GOVERNANCE: Improved Procurement Practices Could Help Ensure Lowest Prices for Materials and Maximum Savings
The objective for this report was to assess the extent to which the company has effectively implemented more economical purchasing practices we recommended in a 2015 report.
We found that the company is realizing some of the cost-saving opportunities we identified in our prior report but still has not fully addressed the gaps in procurement practices we highlighted. For example, the company could have saved up to $4.5 million in material costs in fiscal year (FY) 2019 if it had a robust data analytics capability to assess its procurement data and used the results to influence its purchasing decisions. Additionally, the company has opportunities to reduce costs in its purchase order contracts by negotiating early payment discounts. Our analysis of FY 2019 purchase data showed it could have saved up to $5.4 million by these discounts.
To address these findings, we recommended that the company develop and implement a data analytics capability to help enable better informed purchasing decisions. Additionally, we recommended that the company direct that buyers negotiate early payment discounts and extended payment terms, or to choose the most beneficial of the two options if vendors do not agree to both.