The Ultimate Guide To A Better ROI In Purchasing

Transcription

1 The Ultimate Guide To A Better ROI In Purchasing It s a fact: automation reduces process costs and lead times, improves the operational effectiveness of your organization, and frees up resources for strategic tasks. But how can the real value of automation be quantified? This guide will help you assess the current situation of your purchasing processes and will give you an initial estimate of the true savings potential, Return On Investment (ROI), and project paybacks you can gain from a digital Procurement solution. How To Use This Guide The survey below covers the most common purchasing activities and should be used as a guide which you can then expand to suit your specific needs. Your organization may have more specific activities (process steps) that you may want to include in your analysis. Some of the activities may not be applicable in all cases (e.g. the time and effort required for updating POs based on supplier confirmations does not apply to all POs), and these can be left out if they are not relevant to your organization. SOME INSTRUCTIONS FOR GETTING BETTER VALUE After describing your processes, you will be able to estimate the potential for improvements based on: : amount of time needed to perform the activity / process step time: duration of each activity/process step (from start to finish). In many cases, the cycle time is much higher than the effort due to waiting times and dependencies between activities/steps. : Reduction or elimination of manual (or semi-manual) tasks thanks to the implementation of a digital Procurement platform. Some examples of the potential opportunities and benefits that automation has to offer are listed in the tables below.

2 1 Strategic Sourcing 1. Approximately how much ( total in USD) and what percentage of spend is taken to market annually? 2. How many sourcing events (RFx, eauctions ) does your organization have per year? Events / year: Average number of suppliers taking part: Average number of items in a sourcing event (items = materials or services): 3. What is the total number of FTEs (Full Equivalents) dedicated to managing these events? 4. What is the full labor burden cost (USD) of a sourcing professional in your organization? 5. What are your organization s current pain points/challenges related to sourcing events today? 6. What is the average effort / time needed for the following activities?: Collect, gather specifications and needs Find preferred supplier list Create, issue, and manage events Use of an eprocurement solution, automatically integrate Purchasing requests into esourcing tool, integrate with PLM tool, Integration with SRM processes and tools, direct integration of supplier strategies based on category,.. Templates, pre-filled information, reminders, archive of past events to reuse... Collect bids Analyze bids (Price, TCO, and valuebased) Validate and share award decisions Update information system (ERP) with new conditions Unified templates for suppliers, automated process, reminders, eauctions / soft auctions, Automated integration of non-price elements (supplier performance, CSR, risks ), templates (elements and weight) per category, integrated benchmarks against market indexes, Templates ( s, reports), electronic workflows for award reviews and approvals Interface between esourcing tool and operational systems to automatically create contracts, POs, info records, etc. based on result of award

3 2 Supplier Management 1. Overview of your supply base and metrics: Total Number of Suppliers: Breakdown by Strategic (A s), Secondary Strategic (B s) and Others (C s): Direct vs. Indirect: : 2. What are your organization s current pain points/challenges related to supplier management today? 3. Number of FTEs (full time equivalents) dedicated to managing suppliers: 4. What is the full labor cost burden (USD) of the individuals involved in supplier management? 5. What is the average effort / time needed for the following activities: Supplier discovery Self-registration portal, supplier network Supplier onboarding Rich supplier profiles, electronic workflows for reviews and validation, interface with ERP Supplier qualification Central SRM, collaboration workflows Develop and communicate supplier strategies Performance scorecard generation / update Supplier nonconformance and corrective action processes (ex: 8D, 5D, NCR, etc.) Central SRM, integrated digital category management, process integration (e.g. direct application of category strategies in sourcing events) Integration of hard facts from source systems (ERP, BW ), scorecard templates / category, electronic workflows to collect cross-functional input (soft facts) Templates and forms, electronic workflows and supplier portal

4 3 Supply Chain Management 1. Approximately how many purchases are made annually in terms of both spend and number? Annual number Spend Paper Purchase Orders Electronic Purchase Orders Blanket Orders/Call-offs Purchasing Cards Check Requisitions Direct Order Placement with the Supplier Other Non-PO Purchases 2. Total number of invoices submitted annually, and the number of invoices by type TOTAL # OF INVOICES PER YEAR: Annual number Spend PO-related manual invoices PO-related electronic invoices (XML, EDI) Non-PO related manual invoices Non-PO related electronic invoices (XML, EDI) Paper checks Electronic Payments (ACH/EFT) 3. Total number of queries and disputes Supplier queries: Internal queries: Invoice disputes: Because of mismatch on price: Because of lack of Goods Receipts: Because of missing data on invoice (PO #, Vendor data,...): 4. Number of FTEs (full time equivalents) dedicated to managing the above processes:

5 5. What is the full labor burden cost (USD) of the individuals involved in Supply Chain management? 6. What is the average effort / time needed for the following activities:number? Issue an order to suppliers (for each PO type) Update an order based on changes requested by suppliers Interfaces between esourcing and eprocurement tools and your ERPs to create POs based on requisitions or RFx, Supplier portal (webedi) or EDI Supplier portal and electronic workflows regarding confirmations, interface with ERP delivery notifications / ASNs /book an invoice Resolve an invoice dispute Supplier portal and interfaces with ERP Supplier portal (PO flip to create invoices) reduces errors and paper invoices, electronic workflow to route exceptions, interface with ERP Electronic workflows, routing of exceptions only Answer supplier queries Answer internal queries Supplier portal provides self-service in real-time (view of POs, invoices, shipments ), notifications about key events and reminders, centralized repository for all data and info (archives and search engine) Supplier portal to provide self-service in real-time (view of POs, invoices, shipments ), notifications of key events and reminders, centralized repository for all data and info (archives and search engine) Please Keep In Mind This document is a guide meant to help procurement professionals define the business case for digitalizing certain purchasing processes. It focuses on the main elements and steps. In order to estimate the potential improvements in a more meaningful way, a more detailed breakdown of the activities / processes listed above may be necessary. These improvements can then be translated into process cost improvements (FTE reduction, doing the same with less) or into increased effectiveness (doing more with the same) or a mix of both. Want to dig deeper into the full ROI potential of your Purchasing organization and prepare your specific business case for management? Contact our Value Consulting experts now to get immediate answers to all your questions! JOIN THE CONVERSATION on our blog at USA sales@jaggaer.com EUROPE dach_sales@jaggaer.com