CPO: “Within Procurement, our current approach to supplier management and communications are so cumbersome that I figure automating those processes could enable us to save in several ways (all conservative estimates based on our $100M total spend, by the way).”
- $1.55M by using freed up time to address an additional 15% of our spend with professionally sourced agreements ($100m x 15% x $17% average savings)
- $1.0M through an average 1% in price reductions by improving our negotiating position when renewing existing agreements because we become so much “easier to do business with”
- $1.7M in realised savings against existing supplier agreements by being able to put all supplier catalogs in our e-procurement system where people will see and use them instead of buying off-contract (10% percent increase in on-contract buying x 17% average savings)
That’s a total of $4.25M just by making us more efficient so we can take advantage of savings opportunities we know are sitting there.
CFO: “We could save in Accounts Payable (AP), too. For us, it’s mainly from reduced administrative workload and the resulting opportunity to re-assign a few people to other functions outside AP.”
CFO: “Here’s my estimate for the first year – BEFORE we even put a big push on electronic invoicing with large suppliers…”
- $43,500 by reducing .75 FTE currently allocated just to answering phone and e-mail supplier inquiries about the status of their invoices
- $43,500 by reducing .75 FTE currently allocated to supplier data management – all of which is duplicate work to what procurement does
- $145,000 by reducing 2.5 FTEs needed today to process paper invoices that we know we could turn into electronic invoices almost immediately (e.g. complex utility bills, small suppliers, etc.)
That’s $232,000 savings from about a 25% reduction in AP in manpower costs. And I’m certain we can make further reductions over time with a framework for more electronic invoices.
CPO & CFO: “Yes – that’s what we’re saying – here’s the summary:”
- $4.25M in Procurement by freeing up more time for professional sourcing, small price reductions because we’re easier to do business with and an increase in on-contract buying because we make it easier for employees to buy off preferred supplier catalogues
- $232,000 in Accounts Payable because we can re-assign several FTEs currently allocated to tasks that could be eliminated or greatly reduced