What is E-Procurement?
E-procurement, also known as electronic procurement, has been practiced since the 1970s. Today’s modern e-procurement tools and platforms have advanced dramatically since the term was first used.
From inventory tracking to supplier management and order fulfillment, the best e-procurement tools can automate all or a significant portion of the procurement cycle. These tools help organizations of all sizes save money, optimize resources, build long-term supplier relationships, and bring visibility to the procurement function. Read on for our guide to e-procurement and some of the key benefits it offers.
What is e-procurement?
E-procurement involves the purchase and/or sale of supplies, work, and services through the Internet as well as other digital information and networking systems, such as electronic data interchange and enterprise resource planning. This form of procurement can take place on a business-to-business, business-to-consumer, or business-to-government level.
The e-procurement process digitizes and streamlines many of the time-consuming, error-prone manual tasks of traditional procurement. There are different components to e-procurement, including:
- Source-to-contract (S2C): the process a company goes through when selecting and sourcing goods or services. This process includes e-sourcing and contract management.
- Purchase to Pay (P2P): the process of ordering goods or services from a supplier, and paying for goods received/services rendered. P2P software can improve efficiency, optimize spend management, and bring transparency to the purchasing lifecycle.
- Supplier management: the process of capturing and monitoring suppliers’ data and performance metrics, as well as proactively managing relationships and interactions. Typically, supplier management consists of two practices: Supplier Information Management (SIM) and Supplier Relationship Management (SRM).
- Analytics: perhaps the biggest benefit of e-procurement is the advanced analytics that is built into most, if not all, digital e-procurement platforms. These allow companies to find savings, optimize the procurement lifecycle, and build strong supplier relationships.
These different subcategories of e-procurement allow modern procurement teams to work smarter, not harder. Here’s how.
Benefits of e-procurement
E-procurement offers significant benefits to organizations that digitize their procurement functions. Chief among them is the ability to automate repetitive tasks, such as spend analysis, supplier bids, contract management, and the actual purchasing and payment processes. Automation also plays a role in many of the other benefits that e-procurement can bring.
E-procurement creates a digital database of supplier, function, and cost information that adds visibility and transparency to procurement at an organization. This transparency can be used to reduce rogue spend and improve supplier relationships.
The first step to mitigating the risk of rogue or maverick spend is to root it out: companies with the greatest maverick spend problems are usually those with overall less visibility of their spend, in general. E-procurement centralizes all procurement activities through one user-friendly platform, reducing the need for off-book purchases and bringing to light where bundling or ordering in bulk can benefit a business.
Likewise, data gathered through e-procurement can also help procurement teams gain insight into the health of their supply chain. By sharing data with your suppliers, you can even gain insight into next-tier suppliers and upstream value chains.
Shorter purchasing cycles
A purchasing cycle includes all events that lead up to the final purchase of goods and services. Digitizing procurement streamlines this entire process.
“Centralized transaction tracking simplifies reporting on orders, payments, and requisitions, as well as ensuring contract compliance, all of which can reduce delivery time. Buyers have electronic access to available products, services, and prices,” wrote the University of Michigan.
Bottlenecks to completing the purchasing cycle can be quickly identified and improved. Inevitably, automating e-procurement accelerates the order process, boosting efficiency and shortening the purchase cycle to help organizations manage their resources better.
The ROI on e-procurement systems is high. Automated e-procurement offers procurement teams a way to reach a wider number of suppliers (e.g., source more competitive bids), calculate supply needs (e.g., avoid overordering), and manage contracts (e.g., avoid fees and penalties). It also helps departments see where to continuously reduce costs, approve expenditures in a timely manner, and see historical data to negotiate lower purchasing costs. These benefits, plus the ability to reduce rogue spend, can significantly improve an organization’s bottom line.
[Read more: 6 benefits of automating procurement]
Get started with e-procurement
The Sourcing Simulator will show you how easy it is to request, receive, and review quotes through Fairmarkit’s e-procurement platform. Fill in your order info on our sourcing form with information like the brand, description, and quantity, and our simulator will provide a list of matching suppliers.
The Savings Calculator estimates how much your business could save annually by leveraging Fairmarkit's intelligent sourcing platform. Clients like the Massachusetts Bay Transportation Authority have used our e-procurement tools to save an average of $100K per month.
For more resources and trends in procurement, check out Fairmarkit’s blog, The Source.