The implementation of purchasing systems can be justified with industry benchmarks that demonstrate the benefits of e-procurement. The Aberdeen group cites results of eProcurement initiatives in terms of processing cost, cycle time, spend under management, and reduction of maverick spend.
| Performance Area | Before | After | Improvement |
| Requisition-to-order costs | $51 | $26 | 49% |
| Requisition-to-order cycle time | 9.6 days | 3.4 days | 65% |
| Spend under management | 42% | 60% | 43% |
| Percentage of maverick (off contract) spend | 33% | 20% | 39% |
Source: Aberdeen Group
E-procurement cost justifications can build with data from a reputable research organization.
| System Investment | Annual Operating Cost | Cost Savings per Requisition | Annual Purchases | Annual Savings | Net Annual Savings | Internal Rate of Return |
However, research surveys combine tangible and intangible results. The benefits of a solution may be critical to the success of an enterprise, but difficult to quantify for a specific organization.
- Labor savings only add to the bottom line if the work force is downsized, or redeployed to tasks that produce revenue or quantifiable cash savings.
- Spend management actions such as disapproved requisitions, travel requests, and purchases generate increased profits only when net spending is cut.
- Delays in approvals only raise spending if the resulting corrections (emergency orders or late travel booking) increase the cost of the eventual purchase.
A future posting with examples will address quantifiable spend control and measurable cost savings resulting from specific actions that are supported or enabled by a purchasing solution.
About Paramount Technologies
Paramount Technologies is a leading global provider of web-based / mobile spend management and workflow automation solutions for midmarket and enterprise organizations. Our WorkPlace solutions automate Requisition, Procurement, AP Invoice Automation, Materials Management, Project Time, as well as Travel and Expense transactions. The WorkPlace suite of products can be deployed on premise or in the cloud and is universally accessible from any browser-enabled device. WorkPlace 2014 integrates seamlessly with Microsoft Dynamics, Sage, Blackbaud and other financial systems. Established in 1995, Paramount is a private company headquartered in Walled Lake, MI with regional offices across the United States and Canada.
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