What Is E-Purchasing or E-Procurement?

by Janet Brown
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Close to 70% of B2B buyers buy goods online. Moreover, the online B2B budget spending has doubled since 2013. Many companies are replacing traditional procurement with electronic procurement procedures to reduce time and save money. 

In this era of B2B e-commerce, e-procurement can help companies streamline their procurement operations. 

Here is a quick guide to e-procurement, its benefits, and the steps involved in it. 

E-Procurement or E-Purchasing: An Overview

E-procurement refers to the buying and selling of products and services online. It takes place on a web portal or network system, known as an eProcurement system. 

E-procurement is essentially a business-to-business process, and the products could include equipment, supplies, raw materials, etc. It is also known as e-purchasing or supplier exchange.

E-procurement is different from e-commerce in many ways, such as:

  • E-procurement is essentially a B2B process, whereas eCommerce can be both B2B and B2C. 
  • E-commerce is open to everyone, while e-procurement is open to certain registered users only.
  • E-procurement is a part of the supply chain; e-commerce is not. 

Benefits of E-Procurement

E-procurement helps companies dematerialize commercial transactions between businesses and their vendors or suppliers. It speeds up the procurement processes by automating several commercial and contracting tasks. 

Let’s look at the major benefits of e-procurement. 

Elimination of Administrative Processes

Online procurement of goods and services helps you eliminate various manual and recurring tasks, such as:

  • Sending purchase orders
  • Asking for confirmation
  • Accepting orders
  • Invoicing

E-procurement automates all these tasks, plus many more. Besides, automation alleviates the risk of errors, making your operations more efficient. 

Cost Reduction

When you rely on manual procedures, you increase not only your risk of errors but also your expenses. By eliminating redundant tasks, you can significantly reduce your labor costs and save more money. 

Faster Lead Times

The traditional procurement process is lengthy. It involves a substantial amount of paperwork and other administrative tasks that increase lead times and make the entire process slower. 

E-purchasing speeds up the procurement process. When a business places an order, it automatically gets converted into a packing slip, eliminating the need for doing it manually. 

Increased Control Over Expenses

Procuring goods and supplies online provides businesses with better control over expenses. You get a real-time view of where your money goes. Therefore, you can better manage your budget and keep your costs in check. 

Empower Your Suppliers

The traditional procurement process involves manual management of supplier data. This slows down the process, as suppliers have to seek clarification from the procurement department for every action. 

In e-procurement, suppliers can use vendor portals to track purchase orders, send invoices, manage payments, and more. 

Steps Involved in E-Procurement

The electronic procurement process isn’t much different from the manual procurement process. Let’s look at the steps involved in e-procurement. 

Selecting the Products/Services

First things first, you need to select the products or services you need to procure. Work with your internal teams to determine the materials you want to buy. If you’re developing a new product, the production department can offer useful inputs. 

Supplier Evaluation

Once you decide the products you need to buy, you’ll need to evaluate suppliers. Find a few suppliers selling the items you need and assess them to find the best pick. This step can involve various sub-steps based on the size of the purchase and your evaluation process. 

Bidding and Negotiation

Based on your evaluation process, you’ll shortlist a few suppliers that match your criteria and requirements. The next step is to ask for bids from the shortlisted suppliers. 

Once the procurement team receives the bids, it enters a negotiation with the suppliers. At the end of the negotiation, the procurement team selects the supplier. 

Purchase Approval

Once the procurement team finalizes the supplier, they’ll create an electronic purchase requisition. The requisition will go through the approval process, after which it will automatically convert into a purchase order. 

The purchase order has all the procurement details, including quantity, price, delivery method, ship-to-address, and more. 

Releasing Purchase Requirements

Finally, the procurement team will submit orders to the supplier. The supplier will receive purchase requirements and release them in a predetermined time frame. This step may also involve several documents, such as material packaging slip, bill of lading, and more. 

Conclusion

The traditional procurement process has many drawbacks in terms of usability, flexibility, and automation. It is lengthy, time-consuming, and prone to errors, which leads to increased costs and lower productivity. E-procurement helps companies overcome these hurdles. It helps save time, negotiate the best prices, and increase visibility all from a single portal. 

 

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