Business Articles

E-procurement: Top Tips Need to Know in 2021

November 10, 2020

Living in a digital world, you have probably heard of e-procurement. E-procurement enables companies to automate business processes and transactions using internet technology. 

If you are an entrepreneur, understanding how it works can be a huge asset for your business. Understanding how to implement it can also be very important for your business.

In this article, you will learn more about what e-procurement is. What is the e-procurement value chain? How does e-procurement software work? What are the main ones?

What is e-procurement?

E-procurement is a business process in which business transactions are done through electronic means. E-procurement can be also called electronic procurement or supplier exchange. In other words, the buying and selling of goods and services are done via the internet. E-procurement can be also the sale or purchase of networking systems and information done via the Internet.

E-procurement can be done at any stage of the transaction. It can be at the start with the sale arriving at the purchaser. It can be at the end with invoicing and payments.

The arrival of the internet has led many entrepreneurs to only sell their goods and services via computer technology.

E-procurement doesn’t only benefit companies, it also makes it easier for customers to make purchases. It gives customers a much wider range of goods and services to choose from. They can access these goods or services from their own home or workplace. They can relatively easily find the most affordable and available goods.

E-procurement, more than just purchasing and sales, also allows businesses to advertise and market their products. This can be done more easily than ever before. It also allows cost savings and, as a consequence, e-procurement operations improve efficiency.

This operation can be done in real-time. Companies do not need to go to the shop and buy the product. They do not have to physically sell it either.

How does e-procurement work?

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E-procurement enables the streamlining of regular procurement processes (or procurement cycle). E-procurement means you can avoid doing things such as exchanging contracts, filling out supplier onboarding questionnaires. You can also avoid sending out tender documents manually.

The whole process is automated. E-procurement also blends elements of finance and procurement together, thus smoothening the operations between both.

There are a few components to the e-procurement process:

  • Source to Contract (S2C). S2C is the end-to-end process a company goes through when selecting and sourcing goods or services. It orchestrates strategic sourcing operations and manages contracts. S2C generally consists of eSourcing (eAuctions and eTenders) and contract management. 
  • Purchase to Pay (P2P). P2P describes the ordering process of services or goods from a supplier, through to the company paying for services rendered.
  • P2P is made up of product orders, supplier requisitions, budget approval, receipt of delivery and invoice processing. P2P software can help businesses with improving efficiency, savings, spend management and transparency across the entire purchasing lifecycle.
  • Supplier management, which refers to the buying company taking care of the suppliers’ information, performance, relationships and interactions. Supplier management means having a complete overview of the information, ongoing performance and interactions of an entire supplier database. 
  • Supplier management most often comprises two different elements. Supplier Information Management (SIM) and Supplier Relationship Management (SRM).
  • Analytics. Most tools used by companies include some sort of analytics platform, with e-procurement being no exception. Generally, analytics allow finance and procurement departments to analyze and review spend measures for the business.

The e-procurement value chain

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The e-procurement value chain consists of:

  • Indent management
  • E-Informing
  • E-Tendering 
  • E-Auctioning
  • Vendor management
  • Catalogue management
  • Purchase Order Integration
  • Order Status
  • Ship Notice
  • E-invoicing
  • E-payment
  • Contract management (This part of the value chain is not mandatory, the procuring departments can delineate their own indenting process.)

e-Informing

E-informing is not directly included in the purchasing process as it actually comes before the purchasing. E-informing describes the process of researching and distributing purchasing information from and to external and internal departments, using the internet. 

Information sharing describes how much important or proprietary information is shared with one’s supply chain partners. This will have an impact on the performance and efficacy of the supply chain. Information quality is also considered with timeliness, accuracy, credibility and adequacy of information exchanged taken into account.

The e-informing process takes place especially in Enterprise Resource Planning (ERP).

e-Tendering

The aim of e-tendering is to improve and streamline the tendering process. This is for the procurement of specialised goods, services or operations of low volume but high value.

e-Auctioning

E-auction describes the process of organising an auction to sell natural resources, assets or other products via online competitive bidding. As opposed to a physical auction, an online auction offers transparency and makes it possible for more people to participate.

Vendor management

Vendor management happens when a contractor strives to drive service excellence, control costs or mitigate risks. This is done to increase value from their vendors throughout the procurement process. Contract management teams are generally set up to make sure that only the most efficient deals are made.

Catalogue management

Catalogue management denotes the strategic process that begins with suppliers publishing their product portfolios online.

It makes suppliers’ products available to customers so as to procure products and services electronically. It comes into play when coordinating the product catalogue. It helps to make sure that the quality of the product date is up to standard across all sales channels. The product content can be presented by the supplier and/or the buyer.

e-Purchasing

E-purchasing is the opposite of e-tendering. It is used for the procurements of services and products low in value but high in volume. The e-purchasing process simplifies through electronics the buying process of these services and products. 

Catalogues are the most important elements for this type of procurement. Some of the elements of this system are often complex, meaning system development is often necessary. The process begins with the publication of goods by suppliers online. Then, it goes through to electronic selection, order, reception, and ends with payment by the party making the purchase.

e-Ordering

E-ordering describes the process of creating and approving purchasing requisitions. That means placing purchase orders but also receiving services and products that were ordered. All this is done through IT-based software systems which smoothen the supply chain management performance.

When considering e-ordering, the goods and services ordered are most often not product-related but are indirect. With Enterprise Resources Planning (ERP) the products and services ordered are products related. 

e-Invoicing

E-invoicing describes all the different electronic methods used to invoice customers. In large businesses, accounts payable teams are in charge of approving, processing and paying invoices.

e-Contract Management

E-contract management describes the management of payments, receivables, contract variations, contract settlements, performance securities, and auditing and control activities. As opposed to normal contract management, e-contract management is done electronically.

How public procurement is changing

Just like the world of business as a whole, the world of public procurement is also going through a digital transformation. The European Union has launched initiatives to support the remodelling of public procurement processes to accommodate new digital technologies. Their aim is to make it easier for companies to use them and for the public sector to manage them. Such initiatives will also enable the integration of data-based approaches throughout the procurement process.

There is an intrinsic link between digital procurement and eGovernment. Indeed, digital procurement is one of the key drivers toward the implementation of the “once-only principle” in public administrations. This is a fundamental principle of the EU’s Digital Single Market strategy.

Within the current world ruled by big data, digital procurement is vital. It allows governments to make decisions about public spending based on solid data and evidence.

Public spending can be more effective using digital tools because it will be more evidence oriented, transparent, streamlined, optimised and adapted to market conditions. In fact, e-procurement has been one of the main additions to public procurement in recent EU directives.

There are many benefits to using electronic tools within public procurement:

  • Greater innovation
  • Increased transparency
  • New business opportunities which will come from the improvement of the access of companies of all sizes to public procurement markets.
  • Less red-tape and administrative burdens
  • Sizeable savings for all parties
  • Shorter and simpler processes

What are the benefits of e-procurement?

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There are many advantages to e-procurement. Here are a few:

  • Joining ERP (Enterprise Resource Planning) and your external supply chain. Information can be exchanged in real-time between finance systems or ERP and supply chains. This will lead to the better overall visibility of transactions with and information from suppliers.
  • Streamlined procurement workflows. E-procurement enables end-users to serve themselves instead of needing staff support. It also leads to decentralisation in which control occurs through company approved catalogues. It also makes easier the processing of supplier payments and staff requisitions.
  • Transparency and accessibility of the company’s purchasing behaviour. E-procurement allows you to gain a better understanding of how and where it spends its money. This information is invaluable and will help you better manage spendings. It also avoids wasting money, leverages power during negotiations, and spots areas for consolidation of suppliers.
  • Automation of long and tedious tasks. Within any business, there will always be some tedious tasks that need to be taken care of. For example, their tasks are managing purchase order documentation, selecting suppliers, negotiating prices or filing supplier contacts. However, it is possible to automate all of this between a supplier and a company. This implies that the business can be done a lot quicker.

Who is e-procurement for?

One will generally consider e-procurement for four specific levels within a company:

– The purchasing department, which is in charge of determining and improving procurement strategies

– End users, which are the basis of the needs and who are the ones placing the orders

– The approver, who has the authority to approve or reject orders

– The accounting and finance departments, who deals with the orders and invoicing as well as making payments.

How e-procurement software works

In order to start implementing e-procurement within your organisation, you first need to choose and install e-procurement software. Of course, different providers will offer different functions and features. However, there are some general functions that they will most often offer.

E-procurement software enables staff to go through online catalogues and choose the products they need online. However, there is more to e-procurement than just online shopping. Staff can also manage their own purchases by determining user permissions when the software is set up.

The process starts with a purchase requisition. It can then be approved or dismissed by the user who has the authority to do so. If the user doesn’t have the authority, then the request is automatically sent to an employee who does.

The software will store a range of products from suppliers that the procurement team has already accepted. Most often, these will be suppliers with already existing relationships and contracts already established. The software will generally allow the contracts and payment terms to be stored so that they are easily accessible.

E-procurement software also stores different products and the suppliers who stock them. This makes it possible to avoid having anyone buy anything that is outside of the company budget. It avoids buying anything that does not fit in with the company requirements either.

Once an order has been placed, the software will automatically change it into a purchase order. It will then be sent to the supplier electronically. When the supplier has delivered the products ordered, these will be marked as received in the e-procurement system. This will then generate an invoice, which is sent to the accounts payable department to await payment.

What are the major e-procurement tools?

Visual of tools on a worktable

There is a range of processes and tools which can be used for e-procurement. Here are a few key ones:

Electronic data interchange systems

An electronic data interchange (EDI) is used to share and swap information and data between different electronic devices. Information and messages from other parties, partners, and external companies are exchanged and stored via EDI. This enables the streamlining of order and invoicing processes.

Internet applications and platforms

Companies use a whole range of e-procurement tools and online platforms. They facilitate daily operations such as e-tendering, e-auctioning, e-sourcing and e-ordering. Email is of course also used a lot, as well as XML-based data exchanges.

E-ordering and purchasing tools

The most widespread tools related to product purchasing include digital mechanisms for e-auctioning and online-based ERP.

Web3

Web3 is used within the purchase to pay process. It gives procurement teams clearer insight into purchase patterns across various devices. It also enables important savings throughout the supply chain.

How CONNECTS can help with your e-procurement strategy

If you are interested in e-procurement CONNECTS is the perfect platform for you. CONNECTS is the online business matchmaking platform that enables you to conduct business wherever you are. You can find new suppliers, distribution partners and customers across the world from the comfort of your home.

Working with Chambers of Commerce means all the businesses on our platform meet the high standards set by the Chambers. We provide access to business opportunities you can trust.

Did you find this article interesting? You might also want to read our article about How You Can Use an Online Platform for Lead Generation Post-COVID-19.

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