Research from Xchanging Procurement Services reveals that e-procurement technology addresses only 10% of the cost savings challenge. The research, based on Xchanging’s experience with leading UK companies, found that technology solutions are concerned solely with transaction, which represents only a small part of the procurement process.
This means that the vast majority of cost remains untouched by the benefits of e-procurement technology.
Xchanging’s David Oates points out that while the IT-centric approach effectively focuses on automation, competition and aggregation, it does little to address inefficiencies in the supply chain as a whole. He says: “While technology has a key role to play in reducing transaction costs, there is much more to procurement than that. Technology is simply not a substitute for strategic sourcing, deep supply market expertise and customer relationship management.
“The key to more effective purchasing in the future will need to be far more holistic in approach if it is to deliver strategic value to companies going forward.”
Oates says that aggregation might help drive down costs of commoditised products such as paperclips, but it does not necessarily deliver savings across all spend categories. Millions of pounds have been spent on technology, but procurement is still under-funded. The balance is currently all wrong and successful purchasing needs to come from a more integrated approach, combining elements such as auctions, spend aggregation and supply chain process improvement to deliver a more flexible approach.
