What is e-Procurement?
E-Procurement is a process through which organizations procure goods and services electronically. It can save time and money and prevent potential errors or mishaps during the procurement process. Much has changed since the days of paper-based procurement.
The more quickly and efficiently an order can be processed, the less it costs; so there is a clear emphasis on speed and accuracy. For example, with e-Procurement, you will already have quotes and approvals before even creating a purchase order. All this saves time for enterprises. e-Procurement cuts down on the negotiating process, where you're dealing with suppliers and trading partners, who could be anywhere in the world. In business, time is money, and for this reason, much effort is put into reducing staff times that could be put to better use.
Today, e-Procurement is not just for large businesses with expansive purchasing departments. Even mid-market companies and small businesses should consider using e-Procurement to streamline their procurement process. Several tools and technologies such as online auctions, web-based procurement systems and purchasing platforms, make the procurement experience much more tactile.
Steps in e-Procurement
Five Steps You Need to Follow
The process occurs in stages when an organization exchanges information with external suppliers.
The first stage is called e-informing, which means exchange of information from one party to another, usually across units and external parties.
e-Sourcing refers to pre-qualifying all suppliers, allowing a company to see which are most qualified for evaluation. This process coincides with defining your organization's business requirements and organizational goals.
During the third stage, a company makes in-depth assessment of potential suppliers. They may implement strategies to ensure it's transparent in their assessment. E-tendering provides support in the selection phase of tendering and acts as a communication platform between purchasers and suppliers. It covers the complete tendering process, from creating requirements to contracting. E-tendering helps reduce legal errors, provides clear audit trails, and improves efficiency in tactical procurement processes. Some UN entities use e-tendering, such as UNDP-IAPSO and UNHCR, when they need to formulate long-term agreements for vehicles, tents, motorcycles or pharmaceuticals.
In a traditional auction, the seller is in control because they set the contract terms and negotiate prices. They sell their items to the highest bidder. The buyer can do a reverse auction where they ask for bids from suppliers and get the lowest by accepting it. There are more potential buyers in an online auction or e-Auction, so sellers can't be as restrictive.
Product ordering is the final step in the e-Procurement process where a business's employees can access and place orders for products. Companies usually use a digital catalog to store their rendered contracts to make it easier for new employees to find information quickly.
Benefits of e-Procurement
When done correctly, e-Procurement can bring in many advantages to businesses, including saving time and money, improving communication and collaboration, and reducing stress levels.
Here are five e-Procurement benefits:
E-Procurement can save businesses time by automating the procurement process and eliminating the need to contact multiple vendors. Furthermore, e-Procurement tools can track purchase data so that you can better manage costs and optimize your procurement strategy.
E-Procurement tools can help streamline the procurement process by automating the gathering of the necessary information from suppliers and facilitating the submission of bids. It can reduce the time needed to review proposals and make purchasing decisions.
Improved Communication and Collaboration
By making all procurement activities electronic, businesses can improve communication between different departments and reduce time wasted on redundant tasks. Additionally, e-Procurement tools can help reduce misunderstandings and coordination issues by providing consistent documentation across departments.
By using e-Procurement, businesses minimize the risk of potential scams or fraud by ensuring that products and services meet specific requirements. It reduces the possibility of costly mistakes or problems down the road.
Increased Compliance with Legal Requirements
By using e-Procurement tools, businesses can ensure that they're meeting all applicable legal needs while conducting their procurement activities.
Additional Read: Traditional Procurement vs e-Procurement
Types of e-Procurement System
If you're looking to streamline your procurement process, you'll want to use an e-Procurement system. Here's a lowdown on the most common e-Procurement types:
One of the best features of the EDI software is that two different organizations can exchange messages with each other. EDI sends messages between organizations, batching the notifications with other messages. It speeds up the process and is essential when working with specific types of messages, such as order confirmations or invoices. It is primarily implemented by close networks, unlike open networks such as the internet.
ERP systems are one of many electronic procurement tools and applications. These software and systems take care of all the administrative tasks a company might be dealing with, such as the manufacturing process, logistics, distribution, and shipping invoices. ERPs help with sales, delivery, billing production, inventory management and human resources.
This is the most popular type of e-Procurement system because it's simple to use and provides a centralized way to manage bids from different suppliers. However, online bidding can be slow and cumbersome, and tracking spending cannot be easy.
Email Bid Watching
Email bid watching is similar to online bidding but allows suppliers to submit bids electronically through an email notification system. This system is faster and more efficient than online bidding, but tracking spending can be more difficult.
Piping is a more advanced form of e-Procurement that allows suppliers to submit bids through secure pipes instead of emails. This method is faster and more efficient than email bid watching, but it can be more complicated to set up and use.
Web-based procurement systems are similar to email bidder watching, allowing suppliers to submit bids through an email notification system.