Cutting process costs with eProcurement
How a major automotive manufacturer saved £81,000 on processing costs with the help from RS.
End inefficient, costly procurement processes
Procurement teams and engineers face several challenges with how they source industrial consumables and manage their supply chain. With complexity coming from a number of stakeholders involved, a fragmented supply base and the range of products split across categories. The crucial fact for organisations to appreciate is that indirect procurement process costs can be twice as much as the amount spent on the products themselves.
An example of how RS has worked with an organisation to improve the indirect procurement process is our relationship with one of the UK’s biggest automotive manufacturers. Using RS as one of their key suppliers for MRO products, they were faced with placing high volumes of low transactional orders across their organisation.
Each order placed had to go through a manual requisition process and be manually keyed into their local ERP system (Enterprise Resource Planning). This caused duplication of work for the procurement department and as a result, processing times (and the ensuing costs) for each order were high. Every order raised outside the company’s own eProcurement system required an internal purchase order to be raised and added into the system.
Given the number of transactions involved across an organisation of this size, this significantly added to the procurement team’s workload. In addition, the customer wanted to have greater visibility of its indirect spend across the key suppliers they were regularly purchasing from so that it could better identify cost-saving and efficiency opportunities. As such, the company wanted to integrate these suppliers within its eProcurement system.
RS was chosen to be part of the first phase of suppliers, this was due to RS’s extensive product range, which meant it could cover all of the customer’s product category needs, as well as the technical experience RS has with eProcurement implementations.
To ensure minimal disruption for the engineers and still give them access to all product information they need, a capability called PunchOut was used. This provides a secure connection to RS’s website from within the customer’s eProcurement module. Using PunchOut means that end users can open a purchase order (PO) in their own system, access the RS website and build a basket of products, which is then pulled back into their system. When the basket details are received it automatically populates the PO with all the details the customer needs, ready to be sent (via any internal approvals) directly to RS for processing.
Due to the large number of variables involved in set-up, the teams mapped out the customer’s current process to check that the new process would follow it as closely as possible to achieve the desired outcome and ensure that all the procurement data required was captured in the system.
This new, simplified process has significantly reduced the process time for orders being placed. This frees up the time of both the procurement team and end users to focus on value-added activities in their respective roles.
The total process ‘soft’ costs have been reduced from £223,554 per year to £141,987 – a saving of more than £81,000. This has been achieved by reducing the order processing time from an average of 89 minutes to just 56 minutes. This breaks down to just 7 minutes to raise an order (half the previous paper process), getting it authorised in 6 minutes (half the previous process) and removing the need to confirm price/ availability of the product due to instant access to this information (removing 11 minutes from the previous process). In addition, there is also no need to pay individual invoices each month, with RS providing a single monthly invoice summary.
With all the data from thousands of purchases collected in one system it is now possible to analyse this information to help the customer benchmark its performance and improve its indirect procurement strategy in the future.
The data from eProcurement can be used to keep better control of its inventory. By having clear sight of what is being purchased, it’s possible to create a stock profile based on actual consumption.
Compatible with your system, tailored for your business
Our eProcurement integration dovetails with your existing platforms for ease of use, with full implementation support from our experts. Contact us now to find out how we can help you speed up your processes.