Purchasing managers at large organizations might argue that the current system of procuring office supplies isn’t broken. That’s because they’ve worked with the large office supply firms to establish such innovative systems as next-day delivery, Internet ordering, stockless inventory and desktop delivery.
However, The Aberdeen Group, a Boston-based consulting firm that has studied automation opportunities for corporate operating resources, concluded in a recently published research paper that “operating resources procurement is in need of an overhaul. Surprisingly, these resources (which include office supplies) account for a portion of corporate expenditures that has been largely overlooked. (Their) purchase (has) been widely distributed and poorly controlled at most organizations. The lack of corporate controls has led to significant off-contract buying making it difficult for organizations to determine actual spending patterns, take advantage of existing contract prices, or leverage companywide purchasing volumes for improved contract negotiations.”
Though many companies have developed and incorporated a “stockless” inventory system to take advantage of Internet ordering and next-day delivery, there are a number of inefficiencies in this process.
First, for many users, next-day delivery does not occur the next day. Although vendor delivery may occur on a next-day basis, ordering and distribution processes within the company often add additional time to the fulfillment process. Second, next-day delivery does not provide information regarding employee usage of the product. Orders are compiled and sent to the vendor, the product arrives in bulk, and then it disappears into the corporate environment for distribution with few controls.
– Processing Orders
Can Be Labor Intensive
“These items are typically low-dollar, high-volume purchases, and processing purchasing requests remains paper-based and labor intensive , with order processing costs often exceeding the cost of goods being purchased,” the Aberdeen Group concluded. “This is one of the few areas of operations that has yet to be effectively automated at most organizations as customers incur significant processing costs for every order and invoice they handle.”
A recent study by Killen & Associates has shown that this soft cost ranges between $75 and $175 per order.
Next-day delivery is also an expensive and profit-curtailing service offered by the supply vendor. Order size is directly correlated with profitability and, according to suppliers, deliveries of orders of less than $50 are money losers.
– Offices Implement
Companies are now implementing systems that take advantage of Internet and desktop ordering while monitoring usage of office supplies. The Wall Street Journal reported earlier this year that high-tech vending machines are offering more and more items, ranging from soundtracks to office supplies. Some of the cost-saving attributes of these Internet-based automated systems include:
– Limiting the amount of space needed to store supplies
– Tracking inventory usage patterns by item, user or department
– Automatically reordering when supplies become low
– Allowing employees to view inventory from their desktops
– Limiting administrative staff time spent on supply distribution
– Reducing the number of total orders while increasing the amount per order
The office environment continues to evolve as we head into the final year of the 20th century. We are shifting toward an ever-increasing use of technology in the workplace; Web-based systems such as automated supply vending machines will affect business practices just as the PC has over the past two decades.
Holmes is co-founder and CEO of SupplyPro, Inc., a San Diego-based company offering automated supply cabinets linked to a central Web-based server that tracks supply usage and automatically reorders inventory as needed.