North American B2B Procurement Inefficiencies Cost $1.5 Billion/Year

Although the concept of B2B procurement systems is to sharply increase productivity, that’s doesn’t seem to be how it’s working out. Barely 28 percent of procurement professionals say that their procurement systems make them any more productive, according to a research survey.

Topline Strategy Group conducted a study that surveyed 241 sourcing and procurement professionals at 201 unique US companies with $500 million or more in annual revenue. These participants rated 426 individual deployments of sourcing and procurement systems across five application areas—Spend Analytics, Supplier Information Management, eSourcing, Contract Lifecycle Management, and eProcurement.

The result? A listing of inefficiencies that total about $1.5 billion annually.

“When sourced and implemented correctly, procurement systems represent an opportunity for organizations to drastically reduce costs, improve process efficiency and gain visibility into spending decisions,” said Mark Digman, Senior Vice President of Marketing at SciQuest, which financed the study. “This research from The Topline Strategy Group indicates that most organizations are falling well short of these transformative benefits. The concept of turning spending into a source of savings takes some getting used to, but it’s an idea that more purchasing and sourcing professionals need to embrace.”

How bad was it? “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,” the report said. “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.”

The report also tried to drill down into where that productivity is being lost. “When measured in terms of lost opportunity, the cost to companies of not having better sourcing and procurement solutions—ones that make their sourcing and procurement professionals much more productive—is staggering. The 72 percent of respondents whose system did not make them much more productive reported that a better system would save them an average of just under 3.2 hours per week,” the report said. “That number totals 158 hours per user per year, nearly an entire work month. For these 204,000 sourcing and procurement workers in the United States and Canada, this translates into an eye-popping 32.3 million hours that are wasted in wrestling with or working around sourcing and procurement systems.”

One complaint cited was the need to manually work around systems that they did not properly anticipate the functionality needs of B2B companies. “Increases in productivity disappear rapidly when employees have to manually work around the system because it does not have the features to automate the process,” the report said and it then described the experience of one unidentified company that had participated in the survey.

“When they purchased the system, they anticipated that they would be able to build the spreadsheets they were previously using to capture bid information directly into the system. In turn, this would drastically reduce the amount of time they spent consolidating and analyzing RFP responses. The customer stated that when they tried to do it, it wasn’t easy,” the report said. “They do use the eSourcing system as intended for some basic commodities. But in most cases, they’ve reverted to gathering responses by ‘attaching the same spreadsheets we used before [we got the system]’ and then compiling and analyzing the spreadsheets manually. In terms of productivity, the interviewee stated, ‘It’s no better than it was.'”