E-Procurement Initiatives

E-procurement is purchasing implemented through the Internet. It has an important role in achieving efficiency and effectiveness in business today. This results in a reduction in the intermediate costs and labor that are associated with conventional systems.

The e-procurement initiatives involve many issues such as security, the products to be procured and also the investment needed. Despite the various complications, an increasing number of companies are joining the trend owing to the enormous cost savings e-procurement can bring in.

One of the major issues concerning e-procurement initiatives is security. Companies usually desist from sending sensitive information over the Internet for security reasons. The growing number of cyber crimes has added doubts regarding the reliability of the Internet. Security measures such as authentication and encryption are therefore employed while passing sensitive information between companies. Another major issue concerning e-procurement is the type of goods that are procured through the online medium. Companies usually prefer to source smaller, inexpensive goods such as office stationery. Larger complex orders that usually take weeks or months for negotiation are done in the traditional manner. However, the rapid improvement in software technologies has encouraged some companies to employ e-procurement for expensive products also.

Companies launch e-procurement initiative with a view to improve the overall performance of its business machinery. Although the initial investment required in hardware and software may be high, the return is even higher. Some studies indicate that a company can enjoy returns as much as 300% of the initial investment, within three years.

E-Procurement Software

It is estimated that supply chain invisibility leads to 20 to 40% more inventories. The invisibility comes from time delays and lack of communication. Advanced technologies enable real time communication through exchange of documents and they enable many communications.

Ecommerce platforms started with business-to-consumer sales. The characteristics of business-to-business transactions such as multiple decision making process has hindered the progress of B2B ecommerce platforms. The need to save costs has forced firms to look at opportunities provided by the Internet. Many large corporations have started to formulate e-procurement strategies, just like corporations evolved strategies for Internet presence.

E-procurement strategies include category selection for procuring online vendor access to the portal and vendor selection. Category selection decides which items to be procured online. Vendor selection decides the infrastructure access and the nature of access to the vendors and the platform on which the technology has to be hosted. E-procurement software is a web-based interface that is open source or proprietary and integrates email, ERP and legacy systems of the firm and suppliers.

E-procurement software has features to receive proposals, evaluate them, raise purchase orders and track them, and process invoices. In addition to these features, the menu has eMarketplace, where vendors can auction for the items. This is called reverse auction, in which ones bids for the lowest price. The advantage of reverse auction is that many vendors can participate in it; lowest price can be obtained when compared to conventional purchasing prices. E-procurement allows vendors to manage customers' inventory by having access to inventory data.

An E-procurement package comes along with a Supplier Relationship Management suite, in which suppliers and firm communicate using e-mail and other technologies. Suppliers can access the web based software using their own log-in passwords. Connectivity to legacy systems would require long term commitment from vendors and the firm. Many small and medium enterprises, who are the suppliers to large enterprises, lack web savvy, which explains the lack of penetration of B2B commerce when compared to B2C commerce.

E-Procurement Systems

E-Procurement systems include a variety of applications to enhance procurement process electronically. Primarily E-Procurement systems consist of three main categories with each focusing on different business areas. Success of an organization thus largely depends on choosing an appropriate application and successful implementation of these systems.

The first category focuses on improving decision-making that may improve transaction abilities of organizations. Most companies deal with hundreds of transactions every week. Applications falling under the first category simplify the process and help in maintaining a strong and successful buyer-supplier relationship.

The second category is essentially built to manage assets. Inventory management, maintenance scheduling, in-house availability of the product and related services are provided by the second category. These applications are particularly helpful to those organizations that need to maintain a clear idea about quality of material in stock.

The third category optimizes company production dealing with production cycle, procuring materials in case inventory is running low, managing supplier contracts and scheduling production. Disparity in functional area and usability purposes highlights importance on choosing the right system for individual companies. Irrespective of system category, organizations can reap benefits of implementing E-Procurement applications that include saving money, improving process of purchasing, better timelines and reducing loss.

As a result of implementing these applications, the supply chains of such organizations also may be able to undergo great improvement and increase efficiency.

Other businesses, manufacturers and distributors supplying goods or services in the production process could be included in such supply chains. Improved methods of transaction processes could have an impact on the entire economical account of such organization. Electronic process also makes it easier for accounting department to maintain all records of payments. This system offers catalogs providing comparisons of all suppliers under one head, thus expediting choice of company for placing supply orders. Clients need to choose a system suiting individual businesses and industry needs as these systems do not essentially boost up any procurement process automatically.

E-Procurement Systems - Why You Should Start Connecting to Today

Want a piece of a multi-billion dollar sales pie? The one served up by the tens of thousands of buyers who make the purchases for Fortune 500 companies and huge government organizations? Then it's time to connect to the world of e-procurement.

It used to be complicated, difficult, and horribly expensive to play the e-procurement connection game. But as Bob Dylan said, "The times, they are a changin'".

What is e-procurement, why does this challenge exist in the first place?

E-Procurement systems are vastly complex, enormously expensive software applications that allow large organizations to ensure that buyers make all their purchases in the same way.

This has several benefits,including:

* Saves buyers time and effort
* Allows management to control purchasing budgets and eliminate maverick spending
* Allows purchasing to interface with other systems within the company including inventory control, shipping and receiving, and accounting

While these systems are a great boon to the company that invests in them, they create a problem for vendors like you and the buyers who need your products and services. That's because e-Procurement systems are internal to the company.

That means that buyers now have a daunting task; get supplier information - like products, prices, and ordering methods -- into their e-procurement system.

That also means the suppliers who want to do business with a company that uses an e-procurement system have to find a way to 'plug in' to their system.

That's exactly why the businesses that have already figured out how to do that are the ones who get the lion's share of these enormous sales. Just take a look at these supply categories and the companies who dominate them:

E-Procurement of Direct Materials

In today's competitive business world, the corporations are continuously looking for IT solutions to improve the efficiency of their business processes and there by cut cost of operation to improve their margins. The businesses are under constant pressure to improve their bottom line irrespective of the growth in top line. They have no choice but to adopt the new e-procurement solutions, to improve time-to-market, reduce operations cost, avoid costly mistakes to stay on top of competition and avoid risk of extinction

In order to improve the procurement efficiency and realize maximum potential savings, it is necessary that the entire supply chain must be very efficient. The suppliers and the trading partners, such as shipping agents, clearing and forwarding agents and finance agents must be as efficient in order to provide the right materials at the right time at the right place at the right price at the right quality. This is only possible by a collaborative solution between buyers, suppliers and trading partners. It is important that the e-procurement solution must focus on collaborative supply chain practices in order to realize the fullest savings.

There are various types of procurement activities in an organization based on direct and indirect materials. The direct materials are items that are purchased for the production and the indirect materials (MRO items) are purchased for support of production activities. The features and the specifications of the e-procurement solutions vary for direct and indirect materials, depending on the procurement process of different vertical industries. Due to these varied requirements of e-procurement, different e-procurement providers focus on either different vertical industries or horizontal processes based on their domain knowledge and expertise.

E-procurement solutions come in different flavors and colors to cater to variety of industry requirements.

Vertical and Horizontal Exchanges

Public exchanges for various vertical markets

Private exchanges sponsored by corporations

ASP solutions

The above technologies can provide efficient e-procurement solutions, but have limited scope in their effectiveness. Vertical exchanges focus on transacting goods in a single industry, product or material. They typically exist in industries where buyers and sellers are fragmented and inefficient. Horizontal exchanges focus on leveraging expertise in a particular business process across number of industries. Service industries lend themselves well to a horizontal exchange. The most active horizontal exchanges today are competing in the realm of e-procurement.