E-procurement advantages
E-procurement advantages are becoming more evident as the wider understanding of its many uses becomes apparent. The main reason companies have embraced e-procurement is to increase productivity, provide visibility into day-to-day transactions and make it easier for users to get the supplies that they need.
It has not been an easy road for e-procurement as implementation has its challenges and it has taken time for business managers and procurement departments to fully accept it. The advantages of e-procurement are slowly being understood:
Reducing costs: Costs can be reduced by leveraging volume, having structured supplier relationships and by using system improvements to reduce external spend while improving quality and supplier performance. E-procurement eliminates paperwork, rework and errors.
Visibility of spend: Centralized tracking of transactions enables full reporting on requisitions, items purchased, orders processes and payments made. E-procurement advantages extend to ensuring compliance with existing and established contracts.
Productivity: Internal customers can obtain the items they want from a catalogue of approved items through an on-line requisition and ordering system. Procurement staff can be released from processing orders and handling low value transactions to concentrate on strategic sourcing and improving supplier relationships.
Controls: Standardized approval processes and formal workflows ensure that the correct level of authorization is applied to each transaction and that spend is directed to draw off existing contracts. Compliance to policy is improved as users can quickly locate products and services from preferred suppliers and are unable to create maverick purchases.
Using 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 provide the framework for the supplier databases and spend management as well as holding key vendor information and being an electronic repository for contracts.
All these facilities cost money and a clear business case must be made for e-procurement. In most cases this is fairly clear that cost savings are possible. It pays for companies to spend money on e-procurement technology, this investment will boost efficiency. The longer term reduction in costs will enable companies to direct their resources to more strategic initiatives. E-procurement advantages are significant bottom-line benefits, including cost reduction, process efficiencies, spending controls and compliance.
Benefits of e-procurement
1. Management benefit
- Better availability of information from all areas of procurement to management for decision making.
- Better control of individualist spend and better use of corporate contracts.
- Greater management influence and control over purchasing
2. Supplier benefit
- Time saving
- Cost saving
- Reduction of paperwork and duplicated records
- Bills are paid on time and more quickly
- Improved relationship with the buyer
3. Operation-Purchasing
- Reduction in paperwork
- Time saving and cost saving
- Reduced inventory level and inventory cost
4. Strategic Purchasing Benefit
- Increased purchasing power
- Increased profit margin
- More efficient purchasing process
Disadvantages of e-procurement
1. Lack of qualified workforce.
2. Unreliable systems.
3. Security threats
4. Staff resistance to change.
5. Expensive to implement and maintain.
