One way to reduce the cost of MRO procurement is to automate the process
A recent survey of nearly 1,000 procuement professionals, carried out by RS Components and the Chartered Institute of Procurement & Supply (CIPS), found that one of the biggest day to day company challenges in controlling purchasing activity is a lack of spend visiblity (40%).
Indirect costs are an inevitable part of procurement. But have you considered the time involved in researching products, checking availability, negotiating pricing and arranging delivery? Then there’s the time spent on seeking internal approval, issuing purchase orders and processing invoices and payments.
Alex Davies, Head of Value Added Services at RS Components, regularly sees this inefficient system in action. “CIPS calculates that, across industry, the total process cost for each purchase order is £80,” he says. “Yet there are businesses raising hundreds – if not thousands – of purchase orders a year for low-value products and not really having any appreciation for this significant hidden cost.”
However, there are ways to drastically reduce this figure.
"There are businesses raising hundreds – if not thousands – of purchase orders a year for low-value products and not really having any appreciation for this significant hidden cost."Alex Davies, Head of Value Added Services, RS Components
By taking a holistic view of the indirect procurement process, RS can offer solutions that save quantifiable amounts of time – and, therefore, money. “We have a calculator that we use with customers,” says Davies. “Specialists in eCommerce will get right into the detail of their end-to-end procurement process, putting real timeframes and real costs into the calculator and producing a true cost to that company.” RS can then recommend tools such as its Purchasing ManagerTM system, which reduces these costs. A well-known confectionery manufacturer, for example, saved more than £30,000 per annum in indirect procurement costs (the equivalent of 3.7 working weeks) when it adopted PurchasingManagerTM.
What is Purchasing ManagerTM?
RS’s Purchasing ManagerTM is a free, web-based order management tool that can dramatically streamline the buying process without having to invest in upgraded IT systems or software. It is a self-administered system that can be set up quickly and doesn’t require extensive staff training.
Purchasing ManagerTM automates large sections of the purchasing process and allows staff to place their own orders, under specified controls, with a full suite of online management reports.
Davies regards Purchasing ManagerTM as a flexible tool that meets the needs of a wide range of businesses. “It’s a versatile solution that can be installed in a small business, of maybe 10 employees, and provides a level of functionality that it wouldn’t otherwise have without significant investment in a large, costly, purchasing system,” he says. “It can operate at that smaller end of the market but can also be used in a large multiple-site business that has end users everywhere. The commonality is the challenge they face procuring low-value materials.”
"Purchasing ManagerTM can operate at the smaller end of the market but can also be used in a large multiple-site business that has end users everywhere. The commonality is the challenge they face procuring low value materials."Alex Davies, Head of Value Added Services, RS
The benefits of Purchasing ManagerTM
Davies is clear about the benefits of Purchasing ManagerTM, observing that: “It provides quick access to more than 600,000 items at RS in a user-friendly way that removes many layers of process from a business’s operation.
“Purchasing ManagerTM provides access to the RS website but with certain customisable controls, such as spend limits and approval mechanisms, built in. Users can also be required to select a cost centre, project code or ledger code. All of the data, up to 13 months’ worth of purchases, is available to view at any time, ultimately improving levels of control.”
There are also enhanced reporting capabilities built in to Purchasing ManagerTM that enable users to analyse spending. Davies points out that: “The reports tell you not just what you’re buying but who’s buying, how often they’re buying and for what purposes. These insights can highlight trends and how assets are performing.”
"All of the data, up to 13 months’ worth of purchases, is available to view at any time, ultimately improving levels of control."Alex Davies, Service Delivery Manager, RS
A Purchasing ManagerTM case study
RS recently supplied Purchasing ManagerTM to a large utilities company in southern England. Davies outlines the company’s problem: “They had a high volume of remote end users who were procuring low value goods through various trade counter networks across the region. This lack of control led to erratic, random purchases.”
The potentially negative repercussions were enormous, continues Davies: “You’ve got quality and traceability issues because you don’t know where the products are coming from. Moreover, you’ve got different widgets being fitted to the same machinery and ultimately no economy of scale to leverage in the market.”