15% savings to be made for businesses: the emergence of e-Procurement

e-Procurement is he in the process of becoming the ally of entrepreneurs to optimize their expenses? While it was long thought that sales contributed to the prosperity of a business, it was only recently that we realized that purchases also have a role to play. The performance of the Purchasing function actually has a direct impact on the profitability of the company. Like all departments in a company, it must fulfill operational and commercial objectives. Failure to meet these may reduce the company's profits. Recognizing these challenges, large companies have already carried out their digital transformation in recent years in order to optimize managing their purchases. SMEs and ETIs have certainly been slow to get started. However, more and more of them are interested in a solution of e-Procurement or e-procurement because of its numerous advantages. Today we are going to reveal to you one of the major advantages of digitalization of the purchase : cost reduction.

What is e-procurement, e-procurement?

Before we go any further, let's understand the concept first. THEe-procurement, also called e-Procurement, is an anglicism used to refer to solutions for dematerializing buying process or supply. This term is a contraction of the words “electronic” and “procurement” which literally mean digital, electronic or online procurement.

The simple definition ofe-procurement is therefore the set of software solutions that a company can use to make purchases or supplies online. No more paper flows and physical trips... E-purchasing tools dematerialize the entire process, from the search for suppliers or e-sourcing until payment of the bill if it is a complete solution Source-to-Pay. Some e-Procurement solutions relate only to the purchase process, i.e. the search for products on catalogs until payment is made. They are also called Procure to Pay or P2P. The purpose of this practice is to streamline the purchasing process and reduce costs.

The different stages of online procurement or e-procurement

Thanks to the contribution of AI and data, the e-Procurement is poised to become the future of procurement management. This solution allows the automation of the various stages of the purchasing process for optimal savings of time and money:

• Product selection: after identifying a purchase need, the purchasing manager goes to the platform in order to find the corresponding products. The interface of the Source-to-pay solution or Procure to Pay takes the form of an electronic catalog or e-catalog. On it, he will find the list of selected suppliers and their product offer consisting of product sheets and prices. After selecting the products according to his requirements, the buyer can send the order in one click.
• Order transmission: automating the validation workflow shortens the buying process. Once the order has been validated, it will be sent in electronic format to the supplier and transformed into an order form. Upon receipt of it, the supplier must respond within a certain period of time.
• Receiving the invoice: as soon as the order is shipped, an electronic invoice is automatically generated. The finance/accounting department can then automatically reconcile with the order and proceed with the payment. The dematerialization of the invoice, or e-bill, saves time and money on its treatment. It also prevents document losses, as all invoices are listed in the tool.

E-purchase: 15% savings on average for businesses

In a hyper-competitive market, businesses can no longer afford to increase their selling price. To optimize their profit margins, they have only one solution: good purchasing management. Since purchases represent 50% — 60% of their turnover, succeeding in saving on purchases allows them to reduce costs and optimize their profits. But how? By using the right management tools, such ase-procurement. The digitalization of purchasing processes makes it possible to streamline this activity and to generate considerable savings.

According to a study carried out by Hackett Group, more than 40% of respondents believe that 5% savings can be achieved at least by switching to e-Procurement. The percentage reaches 10 to 15% for 20% of them.

How is that possible?

E-Procurement allows you to have a better vision of what spot purchases or class C purchases actually represent, especially at the level of mature purchasing departments that have exhausted any other possibility of reducing costs. Thus, the use of adequate IT solutions makes it possible to highlight the hitherto unsuspected recurrence of many services considered ad hoc. The challenge for SMEs or ETIs that do not yet have a e-Procurement solution consists in developing a strategy that allows them to better control “wild purchases”.

The Hackett Group study suggests that, of the 80% of purchases mentioned above, 55% are covered through a combination of three approaches:

• Strategic sourcing (Calls for tenders) — which allows 40% of purchases to be controlled
• The influence of the purchasing department (Supplier Panel) — which influences 10% of purchases
• The use of e-Catalogs — for 5% of purchases

Due to lack of time, many SMEs or ETIs cannot look at opportunities to streamline their supply management. Too bad, because precisely identifying these potential sources of savings frees up resources for the treatment of tasks with higher added value.

The study shows that up to 30% of Class C purchases are potentially intended for outsourcing, an approach that is still innovative for this type of business.

Why not trust Sourcing-Force.com from Buy Made Easy (BME), which offers a one-stop shop for spot purchases?

How does e-procurement software like Sourcing Force help businesses save money?

Investing in software e-Procurement brings numerous benefits to businesses, including the possibility of reducing costs. This is possible:

By optimizing procurement management

For a business, the only way to save money on purchases is to adopt an effective purchasing policy. This involves limiting so-called wild purchases and setting up a validation system that corresponds to the interests of the company. Indeed, one of the major difficulties that Purchasing Departments face is the management of illegal purchases. Carried out punctually and irregularly, these do not often comply with the purchasing policy in place. However, they represent significant hidden costs for the company. By optimizing the purchasing management, regardless of their nature, the e-Procurement makes it possible to reduce these costs.

Use software e-procurement allows better control of purchasing operations and expenses. Thanks to approval workflows that assign control and validation tasks to a limited number of actors, wild purchases are reduced to make way for controlled purchases. By this practice alone, businesses can expect to earn between 5% and 10% on their purchasing expenses.

By centralizing supplier management

The use of software e-Procurement allows a company to centralize its purchases, and therefore its supplier accounts. This dematerialization of supplier management makes it possible to evaluate and better exploit performance indicators such as the average cost per order, the payment period for suppliers, the coverage rate of suppliers under contract, etc.

By having a better knowledge of this data, you will not only be able to better monitor your suppliers, but you will also improve the relationship with them. La digitalization of purchases effectively allows the various departments concerned to have real-time visibility of the status of orders and invoices. Thanks to it, invoices can be paid on time. A relationship of trust can be established between the company and its suppliers. The provisions will be optimally constituted. All of this will lead to significant financial gains for the company.

By better controlling expenses

Controlling purchases and expenses is a determining factor for the profitability of a business. While most procurement departments focus on optimizing production costs, through renegotiations and optimizations, indirect procurement tends to be forgotten. However, it should not be forgotten that this type of purchase represents half of the company's total expenses.

La digitalization of purchases, through the e-Procurement And of thee-sourcing, makes it possible to optimize these spot purchases. By allowing authorized decision-makers to check the orders placed in real time, the e-Procurement software makes it possible to avoid wild purchases and to better control expenses.

By reducing deadlines and simplifying administrative management

The steps in the buying process are traditionally long. This ranges from identifying the need to signing the contract, including finding suppliers, launching the tender, choosing the partner, negotiating the contract, etc. These are repetitive and time-consuming tasks that are carried out manually in the traditional purchasing process. In addition, they often require a very long waiting period for validation.

With the emergence of e-Procurement, all these procedures are automated and centralized. This is a considerable time and money saver for the buyer. Thanks to this tool, he individually manages his orders with the suppliers he has selected. He goes to the platform to find the products he wants to buy with all the information he needs to make his choice. THEe-catalog, made available to him, makes his task easier. It sends the order once it is validated in one click without having to wait any additional time. All that's left for him to do is wait for delivery. So, no more long validation processes. Everyone can focus on their core business.

This reduction in the time it takes to process purchases, combined with a simplification of administrative management, is a valuable gain for the company. In particular, it allows him to save on his costs.

Apart from the financial advantages, the e-Procurement solutions also offer other significant advantages to the procurement department. These include reducing order errors and disputes and eliminating re-entries. This leads to an improvement Purchasing processes interns.

What costs can e-Procurement software reduce?

The integration of a solution e-Procurement in the purchasing process allows the company to reduce its costs. But what costs are we talking about exactly?

The cost of procurement

Procurement costs are all expenses incurred to acquire goods and services from a supplier. It includes the cost of purchasing the product as well as ancillary costs, such as transport costs, storage costs, order preparation costs, etc. Use a Procure to Pay solution, like Sourcing Force, makes it possible to reduce the cost of procurement. It makes it possible to optimize the supplier base. By giving some exclusivity to certain suppliers, you can benefit from high bargaining power and better purchasing conditions.

Likewise, using an e-Procurement solution allows you to reduce storage costs. Like the buying process is shortened, the latter are reduced.

Management and operating costs

The dematerialization of purchasing process through a comprehensive solution like Sourcing Force allows you to reduce your management and operating costs. Indeed, by rationalizing your purchases, you control your expenses. This benefit is reflected in all of the company's services. The purchasing department can have better visibility and better monitoring of suppliers. The accounting department has access to invoices and purchase orders in real time. The financial department has a real-time view of the financial situation of the company. In this way, each company department will be able to benefit from the advantages of e-purchasing. This generates significant cost savings.

The cost of suppliers

Managing a supplier comes at a cost. This represents an average annual cost of €1,000. By optimizing the selection of suppliers and by allowing easy and rapid access to product prices, thee-procurement makes it possible to reduce the cost of suppliers. In addition, the possibility of consulting the history of orders and incidents makes it possible to refine searches for a better quality/price ratio.

The cost of human resources

Finally, a e-procurement software is a way to save on human resources costs. Of course, it cannot be a substitute for humans. But, by optimizing the purchasing process, it allows the employees concerned to focus on their core business.

You got it. Investing in a Procure to Pay software can bring a lot of benefits to your business, especially in reducing costs. The implementation of such a platform can only have an impact on the productivity and profitability of your business. BME Consulting supports you in your procurement digitalization project. Fully automate your procurement processes and benefit from considerable savings thanks to the implementation of our integrated Procure-to-Pay suite.