strategic sourcing solutions

Strategic Sourcing Solutions

Many companies who have adopted e-procurement techniques or who are moving in that direction are also realizing the benefits of centralized purchasing data. Essentially, centralized purchasing data is just what it sounds like: maintaining a single warehouse to hold all information related to the buying of business-related supplies. While the benefits of such a set up may not seem immediately clear, these benefits do exist. The following sections will outline some of these benefits and will describe some best practices.

First, centralized purchasing data makes it easy for everyone who needs the details of one vendor contract or who needs to track company spending to have access to that information even across multiple branches and corporate divisions. For companies this means that less time is spent trying to track down data and communicating with other branches to make sure purchasing behavior is consistent across each of these areas.

Second, creating a single warehouse for all purchasing data prevents companies from losing track of the company’s vendor contracts. When a single company works with thousands of suppliers, it can be difficult to remember the aspects of each of the contracts. However, if all of that information is stored in one place, then it can be easily accessed and applied to buying arrangements or to manage the ongoing relationship. The benefit of this is that it can preserve vendor relationships, which can be weakened when a company goes to their competition to make purchases that the company had already contracted with the supplier to deliver. Since it is easier to purchase through a contracted seller, more buys are also made that way. Before centralized purchasing data was possible, some companies attributed almost 50% of their spend to purchases made off-contract. Now, many companies who use centralized purchasing data report that number has dropped to less than 1%.

Perhaps most importantly, centralized purchasing data and e-procurement significantly speed up the purchasing cycle. What once took companies as long as 30 days to complete can now be done within one 24-hour period. Since purchasing data is accessible via the Internet and because most purchases are now being done over the Internet, companies can access the necessary order information and place an order much more quickly. Plus, since e-procurement puts a stronger emphasis on developing contracts with vendors, much of the time spent securing a supplier is no longer required. In fact, e-procurement and centralized purchasing data have also shortened the time it takes to forge a contracted relationship with a seller. Ten years ago, the contract cycle would take the average company 6-12 months to complete. Today, it takes around only 30 days for businesses that use advanced purchasing technology.

One additional benefit that centralized purchasing data provides is improved opportunities for accurate risk assessment. Before warehousing spend information was possible, it was nearly impossible for a company to accurately determine what would happen if one of its primary suppliers suddenly went out of business or decided not to work with them any longer. The information needed to conduct an accurate assessment was strewn across multiple divisions and departments, so assessments could only be based on speculation not on data. With centralized purchasing data, conducting those type of risk assessments is easy because all of the necessary information is housed in one location and can be used to predict and plan for those type of possibilities.

Of course, companies that have seen success with e-procurement and centralized purchasing data are also incorporating additional strategies to keep their purchasing processes modern and competitive. Many companies are actually using the Internet to expedite its accounts payable procedures and match its needs to available subcontractors' skills, among other things. While setting up these types of initiatives may seem costly at first, the increased efficiency and savings that these types of programs deliver to the company can make them well worth the initial investment.

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