requisition-to-order cost by 48 per cent, and more than halved their transaction cycle time. However, the research indicated that significant e-procurement challenges remain in areas of supplier enablement, catalog management, and end-user adoption.
‘Our research has discovered that the procurement department is no longer just a transaction center for placing orders, but can also be a source of competitive advantage by acting as an information hub supporting business planning and decision making. Additionally, there is more to an e-procurement solution than cost savings; it is now a tool that removes manual error-prone repetitive tasks and promotes compliance with business controls allowing procurement resources to focus on more strategic tasks,’ says Amit Gupta, research analyst, Aberdeen. ‘Best-in-class enterprises capture significantly higher spend under management, and reduce maverick spend as a result of their e-procurement initiative.’
Best-in-Class enterprises are excelling in many performance metrics, and demonstrate the following performance benefits: Place 78 per cent spend under management control, which is 26 per cent more than their peer enterprises; display 83 per cent on-contract spend, with 25 per cent less maverick spend than all other enterprises; and on average, have requisition-to-order cycle times of one to two days, which is more than half of their peer firms, with transactions costs that are 33 per cent lower than all other enterprises.
The e-procurement benchmark report recommends that enterprises should start with a center-led procurement department championed by an executive, who will leverage the capabilities of business partners and stakeholders, and drive end-user adoption. Most enterprises will benefit by leveraging technology solutions such as supplier networks, catalog hubs, which allow quick enabling of suppliers and transmitting purchase orders electronically. Additionally, top performing enterprises should aim to integrate e-procurement with finance and accounts payable systems.