SA Companies finally benefiting from e-Procurement promises
Local results seem to be echoing recent international research regarding e-Procurement benefits. According to Tracey Newman, CEO of MWEB CommerceZone, recent research from Aberdeen showed that e-Procurement tools deliver a 64% reduction in maverick spending…
“Just two-thirds of procurement transactions were compliant with procurement contracts. The resulting maverick spending led to savings leakage in lost discounts or rebates. Aberdeen has found that spend brought back onto contract results in a 7,3% reduction in prices. ”
“CommerceZone’s experience is that local companies score an average of 8% savings across all categories of indirect spend on non-core, but essential purchases such as general office supplies,” she says.
“However, it is becoming increasingly clear that e-Procurement delivers more than cost savings – although Aberdeen’s estimated cost reductions of between 5% and 20% is not to be sneezed at.”
“Now businesses around the world are also noticing that effective e-Procurement systems deliver strategic, tactical and operational advantages as well. CommerceZone’s experience is that this is also the case with South African companies that have embraced e-Procurement,” she adds.
“From a strategic perspective, e-Procurement is having the greatest impact in the areas of sourcing and supplier management. Apart from reducing the cost of goods and services, the real strategic advantage for local companies lies in the way it assists them to achieve their affirmative procurement targets.”
Newman notes that with the DTI’s BBBEE scorecard ascribing the same rating – 20 – to preferential procurement as to BEE ownership, measurable and provable affirmative procurement has become a strategic imperative for local companies.
“The most effective, and cost-effective way to ensure preferential procurement compliance is through the implementation of e-Procurement procedures,” she says.
“That’s because e-Procurement, from a tactical perspective, ensures improved compliance to contracts. In effect, e-Procurement helps drive the move to bring greater amounts of spend under the control of the Procurement Department and thus deliver more effective and lower-cost supplier management along with better control of spend. ”
“The issue facing local companies therefore should not be whether they can afford e-Procurement, but how they can justify not implementing appropriate e-Procurement tools,” Newman says.
This view, she adds, is reinforced by the operational benefits of e-Procurement, including reduced procure-to-pay cycles and costs.
While Aberdeen reckons these reductions average around 66%, CommerceZone’s experience is that companies achieve time savings of around 30% per procurement process as the process moves from manual to electronic.
“However, the man-hour benefit is best achieved not through the elimination of resources, but by empowering procurement personnel to focus on more strategic issues such as supplier management as opposed to the operational routines which take up most of their time in a non ’e’ environment. ”
“This is particularly important when one considers that their inability to focus on strategic issues impacts negatively on the entire procurement process – strategic, tactical and operational,” Newman concludes.
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