By the Numbers – IT Takes Expense Out of Procurement

Companies that use IT effectively for procuring goods and services can save big bucks, according to The Hackett Group. The consultancy’s study of what it calls world-class organizations finds that increasing spending on procurement technologies, as well as improving the use of existing technology investments, lowers overall procurement costs by as much as 20 percent. Top companies also reap greater returns from their investments in procurement technologies than other companies do—as high as 360 percent more than other companies typically see.

IT automates many of the transactions involved with procuring goods, such as order processing, scheduling and forecasting. Automation improves cycle times and reduces errors. As a result, fewer staff need to be dedicated to tasks such as operational support, order placement and forecasting. Instead, they can focus on more high-value activities like analyzing corporate spending patterns and aligning procurement with business strategy, says Christopher S. Sawchuk, Hackett’s procurement practice leader.

Hackett defines world-class organizations as companies that rank in the top 25 percent on various efficiency metrics (such as staff levels, productivity, costs, cycle times) and effectiveness measures, such as ROI. According to the group, staff at world-class procurement organizations use online tools to communicate proposals, quotes or requests for information to suppliers 78 percent more often than their peers, and they are twice as likely to have access to suppliers’ online catalogs.