Traditionally, procurement was manual process comprising of paperwork that involved a lot of essential procedural barriers. The advent of E-procurement not only brought about reduction in paperwork and manual intervention but has also proved to be cost efficient and more transparent. While many purchasing managers worry that it complicates the process and is difficult to learn, its advantages are becoming more evident as understanding of its many uses are becoming apparent. When things like reduction in procurement errors, costs, and paperwork are factored in, a switch to e-procurement brings in the right kind of environment and provides visibility into day-to-day transactions and makes it easier for users to get the supplies they need.
- Cost Reduction Benefit
Since e-procurement is software based, not only does need for paperwork and external spend gets eliminated, but also improves quality and supplier performance. In addition, digitized procurement documents can be dispatched quickly bypassing purchasing of mail stamps.This leads to structured supplier relationships i.e. reduced time between order creation and order fulfillment, greater choice in selection of goods and services and formation of trading communities to consolidate buying power. This also brings about the opportunity to purchase surplus products and services below market price. The process enables real time tracking of supplies as there is less paperwork and less time devoted to the process of procurement itself. Thus time is freed up so that staff can turn their attention to the business of supply; not paperwork.
A lack of control in the procurement of goods and services may lead to such problems as maverick purchasing practices, difficulty in maintaining audit trails and reduced visibility of overall spending. The traditional procurement process does not adequately address these issues. By automating the procurement process, e-Procurement systems can improve control of purchasing practices-procurement system ensures that the whole business is automated thus making it easier to write and analyze reports viz, items purchased, order processes and payments made. This, in turn, also confirms that procurement procedures are being biddable to the set policies.
- Cordial business Relationships
Some e-procurement systems have automatic alerts set up for suppliers, so if the stocks are low, suppliers are signaled automatically and hence they can maintain the stocks as per requirement. This auto update creates a steady flow between demand and supply. Thanks to the electronic process, the suppliers get paid quicker which establishes and facilitates trusting relationship between supplier and customer. Compatibility between employee’s work-habits and e-Procurement systems enable employees to take control of their own purchasing decision while simultaneously automating procurement security procedures. This provides the employee with a feeling of empowerment and encourages responsible purchasing habits. Increased employee empowerment in turn leads to greater ownership of the purchasing process and therefore achieves accountability and transparency.
As e-procurement is inter-organizational in nature, two types of integration, internal and external can influence how a reduction in manual data entry can affect gaining benefits. Internal integration is concerned with establishing electronic interface between an e-procurement system and other internal systems for seamless data exchange. External integration involves making an interface with the suppliers’ front-end systems to facilitate electronic exchange of documents.
An e-procurement system has even the ability to support e-catalogues which promotes organizational policy to guide employees for buying from approved suppliers only.
Automated procurement processes can yield significant time savings at all levels across an enterprise, increasing opportunities for employees to focus on more strategically important tasks and functions. Increased opportunity to leverage preferred vendor relationships – Buyers can search electronic catalogs containing goods and services from multiple suppliers and compare products and prices on-line. Real time communication allows buyers to check current prices and quantities. Suppliers can provide instant PO status. In addition, internal users can obtain the items they want from a catalogue of approved items through an on-line requisition and ordering system. Electronic catalogs provide a standardized listing of items allowing for easier item comparison. Business rules governing all users and all transactions can be built into the application. Regardless of where they’re located, buyers can access catalogs using web.
Studies thus indicate that e-procurement is all set for exponential growth and is the future of e-commerce and industrial growth. This translates into increased transaction volume that can easily overwhelm the capacity of an e-procurement system.