What is E-Procurement? Advantages and Disadvantages

Definition

E-Procurement is purchase or sale of services, supplies and work conducted via business-to-business, business-to-consumer or business-to-government via the internet and other similar networking systems like E-data interchange or enterprise resource planning.

It is also known as electronic procurement.

What is E-Procurement?

At the enterprise level, an officer or a dedicated department sets specific rules and policies for the procurement of goods and services required for the business. The aim is to acquire the needs of the company at the least possible prices or with the best value at the time of need.

To achieve this objective, the procurement staff establishes relations with suppliers, sets guidelines, negotiates contracts and sets purchasing limits on the types of purchases which are allowed.

Also, the limits are of the kind of items on which money can be spent on. There are many softwares like PurchaseControl, which helps the procurement people to automate many processes.

These processes include adherence to policy, relations with vendors, and contract management, etc. All this can be done within the system. E-procurement is very convenient as compared to regular procurement because of many advantages.

E-Procurement Value chain

The E-procurement value chain consists of

1. E-informing

This step precedes the purchasing process and gathers and distributes the purchase information with the help of the internet. Sharing of info means the extent to which critical and proprietary info is told to a supply chain partner.

This process takes place primarily in Enterprise Resource Planning (ERP)

2. E-tendering

The objective of e-tendering is to enhance the tendering process for procuring specialized works, goods or other consulting services of high value but low volume.

3. E-auctioning

It is the process of conducting an auction to sell natural resources, assets or other goods on the internet via competitive bidding. Electronic auction provides more transparency as compared to a physical sale.

4. Vendor management

When the contracting authority tries to control costs and drive excellence in services, vendor management takes place. It helps to mitigate risks to gain additional value from their vendors.

5. Catalogue management

It is a strategic process which begins when suppliers publish their product portfolio electronically, and the products are made available to buyers to procure services or goods electronically and also appears.

In contrast, product catalogue management ensures the quality of product data across different sales channels.

6. E-purchasing

Contrary to e-Tendering, e-Purchasing is used to purchase goods and services which have high volume but low value. It simplifies the process of buying products and services.

The essential components of this system are complex, and system development is needed.

7. E-Ordering

The process of creating and approving the purchase request for placing as well as receiving the ordered products with the help of software improves the performance of supply chain drastically.

When ordering the goods online, the ordered goods and services are not related to the product. In the case of ERP, the goods and services are related to the product.

8.  E-Invoicing

It is defined as any method which is used to generate an invoice electronically and is given to a customer for payment. In large corporations, the department of accounts payable is responsible for the invoices which are to be approved, processed as well as paid.

9. E-Contract management

This is the management which consists of managing payments, receivables, settlement of contracts, variations in contract, auditing, performance securities and all the relevant control activities and its electronic variation.

E-procurement Software

To implement and execute e-procurement software, you should select software and set it up. There are many features and functions which vary widely depending on the vendor that you choose, industry that you work in, your products, etc.

PurchaseControl is a software which offers almost everything which a company may require for executing the e-procurement process successfully.

With that software, you can reduce or eliminate the paper-based processes. The software is fully automated, which reduces the time required for the execution of operations as well as chances of error.

This software allows the employees to browse through a lot of catalogues online and select the items they want to buy. It also allows employees to manage their subscription and purchases, which was created during the initial set up.

There is a lot of information stored in software right from items from different supplies which are approved by the procurement department. These vendors are with established relations, and the contracts will be stored in PurchaseControl along with contact info of the vendor as well as payment terms which would make things easier.

The software also stores a list of times and respective vendors from which they are available. This also ensures that no one requesting items or making purchases can buy anything which is beyond their budget or not compatible with the IT Structure of the company.

Also, there are many other general e-procurement softwares which are customized for retail, 3PL as well as for warehouse management.

Advantages

E-procurement has several significant advantages to the companies as follows:

1. Cost reduction

E-procurement software has a built-in tool that helps to maximize performance and reduce costs at the same time, which not only reduces overhead but also minimizes paperwork.

The software is fully automated, which streamlines the processes and will result in fast cycles right from creating an order to its completion. Also, there is an opportunity for a more excellent selection of products and services.

2. Shortening purchase cycles

The centralized transaction tracking simplifies the reporting on orders, requisitions, and payments. It also ensures compliance with the contract. All of these will result in shorter delivery timings.

The customer has electronic access to all the available products and services.

4. Improved control of inventory

The products can be located instantly from preferred supplies by procurement people. The purchases which they can make are limited, which makes the inventory better controlled.

5. Transparency

All of the purchase information is centralized and is made available to management, shareholders, internal as well as external stakeholders as deemed appropriate.

This is useful, especially in the case of government procurement, where every bidder gets an equal opportunity. The transaction costs are lowered since competition increases in e-procurement.

Since there are easier accessibility and openness to the internet, more and more people now have access to information which earlier they did not.

Disadvantages

Since the vendor gets more info of the customer than he would have gotten in case of regular supply chain structure, one of the significant disadvantages of e-procurement is the incentive of the vendor to take advantage of the customer.