The Benefits of
David Daffner, Vice President
In previous blog articles, we outlined the difference between procurement and purchasing and how eProcurement (electronic procurement) is one of several procurement best practices. Now let’s take a closer look at the benefits enterprise organizations stand to gain from using eProcurement.
What is eProcurement?
The Purchasing and Procurement Center defines eProcurement as “the electronic purchase and sale of goods and services, usually through an internet-based platform. It is a tool designed to improve the purchasing process transparency and efficiency, and help companies capture savings.”
The goal of eProcurement is to acquire a product or service of the greatest value at the best possible price at the time it is needed. Basically, it’s a term that covers many aspects of buying that is facilitated by electronic means, such as:
- Supplier sourcing
- RFP tendering
- Catalog management
- Spend data management
- Purchase order
eProcurement was first used by IBM in 2000 when the company launched its Replenishment Management System and Method. The system was designed to solve IBM’s complex procurement process at their largest laptop-producing plant. The company later sold using licenses to other companies around the world.
Benefits of eProcurement
We can summarize the benefits of eProcurement into three categories:
Automation: eProcurement eliminates the tedious manual work associated with traditional procurement methods, like phone calls, meetings and snail mail by automating these functions. The result is greater efficiency, improved compliance and cost savings. Staff can focus their time on more critical tasks like negotiating contracts.
Speed: Companies using eProcurement streamline processes, improve oversight and decrease cycle time from request to purchase. This may lead to an increase in the number of events per buyer.
Compliance: Compliance is enhanced through improved visibility and management of data, increased RPF process transparency and spend optimization. It usually reduces or eliminates “maverick spending” that is off-contract too. Additionally, audits are easier to conduct and review of previous activity is easier to facilitate.
Who uses eProcurement?
We see industries such oil, gas, pharmaceutical and mining embracing eProcurement more than other sectors. Governments in mature economies are also adopting eProcurement more extensively. eProcurement in the public sector has seen rapid growth in recent years.
Another important component: Strategic sourcing
Many organizations boost the benefits of eProcurement by also employing strategic sourcing rather than tactical sourcing, which often proves to be inefficient and more expensive. With strategic sourcing, a proactive, planned analysis of suppliers is done to deliver solutions to predetermined business needs, maximizing the value and reaping the full benefits of eProcurement. It’s been estimated that smart businesses can realize greater savings and see an ROI in a matter of weeks or even days.