In simplest terms, electronic procurement defines the automation of an organization’s procurement processes using web-based applications. Unlike enterprise resource planning (ERP) systems that enable businesses to automate their internal processes, e-procurement enables widely dispersed buyers and suppliers to come together, interact, and execute purchase transactions directly over the Internet.
In a fully web-enabled e-procurement system, each step in the procurement process occurs electronically. From creating and submitting POs to receiving and paying for goods—all transactional data is automatically routed through workflow processors, reducing the time and cost of procurement activities, and boosting operational efficiency of the e-enabled organization.
E-procurement applications consolidate the paper-based catalogs of multiple vendors by digitizing product information into a single, one-stop shopping source for direct and indirect goods and services. In most cases, e-procurement applications are transparent to end-users. Embedded in the business processes and IT systems of buyers and suppliers, e-procurement applications lower process and inventory costs, extend supplier reach, and improve customer access to suppliers.
E-procurement (electronic procurement, sometimes also known as supplier exchange) is the business to business or business to consumer or Business to government purchase and sale of supplies and services through the internet as well as other information and networking systems, such as Electronic data interchange and Enterprise resource Planning Typically, e-procurement Web sites allow qualified and registered users to look for buyers or sellers of goods and services. Depending on the approach, buyers or sellers may specify costs or invite bids Transactions can be initiated and completed. Ongoing purchases may qualify customers for volume discounts or special offers E- procurement software may make it possible to automate some buying and selling. Companies participating expect to be able to control parts inventories more effectively, reduce purchasing agent overhead, and improvement. E-procurement is expected to be integrated with the trend toward computerized Supply chain management
E-procurement is done with a software application that includes features for supplier management and complex auctions. The new generation of E-Procurement is now on-demand or a software-as a-service.
There are seven main types of e-procurement:
- Web-based ERP (Electronic Resource Planning): Creating and approving purchasing requisitions, placing purchase orders and receiving goods and services by using a software system based on Internet technology.
- e-MRO (Maintenance, Repair and Overhaul): The same as web-based ERP except that the goods and services ordered are non-product related MRO supplies.
- e-sourcing: Identifying new suppliers for a specific category of purchasing requirements using Internet technology.
- e-tendering: Sending requests for information and prices to suppliers and receiving the responses of suppliers using Internet technology.
- e-reverse auctioning: Using Internet technology to buy goods and services from a number of known or unknown suppliers.
- e-informing: Gathering and distributing purchasing information both from and to internal and external parties using Internet technology.
- e-market sites: Expands on Web-based ERP to open up value chains. Buying communities can access preferred suppliers’ products and services, add to shopping carts, create requisition, seek approval, receipt purchase orders and process electronic invoices with integration to suppliers’ supply chains and buyers’ financial systems.
The e-procurement value chain consists of Indent Management, e- tendering, e-Auctioning, Vendor Management, Catalogue Management, and Contract Management. Indent Management is the workflow involved in the preparation of tenders. This part of the value chain is optional, with individual procuring departments defining their indenting process. In works procurement, administrative approval and technical sanction are obtained in electronic format. In goods procurement, indent generation activity is done online. The end result of the stage is taken as inputs for issuing the NIT.
Elements of e-procurement include Request for quotation
Advantages and Disadvantages
Advantages include getting the right product, from the right supplier to the right buyer, at the right time, for the right price and the right quantity. In reality e-procurement has the advantage of taking supply chain management to the next level, providing real time information to the vendor as to the status of a customer’s needs. For example, a vendor may have an agreement with a customer to automatically ship materials when the customer’s stock level reaches a low point, thus bypassing the need for the customer to ask for it. A major disadvantage to this type of agreement could be that the vendor has the power to take advantage of the customer by knowing more information about the customer than they would have if the customer was in a normal supply chain management structure.
In simplest terms, electronic procurement defines the automation of an organization’s procurement processes using web-based applications.
Unlike enterprise resource planning (ERP) systems that enable businesses to automate their internal processes, e-procurement enables widely dispersed buyers and suppliers to come together, interact, and execute purchase transactions directly over the Internet.
How E-Procurement works
In spite of many variations, the most common e-procurement model involves an intermediary service provider or a host who links buyers and sellers in an interconnected supply chain using a web based e- procurement application. The host manages transactions, facilitates communication, aggregates and maintains catalog content, and provides the general infrastructure for the virtual marketplace.
Through this network, buyers may compare products from multiple suppliers in a single electronic catalog or check on an item’s price and availability in real time before electronically creating a PO. Once a PO is approved, also electronically, it’s sent to the supplier via the host’s Web portal.
This same Web portal enables suppliers to automatically return real time PO status. After an order ships, buyers can process tracking and receiving functions right from their workstations. Creating an invoice and authorizing payment is handled electronically through the same portal as well!
Beyond merely automating shipping and receiving tasks, however, e-procurement offers far more process improvements and innovative options for streamlining business operations and maximizing strategic initiatives-procurement enables access to global. suppliers, real time communication between buyers and suppliers, electronic payment of invoices, and assignment of logistics freight rating and routing.
E-procurement has also spawned creative new business models such as auctions for suppliers to sell excess inventory, reverse auctions where suppliers bid to fulfill a buyer’s order and trade exchanges where buyers and sellers simultaneously bid for each other’s business
