One of the main aspects being debated right now in procurement is how exactly e-commerce could be harnessed to improve efficiency of organizations and could be used for supporting profitability or organizations.
Definition of e-Procurement
E-Procurement defines automation of supply chain and procurement processes with the help of the internet and technology.
This increases the idea of ERP systems while letting automation of internal business processes which provides a platform which can support automation at global levels. It lets procurement professionals from all over the world communicate information efficiently and simply which will help streamline global procurement process, reduce time and cost while not compromising on quality and standards.
Benefits of e-Procurement
There are quite a few benefits of e-procurement systems in an organization and given below are few of the main points:
- Reduced time for transactions: Transactions (individual business activities) can be finished a lot quicker, but they aren’t restricted by office hours and might not even require human intervention which increases capacity of completing transactions in real-time. This means downstream processes aren’t constrained by waiting for all transactions to get completed.
- Electronic catalogs: E-catalogues have helped organizations to market their products more effectively electronically. This is a great marketing tool for both buyers and sellers since there is 100% price transparency and buyers could compare offers from a number of e-catalogue vendors at the same time.
- Increased standardization: With e-catalogues mentioned, there’s been a move by a number of suppliers to offer standardized offers, which allow buyers to compare offers of e-catalogues easily, but care needs to be taken when it comes to comparing since it is very difficult to assess quality of products when you don’t have samples. If you are in doubt, you should ask for samples and take your time before making an assessment of your own. This is one of the best e-procurement benefits.
- The great news here is most catalog websites operate in more or less the same way. They are easy for you to set up and allow multiple users to undertake their own types of procurement. This helps businesses stay running, helps with sourcing for day-to-day requirements of a business and lets procurement people continue developing great relationships with a lot of value.
- Wider Spread Supplier Bases: Since virtual e-procurement portals are based on the internet, buyers can look for suppliers around the world, which means a wide selection of services and products which are available for organizations meaning when items aren’t available locally, it’s possible to source them. It’s important for you to remember, the cost and time of shipping goods, but it is very good to know it’s possible for you to source items from anywhere in the world.
- Simplified Global Procurement: With e-procurement applications in various currencies, languages, international financing and taxation, shipping regulations, and much more, it’s very simple for suppliers and buyers in various countries around the world to co-operate and communicate.
- Increase Productivity: Since e-procurement automates a few of the procurement and wider processes of businesses that employees handle, this will free more time up for the team to spend on strategically significant tasks and functions. For example, with automated invoice matching, goods could be ordered, paid, and processed within minutes. The most important thing here though is to ensure the supplier is a part of the buyers system support to ensure maximum automation.
- Simple Scalability and Configuration: Applications could be configured for suiting needs of individuals or the needs of the buyer and supplier. They can also grow with organizations as the need arises. It’s important for you to choose suppliers for current requirements and possible future needs soon understanding technical infrastructure plans of suppliers will certainly help buyers choose possible partners long term.
- Trading Communities Creation: Since e-procurement applications are based on the internet, they allow the development of both horizontal and vertical trading communities. This means buyers could consolidate buying power and even opens up opportunities for fresh supply chains. The chance of consolidating requirements of small buyers or trading communicates enables small businesses to access prices that have been reserved historically for big buyers which refuels the SME sector which is developing quickly.
- More Cost Efficient: With reduction in time and an increase in supplier selection, development of communities for trading, additional opportunities for surplus goods purchase at market prices and more, it is not surprising at all that e-procurement is far more cost efficient as compared to traditional procurement.
How it affects bottom line
Among the many e-procurement benefits it has a great impact on organizations profits.
- Savings: E-procurement allows you to purchase services and products from preferred vendors. The more purchases made from the same vendor, the more you will be able to save at unit cost levels since they apply discounts on the basis of quantity. Apart from this, you will also have the confidence of the supply sources, ensuring you have the perfect quality for your requirements.
- Preferred vendor consolidation: Low-volume vendors might eventually get eradicated from supplier networks because of e-procurement, resulting in greater purchases being directed to vendors and larger discounts being made available. But specialist suppliers are much better off continuing their operations in e-procurement environments because of low cost of transactions.
- Spot Discounts: A reduction of the excess inventory of suppliers over a limited period of time can very easily get applied with dynamic nature that online pricing offers. This means big organizations can benefit from significant savings by making purchases at the appropriate time. The most important thing here is staying close to the market and setting up alerts in order to highlight changes.
If you are looking to find out more about purchasing and supply and how it can impact businesses including how to develop e-procurement, Precoro is the place for you to come. They have a lot of commercial experience when it comes to procurement and are very passionate about helping any business better understand how e-procurement works. So what are you waiting for? Find out more today.