E- procurement

What is E-procurement?

E-procurement, also known as Supplier Exchange, is nothing but business to business (B2B) sale and purchase of goods model over the internet. E-procurement enables widely spread buyers and suppliers of goods to come together, interact, and perform purchase transactions directly over the Internet. E-Procurement gives businesses the ability to compare supplier prices, quality of services and various other aspects of the products.

The information technology (IT) sector has very well adapted to the ongoing change in the needs of businesses. It has helped many businesses by providing electronic solutions and internet based solutions for their supply chain networks to operate efficiently. We know that, procurement is an important function in any organization with its direct impact on the ‘productivity’, the most strategic objective of any business and has also had its share in the global e-transformation. Now, it has very promptly changed its form to a new concept called ‘E-procurement’.

E-procurement, one of the major aspects of e-commerce, is still very new to many businesses around the world however it is now catching up in the race as many businesses are beginning to realize its importance. But the transformation from conventional procurement to e-procurement has done great benifit to businesses in achieving their strategic objectives and targets.

Over the last decade in Pakistan, there has been a remarkable increase in the specialized supply chain services through IT enabled systems for the supply chain sector. This is a very good example in the industrial sector of an organization benefitting after shifting on an ERP and E-procurement system is the Polyester Fiber Business, of ICI Pakistan Limited.

Why E-procurement?

1.Cost Reduction

Costs can be reduced by structuring supplier relationships improvising systems to reduce external expenditure thereby improving quality and supplier performance. E-procurement solutions made it easier for purchasers to buy ‘on contract’; increasing buying leverage with key suppliers.

E-procurement also makes work paperless. Also, reduces rework and errors.

Also, because of dynamic on-line pricing, vendors offer limited-time spot discount offers on excess inventory. Even a small reduction in purchasing expenses can yield significant savings for large organizations.

2. Transparency of Expenditure

Central tracking system of transactions enables full reporting of requirements, purchase, processing of orders and payments. E-procurement also ensures compliance.

3. Increases Productivity

Internal customers acquire the items from an approved items catalogue through an online procurement system. Thereby, relieving the burden of low value transactions from the procurement staff, to let them concentrate on orders of strategic importance and on building supplier relationships.

4. Controls

Standardizing approval processes and formalizing workflows ensure authentication of transactions. Compliance to policy is also enhanced as users are able to quickly locate products and services from suppliers according to their preference.

5. E-procurement and technology

E-procurement advantages can only be fully realized when the systems and processes to manage it are in place. Software tools are needed to create the standard procurement documentation: electronic requests for information (e-RFI), requests for proposal (e-RFP) and requests for quotation (e-RFQ). These are proven methods to source goods and make the framework agreements that offer the best prices.

An adequate, fully integrated e-procurement approach is needed for overall success. Additional programs will provide the framework for the supplier databases management as well as holding vendor information and being an electronic repository. All these facilities cost money but this is fairly clear that cost savings are possible!

It pays for companies to spend money on e-procurement technology! 

Picture Source: Google Images

About Author:

Harpreet Kaur Dua is a consultant in Systems Plus Pvt. Ltd. Within Systems Plus, she actively contributes to the areas of Technology and Information Security. She can be contacted at: harpreet.dua@spluspl.com