eProcurement refers to the digitizing and automating of some aspects of your procurement processes. This guide will explain the role of eProcurement in the overall procurement and purchasing cycle of an organization, as well as why you should consider adopting it for your own growing team.
Businesses rely on the procurement process to grow their operations and boost revenue; they also engage with digital transformations to bring their workflows onto an efficient software or web platform, rather than through traditional manual and paper-based management. A combination of these trends has resulted in electronic procurement, or e-procurement, taking over tasks like routing purchase requests for approval, generating purchase orders, and managing suppliers.
The impact is so great that the U.S. Bureau of Labor Statistics has reported that fewer procurement specialists may be hired in the coming years as organizations switch to internet-based technologies for these tasks.
Instead, these professionals will evolve to handle more specialized and strategic business operations like searching for better deals in specific industries or finding more creative ways to reduce risk according to a report by Michigan State University.
Either way, eProcurement is a must-have feature of any procurement department today, so let’s talk about the technology and how it affects teams’ processes and assists in more easily procuring their professional services.
What is the Meaning of e-Procurement?
Your business already purchases supplies and services from third-party vendors to empower internal operations or keep production lines running. Conducting as many of these B2B transactions over the internet with a cloud-based solution constitutes e-procurement.
Turning to e-procurement means that you are registering with and working within the closed system of a vendor or supplier. This direct interaction, which differentiates e-procurement from e-commerce, facilitates communication between the two parties, from transferring bids to purchase orders.
For example, procurement staff can perform the following functions more effectively through e-procurement:
- Contract management
- Setting spending budgets
- Building vendor relationships
The result is purchasing goods and services at optimal prices and at strategic times, which ultimately boosts revenue. You can think of e-procurement as a component of supply chain management.
We’ve mentioned before that e-procurement happens over the internet by definition, but a more specific definition states that procurement personnel interact with suppliers over a digital software platform that relies on online communication. These platforms are being developed by third-party vendors and offer easy, streamlined, and user-friendly ways to integrate e-procurement into a business.
The History of This Technology
We can trace the ancestor of modern e-procurement to EDI, the Electronic Data Interchange of the 1980s. EDI was merely a file sharing medium, but it was revolutionary at the time since it replaced the exclusively paper or phone-based sharing of business documents.
Email, of course, took over shortly after, but, by the 90s, businesses could use EDI to generate online catalogs of various suppliers. The enterprise resource planning (ERP) system had been born.
Even more recently was the rise of dedicated e-procurement software solutions, which offer all types of “smart” features from automated supplier selection to digital contract management.
How Do e-Procurement Systems Work?
E-procurement, like other manifestations of the digital transformation, eliminates the need to carry out the procurement process manually and centralizes all procurement-related activities into a single platform. The key components of e-procurement solutions include the following:
- Vendor onboarding and management: Gathering data on various vendors or suppliers through supplier onboarding questionnaires and developing relationships with your preferred suppliers
- Market research: Comparing your options when viewing suppliers through comprehensive market visibility
- Online communications: Requesting information, getting quotations, and negotiating supplier contracts
- Online transactions: Creating and processing electronic orders and purchase requisitions, as well as any other aspect of conducting a transaction online
- Spending analytics: Gathering spending data and analyzing it to make more informed business decisions in the future
The automation of these tasks means fewer opportunities for human error and more resources being saved for other workflows. It also means streamlined communication among businesses, partners, stakeholders, and vendors.
Finally, it’s worth noting that an increasing number of e-procurement services are being delivered in a cloud-based deployment. These “e-procurement-as-a-service” solutions have inherent advantages of being easy to deploy and convenient to update, as most of the technical work is done on the vendor-side.
The Benefits of E-procurement
You will see substantial improvements to the effectiveness of your procurement department when you begin to implement a e-procurement system.
- Cost savings: Digitization already saves on the strenuous paperwork your teams would otherwise be dealing with. On top of this reduced overhead, a fully automated e-procurement platform streamlines certain processes so that every step from order to fulfillment is performed quickly and on time.
- Better purchasing decisions: The ability to collect market research and compare products and services from various vendors makes choosing the ideal transaction much easier. You’ll be making better purchasing decisions and getting more out of the budget every quarter.
- Faster transactions: You can speed up the purchasing cycle by simplifying the processing of requisitions, order forms, payments, and other documents. Automated inspections for maintaining contract compliance also help speed things along. And all these actions can be conducted through an easy-to-use dashboard.
- Staying informed: Because all the sales, transactions, and activities are recorded in a centralized platform, everyone from management to stakeholders has access to the data and can stay informed on what’s going on at any point in the procurement process. In other words, e-procurement helps maintain transparency.
- Privacy protection: Not all procurement process information needs to be seen by everyone. Software systems allow for role-based access control to check who can view budget information, invoices, requisitions, and other sensitive data points.
- More positive supplier relationships: E-procurement allows you to share information about your activities with internal departments as well as with external partners. For instance, sending the details about a new contract or transaction can be done quickly and easily, ensuring that your vendors will trust you to stay communicative when it counts.
- Connecting with other parts of the business: An e-procurement solution worth your consideration should have integrations with ERPs and other financial tools. Being able to share information in real-time with the rest of the company is invaluable to promoting a fast-moving workflow.
Getting purchasing and procurement right is important. The processes directly impact the quality of vendor relationships, the services your business provides to its clients, and the integrity of internal workflows. While it makes sense to invest heavily in procurement, don’t forget that strategies like e-procurement will help you maximize ROI.
Potential Challenges
The question of whether or not to switch to e-procurement should be a resounding “yes,” as the advantages greatly outweigh any of the new drawbacks of the technology. At the same time, it’s worth noting what its challenges are to give you some perspective into how it will serve your teams.
It Might Not Be Ideal in Every Circumstance
The e-procurement process makes sense in the majority of cases and works especially well when we’re dealing with indirect procurement (i.e. the transactions made that don’t directly involve the manufacturing of products).
However, some types of purchases might not work as well for e-procurement. Those include products that are:
- Mission-critical and have little flexibility with which you can procure them
- Items that only come from a few exclusive suppliers
- Needing of complicated negotiations to procure correctly
These instances are few and far between, making e-procurement still the ideal solution for the majority of your purchasing department’s work.
You Still Have To Worry About Legal Compliance – But It’s No Big Deal
International regulations, particularly those regarding data privacy, impact the operations of e-procurement solutions. One example is Regulation 22 of the Public Contracts Regulations 2015 in the EU, which has to do with transparency in information exchanges in public sector organizations.
There are many laws that impact business software in general. Thankfully, you don’t have to worry about too much of it as long as the service provider you choose covers international legal compliance. A good solution will be SOC 2 certified and support all the leading SSO services. Make sure your solution is enterprise-grade compliant with all its cybersecurity features.
Invest in Employee Training
Ensuring a smooth transition to the new procurement platform will involve some initial training for your staff. Working with new technologies and processes can take a bit of onboarding time in the beginning, but a solution that provides an integration manager will make things a lot easier.
Speed up user-adoption rates by providing relevant training materials in addition to on-the-job experience. While learning through webinars, blogs, and other online resources can help immensely, providing users with guides and walk-throughs is far more relevant and effective.
Software Buying Guide
We’ll end on a basic buyer’s guide on what you should look for when on the market for an e-procurement software service.
Features
First, you need to look at the feature set. Make sure that what’s on offer matches with your specific needs, as the features vary from vendor to vendor. Examples include:
- Approval workflows: There are usually multiple stakeholders involved in approving the same transaction. Automated workflows ensure that the next person “in line” to approve the transaction can do so quickly and get the process moving along, with full transparency of all previous actions taken..
- Three-way matching: The important three way match process matches the purchase order, the invoice, and the goods received note before finalizing the payment to prevent potential fraud.
- Customization options: Is the default deployment not up to your needs? No problem! Modern procurement software allows you to customize the features and tweak the attributes to your desire.
- Reporting and analytics: Nothing is more useful for future business decisions than a graph or chart showing where procurement is making the most impact on the budget. Be able to look back at accurate data and spend information to make increasingly better decisions.
- Cloud compatibility: Hosting an e-procurement solution in the cloud is a natural choice. Among other benefits, you’re keeping your data safe thanks to security measures enacted by service providers.
During the search, it’s not uncommon for managers to find new functionalities that they didn’t know they needed yet. Have an open mind, and you might be surprised.
The Purchasing Process
Are you in the market for e-procurement software now? These steps are typical of any enterprise software purchase. The purchasing process is as follows:
- Identify your needs by gathering internal feedback, defining your pain points, and searching for ways that software can address them.
- Determine your time and monetary budget. What billing plan works out best for you, and did you make room in the schedule for initial onboarding of staff onto the platform?
- Compare your options. Look at various e-procurement providers and cross-check their offerings. Are they fully featured? How are their cybersecurity postures? Ask for quotes or demos if you can.
- Make the final decision with a holistic analysis of a particular vendor.
Who knows? If you find a perfect match, the search for an e-procurement platform might be the last difficult procurement decision you’ll ever have to make!
