Spend Matters welcomes a new guest post from Kevin Turner, Director of Dell’s PremierConnect program.
The overwhelming task of integrating strategic suppliers into your ERP system is on the to-do list, but you struggle to understand why you should take on such a daunting project. Automating the procurement process with your supplier provides important benefits in four key areas: streamlined order processing, increased contract compliance, increased order accuracy, and reduced cycle time. Industry research data provides insight into how significant these benefits are, and this four-part series will provide real world examples of how it applies to today’s corporate environment. Today, I will discuss how procurement automation helps companies streamline their order processing.
By electronically automating your order processing with your supplier, you can help reduce labor costs, boost productivity, and maximize your category spend management. According to industry research, companies can reduce the cost of purchase order requisition, submittal, and approval by up to 75% with procurement automation. Invoice processing costs can also be reduced by up to 90%. Using automation, time previously spent on faxing, emailing, or manually processing orders can now be used to focus on higher value, critical purchasing activities, such as optimizing category spend or managing the relationship with your strategic suppliers.
At Dell, we like to call it eliminating the “swivel seat syndrome.” Before automation, purchasing agents have to open a catalog, whether it’s a file-based catalog or a web-based catalog on the supplier’s site, and go through the quoting process. Once the shopping cart has been created, the agent then has to “swivel” over to their procurement system and open a purchase order. The agent then takes the quote data from the catalog, manually inputs it into the purchase order, and submits for approval. When approval is obtained, the agent has to “swivel” back over to the supplier’s site and places the order with the supplier. The agent “swivels” back to the procurement system to eventually close out the purchase order and conclude the order process. And this does not even include the invoicing and payment process.
With procurement automation using integration technology, the agent can punchout to the supplier’s catalog within their procurement system, shop for the items, and the quote data is automatically transported into their procurement system pre-populating the purchase order. Once purchase order approval is obtained, the agent submits the purchase order in their procurement system and the order data is automatically transported to the supplier’s site… all without the need to “swivel.”
Our research suggests companies can achieve a reduction of 75% in order processing costs by reducing from an average manual cost of $100 to an average automated cost of $25. Companies can also reclaim up to 45 minutes per order and allow the company to focus on higher value activities such as optimizing category spend management. Having direct insight into your total category spend allows for better category management and helps you monitor budgets.
So don’t let the task of integrating your strategic suppliers into your ERP system overwhelm you. Rely on the knowledge and experience of your suppliers to help you along the way. In the end, the positive impact achieved will overshadow the effort, and your organization will thank you for it.