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The AHA! Moment: How efficiency impacts labor savingsReducing the purchasing cycle has a hidden cost savings benefit you shouldn’t ignore—labor.
We’ve covered the fact that implementing a cost containment strategy can boost organizational efficiency and reduce the purchasing cycle by 30%. That in itself is a substantial benefit. While immediately saving your purchasing manager critical time is measurable, we’re thinking bigger. When paired with an overall cost containment strategy it can be a source of significant savings.
The savings impact
Now let’s explore that concept a different way—as an example of real world savings. Brad, a longtime Fraxion customer, who shared this quote with us:
“We were able to start with the system with only 10 users and it has easily scaled with us to almost 400. It’s allowed us to save at least 4-5 jobs in purchasing.”
Brad P., Manager of Master Data.
Not only was the software able to scale the organization’s increasing needs, but they were able to save 4-5 positions in purchasing. This isn’t the dreaded labor reduction conversation, but quite the opposite.
The efficiency gains saved their organization from throwing additional labor dollars at the purchasing process to get ahead of its needs. Instead they used spend management software to improve their effectiveness and reduce the demand on the purchasing department. So as they scaled from 10 users all way up to 400 users they were able to sustain the purchasing department without equally increasing the number of employees.
Moving the profitability needle
In Brad’s case, he was able to save 4-5 positions. How much savings is there if your organization avoided needing to hire 5 purchasing positions?
When you look at an industry average salary the savings potential becomes very clear. We averaged the estimated salaries (US) of support staff, purchasing administrators and managers and used that number to illustrate the savings that 5 positions would yield.
$71,300/yr purchasing department average salary x 5 employees= $356,500/yr
That’s $356,500 dollars annually that can now be redirected at increasing the organization’s profitability.
Stop using labor dollars as a way to patch inefficient purchasing processes. Instead, it’s time to shift the conversation towards a sound cost containment strategy. Get the tools your organization will need to boost efficiency, save time and improve compliance. The results speak for themselves.
If your organization is still asking if it needs spend management software the answer is simple—yes.
I can think of 356,000 reasons why.