eProcurement pay back

eProcurement pay back

Keywords: Purchasing, Outsourcing, Strategy

A total of 50 heads of purchasing, representing over £20 billion of spend, were interviewed for an independent research report that provides insight into the business benefits of indirect eProcurement. The report suggests that:

• 60 per cent of companies will consider outsourcing purchasing activities relating to indirect expenditure;

• 98 per cent think it is important for the eProcurement vendor to have consultants with relevant purchasing experience to design and implement the purchasing solution;

• 82 per cent of corporates believe an eProcurement solution should pay back within 12 months;

• 76 per cent believe an eProcurement strategy is critical to remaining competitive.

The report was commissioned by TomorrowFirst, which claims to be "the UK's first hosted eProcurement business solutions provider with in-depth purchasing and consultancy expertise".

Return on investment (ROI) is a serious consideration for those looking to implement an eProcurement procedure. Of respondents, 82 per cent suggest ROI must be achieved within 12 months to be seen as credible by the board; 54 per cent of those still planning to implement a solution are more demanding,expecting an ROI within six months.

One of the most significant findings in the report is that of those evaluating and planning an eProcurement strategy, 98 per cent think it is important for the eProcurement vendor to have consultants with relevant purchasing experience to design and implement the purchasing solution. A total of 38 per cent think it is essential.

eProcurement is the way forward and has to be addressed for businesses to remain competitive, according to 76 per cent of respondents. On the question of outsourcing, 60 per cent would consider outsourcing purchasing activities relating to indirect expenditure. The key reasons stated were: to free up internal purchasing resources to focus on core value added activities (90 per cent); similar or better levels of service can be achieved (87 per cent) and effective operational relationships are possible with vendors (87 per cent).

George Cooper, CEO, TomorrowFirst, commented: "The research shows that the market has reached new levels of maturity and sophistication and a readiness to outsource more and more business processes. The onus is going to be more than ever on business service providers to respond to this by offering increasingly innovative and flexible solutions in line with the changing nature of UK business".

The findings demonstrate high levels of enthusiasm and support for eProcurement with respondents saying that they would prefer to spend their time on the following business processes: leveraging the best deals on indirect costs and supplier relationship management (92 per cent); negotiating and closing significant deals (84 per cent) and contributing to the strategic development of the business as a whole (82 per cent).

The key drivers towards the adoption of an eProcurement strategy are common across 96 per cent of the sample, with 42 per cent considering their purchasing departments to be under staffed. Not having enough time and resources to seize opportunities to add value was seen to be the major blight of the purchasing department (74 per cent), closely followed by lost cost-leveraging opportunities for the company (72 per cent). Maverick buying and a lack of management information were expressed as concerns by over half of the sample (52 per cent).

The research, conducted by Dynamic Markets Limited, recognises that customers are becoming increasingly aware that eProcurement can be used as a strategic tool, and now tend to focus on how it will improve the operation of their businesses, rather than simply viewing it as a means of cutting costs.

eProcurement is being driven by purchasing professionals. They see that it will solve many of the problems faced by their departments and that it will have a dramatic and positive impact on their role in the company and on the role of purchasing.

Of those purchasing professionals, only 22 per cent had any direct report to the board, although 78 per cent suggest that their strategic contribution is taken seriously by the board. The most common types of board directors involved in the eProcurement strategy are the IT director (89 per cent), the purchasing director (83 per cent) and the finance director (78 per cent).

Overall, the research demonstrates high levels of enthusiasm and support for eProcurement. Those that have not already adopted a specific solution are optimistic and almost all of those who have remain extremely positive.

Further information can be found on the Internet at www.tomorrowfirst.com