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The traditional purchase order process is very expensive, and time-consuming. Factor in the number of transactions, multiple invoices, and frequent payments and the processing costs can easily rise above the cost of the particular item.

In fact, the average cost of processing a purchase order is:

  • $  96 - according to Ernst & Young
  • $150 - according to Gunn Partners
  • $190 - according to Deloitte & Touche study of 18 large companies
Procurement Pie Graph

GRAPH DESCRIPTION

According to the accounting firm of Ernst & Young, your office supply expense consists of more than just the price of the product. Their research reveals an additional cost of approximately $50.00 to $150.00 per order in the Procurement Process.

The graph above is a breakdown of that process and illustrates where you incure the labor and expense. For a detailed description of what charges go into the graph above, please see the chart below.

MONTHLY ANALYSIS

Task Hours Hourly Wage Wage Extended
       
1. Identify Product 2 $ 12.00 $ 24.00
2. Price Product 2.5 $ 12.00 $ 30.00
3. Order 2 $ 12.00 $ 24.00
4. Receive 1 $ 12.00 $ 12.00
5. Distribute 3 $ 12.00 $ 36.00
6. Track 2 $ 12.00 $ 24.00
7. Allocate Expense 1.5 $ 12.00 $ 18.00
8. Payment 1.5 $ 12.00 $ 18.00
9. Usage/History 0.5 $ 12.00 $ 6.00
10. Other 2.5 $ 12.00 $ 30.00
       
  Total Hours   *Total Labor Expense
  18.5   $ 222.00

You will need to add additional figures in the "Other" task field if supply rooms are stocked and inventoried. You will also need to add additional figures if a purchase order system is used.
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