Spend Matters welcomes another guest post from Kevin Turner, Director of Dell’s PremierConnect program.
I have written before on how 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. In Part One of this series, I showed how procurement automation can help streamline order processing, and followed up with Part Two, in which I wrote about procurement automation’s role in increasing contract compliance. Today, I will discuss how procurement automation improves order accuracy.
Streamlining procurement using automation can significantly reduce expensive errors associated with manual ordering processes. Your company’s end users can feel confident they ordered the product they intended to order and not stress over receiving a wrong product. Our research suggests that automating the procurement process can reduce order errors by up to 83% by avoiding costly duplicate orders, omissions, and other errors created by human intervention. With the reduction in order errors, 10 minutes per order of procurement man-hours spent on returns, exchanges, and manual verification of order receipts can be freed up for higher value activities.
A manual purchase order that has “computer” as a description of a product with no other characteristics will definitely increase the amount of time spent on this order, as well as increase the chances of getting the wrong product delivered. Is it a desktop? Is it a laptop? What size hard drive or memory is needed? Highly configurable products, such as computers, require intelligent data that helps the systems decipher what specific configuration of a computer is being ordered. Customers who punch out to their supplier’s catalog and choose the exact product they need will significantly increase the chances of an accurate order and the right product being shipped. The product on the supplier’s catalog is defined with intelligent data, such as a quote number or a shopping cart identifier, which is being transported back and forth between the supplier’s e-commerce system and the customer’s ERP. Therefore, at all times, the supplier knows exactly what product is being ordered by the customer and the chances of order entry errors are considerably reduced.
Procurement automation can also reduce invoicing errors by up to 37%, which is significant for the accounts payable department. Overall, a cost savings of 1% can be achieved by eliminating inaccurate pricing from manual orders and invoices, and in today’s world of razor thin margins, that can equate to a significant impact to profitability.
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.