e-procurement (supplier exchange)

Contributor(s): Mary Pratt

Electronic procurement, also known as e-procurement, is the business-to-business (B2B) requisitioning, ordering and purchasing of goods and services over the internet.

An enterprise chief procurement officer (CPO) or procurement department usually sets the policies governing procurement of materials within an organization, with the goal of acquiring a product or service of the greatest value at the best possible price at the time it is needed.

To meet this goal, procurement leaders negotiate contracts, establish relationships with suppliers and set guidelines or limits on what spending can take place for which items. E-procurement software allows procurement leaders to automate adherence to these policies, contracts and vendor relationships within the system.

E-procurement software

E-procurement is facilitated by e-procurement software. Although available functions and features vary from vendor to vendor, e-procurement software typically computerizes numerous procurement-related activities -- thereby eliminating the need for manual and/or paper-based processes.

One key feature of e-procurement software is that it allows employees to search through online catalogs as well as select and acquire needed items online.

However, e-procurement and the software that supports it enable far more than merely an online shopping experience. More specifically, e-procurement automates many of the functions, procedures and policies that an organization uses to manage its procurement process.

E-procurement applications allow employees to manage their own purchases, from the selection of the desired items from within a preprogrammed offering that matches the procurement office's parameters for cost and quality and supplier; to submitting requisitions; to tracking delivery status.

This automation streamlines the procurement process and makes it more efficient, thereby making it faster and less costly. It also removes low-value tasks from the procurement department, which can then redirect its resources to higher-value activities such as negotiating contracts.

Furthermore, the tools within many e-procurement applications allow procurement leaders to customize the procurement experience, determine which items will be available through e-procurement to which users. Many platforms also offer access over smartphones and tablets.

Advantages and disadvantages of e-procurement

Similar to the implementation of other electronic systems, implementing an e-procurement application comes with potential challenges, particularly around installing and integrating the software with other enterprise back-end systems; training employees to use it; and working with suppliers to ensure a smooth transition to the new computer system.

E-procurement can produce significant benefits for the organizations that implement it. It can lower transactional costs, increase visibility of enterprise procurement spending, and deliver better reporting of procurement trends and metrics through automation. It can also limit or eliminate so-called maverick spending, which happens when employees procure products "off contract," in other words, purchases outside the parameters set in contracts negotiated by the procurement office and suppliers.

E-procurement supply chain management

In terms of supply chain management, e-procurement can be particularly beneficial for procuring indirect materials (i.e., those items and services that are not directly involved in producing whatever final product is sold by the organization). This category of goods typically includes office supplies, janitorial and facilities supplies, and other lower-cost items.

E-procurement may not work well for every type of purchase, however. One such area, for example, is the procurement of mission-critical items that are available through only a few suppliers; where inventories can run low; where procuring them involves complex negotiations; and/or where the potential to lower costs through an e-procurement platform is minimal.

See also: IT procurement, green procurement, sustainable procurement

This was last updated in August 2016

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How has using e-procurement software benefited your organization? If you aren't using it, why not?

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