What’s the goal of e-procurement? To dematerialize or digitize commercial transactions between businesses and their suppliers using digital solutions as a way to optimize the overall procurement process.
What is e-procurement?
E-procurement is another way of saying electronic purchasing of supplies and services. It is sometimes referred to as online procurement, e-purchasing, or e-procurement solutions. It is not the same thing as e-sourcing, which is a component of e-procurement, limited to the scope of strategic source activities and contract management.
It can be defined as a centralized management of a business’s purchases and supplies though a digital or electronic platform. However, it only applies to purchases in the Business-to-Business (B2B) sector and not the Business to Customer (B2C) sector.
The electronic platforms that host e-procurement dematerialize or digitize purchasing in the Procure-to-Pay (P2P) process. This process includes three main stages: Product selection, Order placement, and Invoice management and payment.
The benefits of e-procurement
Overall, e-procurement allows for the optimization of the procurement process, with four main advantages:
- Financial savings: Digital transactions save money, thanks to lower costs of labor and fully automated processes. Over time, these savings per transaction add up to constitute significant financial gains for a business.
- Streamlined workflow: By using a single, automated platform for the main steps of procurement, businesses eliminate unnecessary administrative and manual tasks, thereby improving efficiency and reducing error. Teams save time and are able to focus on more complex or higher added value tasks.
- Reduce lead times: Overall, e-procurement means simplicity and transparency for businesses. Thanks to automated processes, orders are processed and completed much more quickly, meaning businesses get what they need faster.
- Spend control: With procurement centralized on a single platform, companies can access real-time visibility of their spending. The platforms provide expense reporting and analysis solutions, so that finance teams can monitor and plan spending.
How does it work?
It generally includes three main steps:
- Product selection
Businesses use a specific platform (i.e. an online catalogue, a B2B retail site or marketplace), where they have access to the supplier's entire product range, including all necessary information and contractual conditions.
The businesses select products and send a purchase request which is then automatically integrated into their purchasing system.
- Order placement
After confirmation, the purchase request becomes an order and it is automatically sent to the supplier in a digital or electronic format. The supplier then prepares the products for shipment or delivery.
The invoice can also be generated and delivered in a dematerialized or digital way, either as a pdf or other electronic document. Businesses receive the invoice, accept the order and trigger payment, all in a single, digital workflow.
Who is involved in e-procurement in a company?
Within a business, e-procurement is generally aimed at:
- The purchasing department, or those who create and optimize procurement strategies.
- End users or customers, who place orders.
- The approver(s), who confirm(s) the orders.
- The finance and accounting departments, which accept the orders and invoices, and make payments.
There are many available e-procurement solutions and they each offer different functions and features. The various cloud-based platforms enable finding, buying and managing spend on goods and services, all online.
Some popular options include:
SAP Ariba - appropriate for larger or medium-sized organizations, this cloud-based platform works across the whole source, procure, and payment cycles.
Jaggaer - a full-spectrum intelligent solution with flexible options.
Coupa - an easy-to-use, accessible solution with features that support main procurement activities
Companies may also seek out particular solutions adapted to certain parts of the overall procurement process. Expense management tools, for example, are an excellent way to analyze and plan company spending, and some can be easily integrated into the other software systems already in use.