Can eProcurement optimise your procurement costs?

As per PwC Digital Procurement survey 2024, 65% of procurement departments believe cost control to be their top priority, emphasizing the significant role procurement plays in managing and reducing costs. The advent of digital procurement solutions has revolutionized this space, offering a myriad of tools and techniques to streamline procurement activities, enhance transparency and drive significant cost savings.
We explore 8 key areas wherein eProcurement solutions influence and drive cost optimisation. Each strategy is designed to maximize efficiency and savings, ensuring that your procurement processes are not just operational but strategic contributors to your organization’s success.

1. Integrated Reverse Auctions and Dynamic Negotiation strategies in “Procure to Pay” software

There are several cost reduction measures and savings through negotiations is one of them. Modern eProcurement tools not only leverage reverse auctions, but also have “1:1 and 1:Many” dynamic negotiation strategies to drive savings.
More than 15+ reverse auction strategies can be deployed dependent upon the procurement scenario to bring in competition amongst vendors and discover the best price in a market driven environment. This not only ensures the organization reducing their costs but also ensures transparency and fairness in the
supplier selection process. This goes a long way in not just buying goods but developing a partnership
which is beneficial in the long run for the organization.
mjPRO, the leading eProcurement software, provided Voltas India with a quick and easy way to discover prices through various auction strategies, which significantly helped them save negotiation time while driving down procurement costs.

2. Leveraging a pool of diversified and mapped suppliers

Access to a diverse supplier base ensures competitive pricing and reduces dependency on a single supplier, enhancing negotiation power. With access to increased relevant and credible suppliers, buying organisations gets benefited by discovering competitive prices and reduces sourcing risk with a diversified vendor base.
mjPRO, from mjunction, boasts a robust supplier base of more than 75,000 registered suppliers, across various categories and industries, providing organizations with a wide range of sourcing options. Organisations in various industry verticals like Steel, Consumer Durables, Oil & Gas, Petrochemicals, Textiles etc leverage this supplier base of mjPRO in diversifying the sources and make procurement more resilient and risk free.

3. Saving Costs through Rate Contracts

Spend data visibility is a classic challenge in Procurement and the only solution is digitalisation of Procurement processes and spend. With all spend data on a unified platform, procurement leaders have complete visibility of the spend patterns. Systems can track maverick buys, similar buys happening at different locations at the same point of time from multiple sources. Insights from the platform are helping in designing aggregation and effective sourcing strategies for better cost control. Aggregation gives scale for better rate negotiations and rate contracts. This provides a veil to an organisation against future price increases and helps in cost avoidance.
The CGMSC and CSIDC departments of the Government of Chhattisgarh conduct annual rate contract tenders through the eProcurement system developed by mjunction, for the procurement of medical drugs, medical equipment and other supplies. They lock in prices for the entire year and place orders with the shortlisted bidders as and when needed.

4. Cost avoidance through Hedging

With spend intelligence on the eProcurement platform, professionals are aware of the price trends and consumption patterns. Such data insights help a buyer in Hedging, based on historical price trends. This results in guarding the organization against cost spikes and ensuring maintenance of procurement budgets. Manual procurement is devoid of such convenient data management and hence are limited in insights that may help in strategizing the right buy decision. mjPRO provides all spend data on one platform for business leaders to make informed decisions and make procurement cost competitive and resilient.

5. Optimising Bandwidth with Automation

Bandwidth limitation is a classic procurement challenge across organisations. All manufacturing organisations operationally follow the Pareto’s Law when it comes to procurement spend i.e. 80% of value contributes to only 20% of volume while 20% of tail spend constitutes to a mammoth 80% of purchase requests. Most procurement team exhausts their entire bandwidth in managing the transactional load.
Automating transactional procurement processes and workflows reduces manual workload, minimizes errors & redundancies and allows organisations in having a lean structure. mjPRO automates the entire PR to PO process along with automated DoP based workflows, enhancing efficiency and reducing operational costs with resource optimisation.

6. Enhanced focus on Strategic buys for more impact

Automation of routine purchases enables procurement teams to concentrate on high-value strategic sourcing, leading to greater cost savings. Procurement leaders, having saved time from their transactional jobs, can now focus more on delivering strategic savings in high value buys.
Leaders can now leverage spend data analytics and take more effective strategic decisions in their high value buys in terms of low-cost alternatives, aggregation, vendor development and other critical jobs that impact the bottom-line in a significant way.

7. Reducing cycle time and inventory costs

Industry cases suggest that procure-to-pay technologies have empowered procurement teams in reducing cycle time by more than 50%. With automation of critical processes like bidding, evaluation and approvals, Procurement has become super fast.
This helps in raw materials and consumables being delivered faster to stores, optimising the need for greater safety stocks and larger inventory. In short the requisition to delivery is much shorter now with an eProcurement software than processing cases manually offline. Thus, organisations benefit from reduced inventory carrying costs, making organisations more cost competitive. It also reduces sourcing risk and probability of inward material obsolescence.

8. Standardization: Reducing manual errors and negating cost leakage

In a manual procurement environment, errors in process and documentation are quite frequent. Manual errors or omission may lead to non-inclusion of certain clauses in documents like penalty or LD clauses. Such documentation errors can have severe financial implications and can cause cost leakage.
Automation of procurement reduces manual errors, as standard documents are in repository and gets auto attached with RFQ and contract documents, as applicable. Non-inclusion of mandatory & important clauses and commercial terms can be negated, leading to avoiding cost leakages.
Automated processes also ensure alerts and checks that reduces manual errors, limiting costs associated with redundancies and re-work.
Hence, let us identify which or if all of the 8 strategies of cost reduction, through eProcurement, can benefit your organisation, significantly and sustainably.