Introduction to E-Procurement – Tools, Application and its Benefits

Introduction

In layman’s term, e-procurement is nothing but electronic data transfer to support operational, tactical and strategic procurement. E-procurement has been existence for long time in one form or the other earlier it was done through electronic data interchange. In today’s environment, most of the e-procurement is done through the Internet.

Traditionally, procurement of supplies and material was done through paper, which slowly migrated to usage of an electronic medium for order printing and storing. With the advent of the Internet e-commerce flourished, and procurement was done through email and websites. As the Internet technology evolved e-catalogue came in the forefront thus traditional procurement was getting done through the Internet. In the current market with data security and advanced tools whole process of e-procurement is done through the Internet.

Procurement as a Function

Procurement departments are found in most of the organization. There are responsible for purchase of raw material, office supplies, office equipment, facility maintenance, etc. It is important for them to know and understand the e-procurement concept so that they can add efficiency and effectiveness to the whole process.

Procurement managers must have complete understanding of various e-procurement applications. He must be able to identify processes, which can make procurement effective. He should have understanding of e-procurement benefit. He should understand risk associated with e-procurement implementation.

E-procurement Tools and Application

There are several tools and application which fall under e-procurement some of them are as follows:

• In electronic data interchange system, procurement messages are exchange between computers of two separate organizations. Message is exchange in batch and can be easily transmitted and stored. EDI is mostly used for order transmission, order confirmation, logistic information and order invoicing.

• Enterprise resource planning system have separate module to handle the procurement function.

• Internet based tools and resources help in the process of procurement. Some of the common applications are email, internet based EDI, XML based data exchange via the internet etc. Internet provides tools for e-sourcing, e-tendering, e-auctioning, e-ordering and e-catalogue.

• E-sourcing tool is used to identify potential suppliers during the selection phase. E-tendering tool is used to send out tenders with procurement requirements, supply schedule, contracting terms, etc.

  E-auctioning tools bring together potential supplier identified during selection phase under one umbrella to undertake auctioning process. E-auctioning tools operate under two separate mechanism, upward price mechanism for selling organization and downward price mechanism for the buying organization.

  E-ordering tool is used procurement of office supplies and services; it is accessible by all employees within the organization and is mainly used for ad-hoc purchases. A web-based ERP tool is used for product-related purchases, is exclusively used by the procurement department, and falls under a planned process.

A traditional procurement process starts with phase requirement definition, sourcing, solicitation, evaluation, contracting and contract management. In the internet based this steps are replaced by e-sourcing, e-tendering, e-reverse auction, e-ordering and web based ERP.

E-procurement Benefits

E-procurement influences the following:

• The cost incurred on goods and services associated with production.

• The cost incurred on procurement process such as ordering, administrative support etc.

• The cost incurred on specification formulation, supplier selection etc.

• The cost benefit in establishing relationship with suppliers.

• It promotes transparency in the process and therefore improves accountability.