E-procurement

Electronic procurement promises organizations substantial cost savings. Especially for secondary goods and services the cost of the transaction currently are much higher than the value obtained. Handling these transactions automatically in co-operation between buying and selling organizations may save a lot and speed up processes. However, moving into e-procurement is not simple: the market is dominated by the selling side and software vendors, not taking the buying side into consideration. The processes (implicitly) supported by this software do not comply to the services requested by the buy-side organizations.

Common uses of E-commerce:
o Research vendor and product information
o Electronic check of available stock
o Price negotiation
o Order products or services
o Check on the status of an order
o Issue invoice and receive payment
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, Work and services through the Internet as well as other information and networking systems, such as Electronic Data Interchange and Enterprise Resource Planning. E-procurement software may make transaction possible to automate some buying and selling and it reduce purchasing agent overhead, and improve manufacturing cycles. 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.
There are seven main types of e-procurement: Web-based ERP (Electronic Resource Planning), e-MRO (Maintenance, Repair and Overhaul), e-sourcing, e-tendering, e-reverse auctioning, e-informing, e-marketsites. The e-procurement value chain consists of Indent Management, e-Tendering, e-Auctioning, Vendor Management, Catalogue Management, and Contract Management.

Benefits of e-Procurement

Large enterprises have purchase volumes of up to 60% of their overall annual turnover. By deploying an e-Procurement system, corporations can better manage this spend by creating significant process savings and lowering the absolute cost of the goods and services by ensuring adherence with strategic procurement initiatives.
In order to implement and firmly establish such a solution successfully in the enterprise, it is essential that the e-Procurement system offers an easy interface, allowing all participants in the supply chain including suppliers, manufacturers and buyers to participate in the system.
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.

Advantages of Electronic Procurement
• Increased compliance with strategic procurement contracts
• Reduced maverick spend
• Efficient search of products and alternative choices
• Control over requisition approval
• Shorter order and delivery time
• Monitoring of the suppliers and their product portfolio
• Electronic purchase order completion in back-end system
• Improved procurement process automation and control
• Lowered cost of supplier participation
• Rapid return on investment

Key features:
• Supplier catalog management with supplier self service
• Support for all standard classifications (e-Class, ETIM, UNSPSC)
• Multi supplier catalog
• Rule-based verification mechanisms
• High performance searching
• Shopping cart functionality
• Integration with all major ERP and e-Procurement systems
• Procurement extensions to support cost effective procurement
• Configurable goods extensions to support complex goods and services
• Web application, no desktop installation
• Highly scalable system

Disadvantages
o Security of electronic messages
o Lack of face-to-face contact
o Other technological concerns
 Standard protocols
 System reliability

Basic Types of E-commerce Models:
• Sell-side system
o Administered by the seller
o Usually free to the buyer
• Electronic marketplace
o Administered by a third party
o Collection of electronic catalogs
o One-stop sourcing for buyers
• Buy-side system
o Administered by the buyer
o Pre-approves vendor access
o Expensive and usually the domain of large companies
• On-line trading community
o Maintained by a third party
o Used by multiple buyers and sellers

Conclusion:

Most organization, irrespective of size or principal business activity, have considerable scope for realizing cost saving in the area of procurement. These saving can be achieve by eliminating inefficiency in the sourcing, procurement and payment cycles of their over all procurement process by the introduction of e-procurement system. The specific benefits an e-procurement system can be expected to bring: lower transaction cost, shorter order cycle time, higher compliance level, lower inventories and lower price. If implemented appropriately and part of holistic procurement vision, a suitable e-procurement system will realize substantial long term cost saving for the organization.

Source:

http://en.wikipedia.org/wiki/E-Procurement