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Inefficient Procurement Systems Cost North American Businesses $1.5Bn a Year, Study Says

Inefficient procurement tools are costing businesses in the United States and Canada more than $1.5 billion per year and wasting more than 32 million man hours, according to a survey conducted by The Topline Strategy Group.

The report, sponsored by SciQuest and titled “Optimizing Your Sourcing and Procurement: Five Simple Rules," found that just over one quarter, or 28 percent, of sourcing and procurement professionals believe their procurement system makes them much more productive.

With North American companies spending more than $1.4 billion on enterprise software applications in 2013, according to Gartner, this amounts to a massive productivity gap eating away at bottom lines. Topline Strategy surveyed 241 sourcing and finance professionals at more than 200 U.S. companies with $500m in revenue to determine the steps organizations can take to achieve a positive return on their procurement investment. 

The findings indicate that ineffective procurement systems have an impact that goes beyond hard costs. Sixty-eight percent of respondents who said their procurement systems do not make them more productive said that they would use the time lost to inefficiency to find more savings opportunities. According to the report, “they would also use that time to guide purchasers on making better choices, to get more spend categories under contract, purchase more cost-effective items and get more bids per tender.”

The report outlines five rules for organizations interested in maximizing the return on their investment in procurement systems:

1. Choose the right software: More than 50 percent of respondents who were not satisfied with their procurement systems cited a convoluted user interface as a reason for dissatisfaction, while a whopping 38 percent responded that their system lacks critical features that limit what can be done.

2. Don’t get caught up in vendor standardization: Only 16 percent of respondents who used two applications from the same vendor rated both as “making them much more productive.” Meanwhile, only 6 percent of respondents cited ERP integration as a driver of satisfaction.

3. Invest in implementation: Regardless of who performed implementation services, respondents found that how well that organization performed, which correlates highly with the level of investment, makes a big impact. Seventy-three percent of companies where the implementer “did a great job and added a lot of value” were either extremely satisfied or very satisfied with their system.

4. Frequently update and improve the system: Forty-eight percent of companies that regularly improve their system with new features and capabilities, something closely associated with software-as-a-service delivery, said that their procurement system makes them much more productive. Only 16 percent of respondents whose systems are not regularly improved said the same.

5. Use software that is easy for casual, occasional users: Seventy-eight percent of respondents believe that employees would find better deals and save their company money if corporate procurement tools were easier to use. Eighty-one percent believe that easier-to-use tools would reduce rogue spending.

The Topline Strategy Group specializes in helping technology-based companies align their solutions with the needs of the market. SciQuest provides cloud-based business automation solutions for spend management.

Source: Topline Strategy Group

The report, sponsored by SciQuest and titled “Optimizing Your Sourcing and Procurement: Five Simple Rules," found that just over one quarter, or 28 percent, of sourcing and procurement professionals believe their procurement system makes them much more productive.

With North American companies spending more than $1.4 billion on enterprise software applications in 2013, according to Gartner, this amounts to a massive productivity gap eating away at bottom lines. Topline Strategy surveyed 241 sourcing and finance professionals at more than 200 U.S. companies with $500m in revenue to determine the steps organizations can take to achieve a positive return on their procurement investment. 

The findings indicate that ineffective procurement systems have an impact that goes beyond hard costs. Sixty-eight percent of respondents who said their procurement systems do not make them more productive said that they would use the time lost to inefficiency to find more savings opportunities. According to the report, “they would also use that time to guide purchasers on making better choices, to get more spend categories under contract, purchase more cost-effective items and get more bids per tender.”

The report outlines five rules for organizations interested in maximizing the return on their investment in procurement systems:

1. Choose the right software: More than 50 percent of respondents who were not satisfied with their procurement systems cited a convoluted user interface as a reason for dissatisfaction, while a whopping 38 percent responded that their system lacks critical features that limit what can be done.

2. Don’t get caught up in vendor standardization: Only 16 percent of respondents who used two applications from the same vendor rated both as “making them much more productive.” Meanwhile, only 6 percent of respondents cited ERP integration as a driver of satisfaction.

3. Invest in implementation: Regardless of who performed implementation services, respondents found that how well that organization performed, which correlates highly with the level of investment, makes a big impact. Seventy-three percent of companies where the implementer “did a great job and added a lot of value” were either extremely satisfied or very satisfied with their system.

4. Frequently update and improve the system: Forty-eight percent of companies that regularly improve their system with new features and capabilities, something closely associated with software-as-a-service delivery, said that their procurement system makes them much more productive. Only 16 percent of respondents whose systems are not regularly improved said the same.

5. Use software that is easy for casual, occasional users: Seventy-eight percent of respondents believe that employees would find better deals and save their company money if corporate procurement tools were easier to use. Eighty-one percent believe that easier-to-use tools would reduce rogue spending.

The Topline Strategy Group specializes in helping technology-based companies align their solutions with the needs of the market. SciQuest provides cloud-based business automation solutions for spend management.

Source: Topline Strategy Group