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eProcurement >> ONE STOP SHOPPING
5/27/2005
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| Each dollar brought under eProcurement can yield savings of 5% to 20% annually. Even a conservative 2% to 4% can mean big money to university systems—up to $5 or $10 million per year. |
These moves can pay huge dividends. Aberdeen reports that, on average, among 147 primarily North American companies participating in the 2004 benchmark study, eProcurement systems helped them reduce off-contract or maverick spending by 64 percent annually (see box, “Saving through eProcurement”), and that each new dollar brought under management can yield savings of between 5 percent to 20 percent per year. While these figures represent a broad swath of both higher education and corporate customers, recent statistics from SciQuest indicate that in higher ed specifically, even a conservative 2 to 4 percent annual savings on everyday goods and services can mean big money to university systems—up to $5 or $10 million per year.
Saving Through eProcurement
TAKE IT FROM THOSE who know: eProcurement efforts yield cost savings in a variety of areas. According to purchasing managers at diverse college and universities, some of these areas include:
Contract compliance. When users purchase goods or services on their own, they almost always purchase them at prices higher than those of prenegotiated contracts. Implementing eProcurement allows contract items to be readily accessible by end users and directs more purchases toward these cheaper deals.
Strategic Sourcing. In some cases, suppliers will ask for preferred positioning on an eProcurement site, and in exchange will offer even bigger savings or special value-added options. In addition, eProcurement can allow price comparisons where circumstances merit, so that end users can pick and choose based on data all in one place, and can achieve strategic sourcing at the desktop with minimal effort.
Process Improvements. Of course, the most tangible savings via eProcurement come as byproducts of automation: eliminating manual tasks, and reducing delays and errors in requisitioning, ordering and payment processes. Automating the process also frees purchasing and finance teams
eProcurement 101
On the surface, eProcurement technology is pretty easy to understand. It enables an institution to leverage the Internet as a true communication tool with participating suppliers and with each other. It’s all about centralizing control with decentralized execution over purchasing—a perfect model for the higher education setting. On the front end, end users such as department heads, administrative assistants, and professors feel as if they have the freedom to choose the products and prices that appeal to them most. On the back end, however, all of the options have been subjected to a rigorous review process by the institution itself; all of the items represent contracts that school officials have negotiated previously.
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| To help institutions with their “baby steps” toward total eProcurement, some providers are blending eProcurement with asset management, to help institutions manage software license expirations. |
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