Traditional vs. E-Procurement: How Technology Has Helped Transform the Procurement Function
October 29, 2019 | Procurement Software 5 minutes read
In its journey of maturity, procurement has gone through dramatic changes, evolving from a tactical function to a digitalized, strategic process.
What is Traditional Procurement?
Traditional procurement involved manually managing the function, with heavy dependence on paperwork, getting on calls with people for updates, etc., so that goods and services reach one point to another in a stipulated time frame. Not only was the process time consuming, but it was also prone to disruptions from various factors due to lack of visibility.
Disadvantages of Traditional Procurement-
- In the traditional procurement process, the function was managed manually, depending heavily on Excel sheets, paperwork, as well as phone calls and in-person conversations.
- In this tactical approach, the goal was to simply fulfill goods and services to obtain the right quantity at the right price at the right time.
- In handling procurement as a process of short-term purchasing rather than an integral component of business operations, companies missed out on the value that a strategic approach can bring.
- Manual procurement handicapped a company’s operations and potential for financial success, relying on time-consuming and tedious, repetitive tasks that failed to generate significant savings or profit. In an increasingly volatile and digitalized world, the traditional procurement system just doesn’t seem to have a place anymore.
- Moving procurement operations to a unified, digital platform streamlines and speeds up all source-to-pay operations, creating opportunities to generate more value and savings in the procurement process.
So, what are the benefits of moving the process of procurement to an e-procurement platform?
Traditional Procurement vs E-procurement: Benefits of e-procurement Platform-
1. Improvement of Operational Efficiency
Procurement professionals can get so much more done by simply transitioning from a manual approach to an electronic one that utilizes e-procurement software. In a manual approach, procurement operations were managed through paperwork, Excel sheets and phone calls. In moving operations to an e-procurement platform, S2P processes become automated and operations are sped up with much faster processing, allowing procurement practitioners to save time.
The traditional approach to procurement hindered enterprises’ efficiency — it depended on paperwork and phone calls. The entire process of S2P is sped up with the implementation of e-procurement software. A cloud-native digital platform streamlines each functionality of the procurement process and helps it communicate with other functionalities. This feature creates more efficiency within the process enabling procurement professionals to do in days what previously took weeks.
2. Increase in Visibility and Transparency
In the traditional procurement system, it was very difficult to track and manage spend behavior and patterns — and without a clear, streamlined view of operations and transactions, companies couldn’t realize significant value or savings. The implementation of e-procurement software, boosts overall visibility and transparency of S2P processes, offering procurement professionals greater insight into spend behavior. Cloud-native technology offers access to more data at a time, and through advanced analytics, the data is then aggregated, cleansed and classified, increasing spend visibility and allowing improved spend analysis. Companies can also track their spend behavior in real time, helping better manage and monitor their spending as well as track savings, greatly reducing maverick spend.
3. Boost in Compliance
When procurement was handled manually, it was difficult to manage relationships with suppliers and track their performance. E-procurement software offers companies a comprehensive understanding of their purchasing transactions, as well as a stronger handle on the life-cycle of their contract with a supplier. With the use of technology, companies can more effectively monitor supplier performance to ensure that a supplier acts in compliance with contractual procedures. Another challenge that companies faced in a traditional approach was employees’ handling of procurement systems. E-procurement software helps ensure that employees act in compliance with the agreed-upon vendors and contracts set up in their procurement system, helping cut down on maverick spend.
4. Capturing More Savings and Value
Effective use of procurement is about increasing a company’s bottom line and generating more savings and value to the enterprise. The traditional procurement process downplays a focus on strategy, treating procurement more like a short-term process of purchasing, thus failing to bring significant savings and profit. With a digital platform, companies can more easily achieve their financial goals with strategic sourcing of suppliers, better management, and visibility of spend.
5. Enabling Focus on Strategic Work
A mere tactical approach to procurement limits its possibilities. If procurement is treated like a trivial form of purchasing, procurement professionals would miss out on a deeper analysis of their company’s spend behaviors and patterns. The immense benefit of e-procurement software lies in its ability to efficiently handle the tactical and transactional functions of procurement, freeing up procurement pros to focus on strategy. By channeling their efforts into more strategic work, procurement professionals can greatly impact the overall value they can bring to their company.
Beyond a simple transition to an e-procurement platform, a tremendous potential exists on the digital transformation journey. With the implementation of emerging, cutting-edge technologies, like artificial intelligence and big data, companies are beginning to grasp the depth of smart procurement. As companies go fully digital, procurement operations are now finding their home on e-procurement platforms like GEP SMARTTM. This unified, AI-powered, and cloud-native source-to-pay platform optimizes the entire S2P process, reimagining the way procurement professionals work — as well as expanding the possibilities of procurement itself.
Frequently Asked Questions
Traditional procurement refers to the conservative practices in procurement such as manually managing the function, relying heavily on paperwork, getting on calls with people for updates, and assuring by physical means that the goods and services reach one point to another in a stipulated time frame.
E-procurement is the strategic, digitalized approach to traditional procurement practices. It involves dynamic processes such as minimum paperwork, higher transparency, and the use of technology.
E-procurement can significantly increase operational efficiency through automation and increased use of technology. In addition, it leads to better visibility and transparency, boosts compliance, adds more value, and allows companies to focus on strategic work.
Traditional procurement relies heavily on physical means such as paperwork, placing calls, and manually managing the procurement functions. Traditional procurement is a time-consuming and tedious process, culminating in repetitive tasks that fail to generate significant savings or profit. In a dynamic market condition, traditional procurement fails to provide a strategic approach.
Traditional procurement is the age-old, conservative approach to procurement that relies on manual functions, heavy paperwork, phone calls, etc., while E-procurement represents a more strategic and digitalized approach. Along with replacing the conventional functions in traditional procurement, e-procurement also helps create more value, brings about more transparency, and significantly boosts the business operation’s pace.
