Spend More, Pay Less: Procurement Technology Streamlines World-Class Ops

What’s the differentiating characteristic that separates world-class procurement operations from their less sizable and comparatively less successful competitors? Money spent on technology, according to recent research from business process advisory firm The Hackett Group.

World-class procurement operations receive 36% more resources for decision support and risk management than “typical companies.” The world-class operations are more than twice as likely to employ sophisticated reporting tools for spending analysis. Use of online tools for requests for proposals, information, or quotes, is 78% more common at these world-class organizations. In other words, the most successful procurement organizations are willing to invest in technology that automates and streamlines procurement processes.

These expenditures ultimately translate to improved efficiency: Cost per purchase order of these world-class procurement operations is $8.54, compared to a typical rate that is 134% higher—$19.99 per purchase order. In fact, these operations operate with 38 percent fewer staff than typical companies, show significantly improved cycle times, and reduced error rates as well.

One of the keys to understanding these statistics is that “world-class procurement executives have been much more successful than their peers at swapping out labor for technology,” according to Hackett Group senior business advisor Christopher S. Sawchuk. The numbers are convincing: World-class procurement organizations are able to increase investments in analytical activities, with 47% fewer staff dedicated to operational support than at typical companies, and an ability to process more than three times the number of purchase orders and material receipts per procurement staff person. Cycle times for requisitions and purchase orders are 34% faster at world-class procurement organizations, and error rates are lower, particularly for wrong-item correction after issuance (64% fewer) and pricing corrections after issuance (47% fewer).

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