The Pitfalls Of Avoiding Software For Direct Materials Sourcing
DIRECT MATERIALS SOURCING
A move toward direct materials sourcing presents an opportunity for the savvy CFO to drastically reduce costs, increase ROI, and exercise greater control over the supply chain. Yet, foregoing software for the purpose of direct materials sourcing can lead to significant host of problems. From higher operating expenses to decreased compliance, the pitfalls of avoiding software for direct materials sourcing are substantial.
Direct materials sourcing, when done manually, leaves room for human error. Without the input of automated systems to detect any irregularities, simple misspelling or the addition of the wrong digit could mean the difference between an accurate and inaccurate purchase order. This could lead to spreadsheet of incorrect purchase orders, incorrect costs, and incorrect timings?all of which can add up to an unnecessarily high operating expense. What?s more, manual data entry increases the chance of duplicate entries, errors in coding, and propagation of inaccurate data, which can lead to delays in payment and further impede efficiency.
Aside from higher operating expenses, manual direct materials sourcing can mean decreased compliance. Different vendors have different requirements, and manual entry can make it difficult to ensure compliance across the board. Disregarding vendor?s requirements when it comes to data entry, coding techniques, or the timely remittance of payment can lead to decrease in supplier satisfaction. decrease in supplier satisfaction can lead to unreliable service and trouble in maintaining the relationship between your business and its suppliers.
Source-to-pay software can help eliminate the pitfalls of manual direct materials sourcing by ensuring accuracy, compliance, and efficiency. Software can help to streamline data entry with fewer risk of errors in typo and digit entry, reduce chances of duplicate entries or data propagation, and create order uniformity. Automated software can also increase compliance by handling the multiple requirements for different vendors, as well as ensure timely remittance of payment. This, in turn, can lead to increased supplier satisfaction and decrease in potential interruptions.
Software for direct materials sourcing can also help to decrease operating expenses by eliminating the need for manual data entry. Automated software often allows for greater amounts of data to be processed at faster rate, meaning the process of direct materials sourcing can be handled more quickly and easily than ever before?ultimately leading to decrease in overhead costs.
In sum, forgoing software for direct materials sourcing can prove costly to business in the long run. From higher operating expenses to decreased compliance, business leaders must take into account the potential pitfalls that manual entry can bring. By leveraging source-to-pay software, CFOs can help to create an environment that is conducive to greater accuracy, compliance, and efficiency.
