Procurement to Pay: How a 500-Person Manufacturer Cut Procurement Costs by 31% With Better Software

The client: a garment accessories manufacturer in Dhaka with 520 employees, producing zips, buttons, rivets, and labels for export-oriented garment factories. Annual revenue: approximately ৳180 crore. Founded 1998, still running procurement on a combination of WhatsApp, handwritten purchase orders, and an Excel master ledger maintained by one person.

The problem: the MD knew procurement costs were too high but couldn't tell you exactly where the money was going or why. The business had 140 active suppliers. Purchasing decisions were made by five different people across two factories using no standardised process. Prices for the same raw material varied by up to 28% between orders placed by different staff.

The diagnostic: what we found in week one

Before proposing any solution, we spent a week mapping the procurement process as it actually existed:

• Requisitions were verbal: a production supervisor would tell the storeroom manager they needed raw material, who would tell the procurement officer, who would call a supplier from memory.
• No vendor master: supplier contact details, payment terms, and pricing history lived in people's phones and WhatsApp chats.
• No comparison purchasing: for urgent orders, the first supplier who answered the phone got the order.
• Approval by exception: the MD would review invoices that seemed high, but had no baseline to compare against.
• Receiving was manual: goods received were counted by hand and logged in a register. The register was reconciled with invoices weekly — but not against purchase orders because purchase orders didn't consistently exist.

The waste was visible immediately: duplicate orders, price inconsistency, receiving discrepancies that were resolved by trust rather than evidence, and an inability to leverage purchase volume for negotiated pricing because there was no record of purchase history per supplier.

What we built

Vendor master and contract management

Step one was creating a vendor master: a single record for every supplier with contact information, payment terms, bank details, and the negotiated price list for each item they supply. This alone took three weeks — auditing 140 suppliers, consolidating duplicates, and entering data.

We also built a contract module where negotiated rates are locked in: when a purchase order is created for a contracted supplier at a contracted price, it requires no additional approval. When the price is above contract, it triggers an approval workflow.

Purchase requisition and approval workflow

A digital requisition form replaces verbal requests. The production supervisor raises a requisition in the system, specifying item, quantity, and required date. It routes automatically to the storeroom (to check if there's existing inventory) and then to procurement (to place the order).

The approval matrix has three levels: under ৳50,000, procurement officer approves; ৳50,000–5,00,000, factory manager approves; above ৳5,00,000, MD approves. This reduced the MD's involvement in routine procurement by 80% while maintaining oversight of high-value purchases.

3-way matching at invoice approval

This single feature is responsible for the largest portion of the 31% cost reduction. Three-way matching compares the purchase order (what we agreed to buy at what price), the goods receipt note (what we actually received), and the supplier invoice (what they're charging us for).

Before the system, invoices were approved if they looked reasonable. After the system, invoice approval requires matching against a GRN and a PO. In the first three months, 12% of invoices had discrepancies — price, quantity, or both. Every one of those discrepancies was a cost the company had been absorbing without knowing.

The 18-month result

At 18 months post go-live, we conducted a full review against the pre-implementation baseline. Procurement costs — as a percentage of cost of goods — fell from 22.4% to 15.5%. That's a 31% reduction.

The sources of the saving: price variance recovery (34% of the total saving), quantity discrepancy recovery (19%), negotiated rate improvements enabled by volume visibility (28%), and reduction in emergency purchases at spot prices (19%).

The MD's comment at the 18-month review: "We've been paying for this for 20 years. I just didn't know it."