Govt confirms 75 per cent e-procurement savings

A government department in the Australian state of Victoria has used e-procurement to cut its purchasing costs by 75 per cent. Now it's gunning for even greater savings.

A government department in the Australian state of Victoria has used e-procurement to cut its purchasing costs by 75 per cent. Now it's gunning for even greater savings.

John Byrne, manager of e-commerce for Victoria's Department of Natural Resources and Environment (DNRE), says that over the last couple of years the average cost per transaction was reduced from an average $A66 ($US38) down to $A44, "without even touching e-commerce", and then to $A16 following the implementation of an e-procurement system.

He says this will be reduced to below $A10 by the end of the year with the addition of an electronic catalogue system, which is due to be piloted by mid-November.

"The catalogue system will make it really easy to purchase. We will have the sourcing component available via the catalogue and once we have this in the system it will be a lot more intuitive, and reduce costs per transaction to below $A10."

Paper requisitions, signed approvals, and invoices are now almost a thing of the past at the DNRE, as 82 percent of their purchasing (including petty cash, the corporate credit card and purchasing) is done electronically.

Byrne says approval delays were cut from up to two weeks down to "as fast as the emails".

The department is using Oracle's Web Requisitions product, and with some internal modifications had the "self-service thing going".

"We preferred to get an off-the-shelf product because of the continuing change in technology and in various software. We didn't want to be spending a lot of our time modifying an in-house product," Byrne says.

The Web purchasing system, accessed by the 2500 delegated purchasers, has reduced manual account payment processing by 70 percent.

"The other thing is the transparency of the system. It has improved accountability," he says. "Once you log into the system everything you do is recorded."

Byrne said following the amalgamation of five separate departments in 1996, purchasing practices and policies were reviewed as each department had its own way of doing things.

"We found we had oversupply, we paid too much, and the purchases were not necessarily linked to business outputs. We also looked at who should be able to approve expenditure, and again there was a variety across different organisations."

"What we wanted to do was eliminate any non-value-added processes or any duplication. We had up to 13 people involved in each purchasing/payment transaction; we looked at that and really only came up with three people that added any value to the process. So we got rid of the other 10."

At that stage, Byrne says he believed the policies and purchasing delegates were right and they were as efficient as possible with their manual processes, but they wanted to further streamline processes.

"We wanted a paperless process that covered the total procurement cycle."

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