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Internet Procurement: the Payoff

Nearly every organization surveyed by Aberdeen reported that the benefits realized from deploying an Internet Procurement solution were significant and consistent with their expectations. All user organizations realized - or anticipated - savings in the following areas:

Lower material and service costs: Most respondents realized a 5% to 10% reduction in prices for MRO goods and services through greater control of maverick purchasing, increased use of preferred suppliers, and improved leverage for contract negotiations. Some early adopters expect savings in these areas to top 20%.

Shorter acquisition and order fulfillment cycles: User organizations reported that, on average, Internet Procurement automation shortens the time required to process a purchase requisition by 50% to 70%. According to the sites reviewed, the time required to manually complete the purchase requisition cycle - from order initiation through fulfillment - was 7.3 days. By routing orders through an Internet Procurement system, buying organizations were able to shorten the purchase cycle time to about 2 days. Shorter fulfillment cycles have the potential to lower the instances of maverick buying and drive rapid acceptance and adoption of Internet Procurement by providing end-users with rapid response to their MRO order requests.

Lower procurement administration costs: Aberdeen research concludes that, on average, Internet Procurement automation has the potential to reduce requisition-processing costs by 70% per order. Buying organizations surveyed by Aberdeen reported that it cost $30, on average, to process an order through an automated procurement system, compared with $107-per-requisition for orders processed manually. Such a reduction implies a redeployment or termination of procurement personnel resources. Some user organizations reported a reallocation of purchasing professionals to more strategic tasks, such as supplier qualification and rationalization initiatives.

Improved inventory practices: The shorter fulfillment cycles and improved purchase control supported by Internet Procurement automation allowed some user organizations to adopt just-in-time MRO procurement strategies, significantly reducing inventory levels and costs.