What is the ROI? Last time, I highlighted some of the features of the fully-automated procurement process. As attractive as the various features sound, the real synergy occurs when Buyers experience real savings. In today’s sluggish economy, in general, and because of dramatically contracting reimbursements for health care providers, specifically, ROI must be real and attainable.
Ultimately, what really matters is savings - applied (or realized) savings. Let’s look at numbers to illustrate the potential automated procurement ROI. The following hypothetical example illustrates the savings that a 2,000-unit multi-location operation could experience. Let’s assume that this Buyer purchases about $10 million in goods and services - $7 million from large Vendors for food, medical supplies, maintenance, housekeeping, office supplies, therapy services, durable medical equipment, etc., and $3 million for purchases of all types from smaller vendors. The savings illustrated in the model below are the direct result of the following automated procurement process features:
- An automated order & invoice transaction process
- An automated process for handling invoice-only transactions
- An automated process for handling manual purchase orders
*Estimates are conservative and based on extensive research. You may contact me for more information and detail on Savings Analysis.
While the above example is hypothetical, our experience and research indicate that positive results are achievable. In these uncertain times, providers have to be able to count on realizing the savings built into their procurement contracts and experience additional savings through utilization of today’s technologies. That is how the fittest will survive.
Because the highest level of eProcurement is a “Patronizing Partnership,” where both Buyers and Vendors mutually benefit, the next blog will address the benefits Vendors experience through procurement automation.