E-Procurement is the abbreviation for electronic procurement and describes the purchase of goods or services with electronic systems, often through digital networks such as the Internet. E-Procurement is usually part of e-commerce and, therefore, in addition to e-business. In the field of E-Procurement, modern communication methods are combined with classical purchasing procedures and the associated processes are managed electronically or digitally. Electronic order processing is called e-fulfillment. The advantage of e-procurement is the saving of time and, therefore, of costs in the administration of the order processes.
Electronic commerce, e-commerce, has evolved as a result of the digitization and the spread of the Internet. In the same period, the mechanisms for acquiring goods have changed and have already adapted to new conditions in many industries. One of the results of these changes is e-procurement.
Until now, to order merchandise, companies had to follow many individual steps. This whole procedure can now be shortened in many steps. Before digitization, first the needs had to be established, then the budget had to be verified, the offers compared, the order forms created and, in conclusion, the goods receipt had to be verified and archived. At this point, these individual provisioning steps can be automated and can be started with a single button. E-procurement can be done with a single software solution in the form of an ERP system.
Essentially for large companies, e-procurement offers the opportunity to save personnel costs and significantly reduce the time between ordering of goods, deliveries and, depending on the purpose of the company, resale. As a result, e-procurement is particularly suitable for online retailers, whose customers often rely on high product availability as well as speed of delivery. Hence, you can get a clear market advantage if you optimize your e-procurement processes.
Types of e-procurement systems
There are several characteristics that can be used to categorize e-procurement systems. Normally, e-procurement is carried out in the B2B area. The type of merchandise purchased through the system is also a factor. At the same time, the costs of the contracting procedure are relevant, as well as the relationships between the responsible persons within the electronic contracting cycle.
In principle, three different systems can be distinguished based on the listed characteristics:
- Vendor systems (sales solutions): The supplier implements the e-procurement system. It provides the necessary platform and customers can get their products there. The supplier determines both the availability of the merchandise and the prices.
- Purchasing systems (purchasing solutions): For this case, the buyer establishes the conditions such as prices and quantities for his procurement procedure. If, for example, large industrial companies need spare parts, a tender can be published via the electronic procurement system. Several suppliers have the opportunity to obtain the contract for the production of these parts through the system.
- Marketplaces (many-to-many solutions): These systems are mixed with the procurement and delivery systems. Manufacturers can offer their products and customers can specify their needs at the same time. Usually the market is regulated by a third party. A modern example of such a market is the Alibaba trading platform, which also partially mixes the B2B with the B2C area.
For e-procurement to reach its full performance potential, participants must use uniform standards. These can be related to the merchandise labeling (GTIN or ISBN) or the file formats used (eg XML). At the same time as the standardization of the formats used, the infrastructure should not be neglected either. E-Procurement can be implemented in intranets, extranets, virtual servers or through certain markets. In individual cases, must be coordinated with participants and partners.
The electronic processing of the procurement of goods has immense advantages for companies, which are briefly listed below:
- Less time, labor and cost compared to conventional sourcing
- Faster sourcing of materials or products
- More price or vendor comparisons available
- Hassle-free onboarding of new sources of supply
- Flexible shopping, as the fonts are available online 24 hours a day.
- Service providers can transmit directly to their customers the benefits resulting from electronic procurement. Thus, e-procurement offers an advantage to consumers as they can benefit from lower prices.
E-procurement is recommended for medium and large companies. The manufacturing industry and commerce rely on e-procurement solutions when the procurement of goods must be carried out on a large scale or be specifically flexible. To implement all of this electronically, using a VPN or intranet requires large investments, which can be amortized by saving time and money.
Suppose that company X depends on supplier Y, which manufactures and supplies raw materials for a product. Many vendors want standardized data storage so they can react quickly and easily to their corporate customers. If an automated interface is used, communication about merchandise inventories, delivery lists, quantities and amounts to be paid is done entirely through an extranet or intranet, a secure connection between the supplier and the company, which it is also connected to the ERP system.
The result is a highly efficient and automated administration of the deliveries and the data available. In this case, company X will have to integrate an electronic contracting system, since, otherwise, supplier Y would stop providing its services. At the same time, several areas of company X will benefit from this system, such as logistics, goods receipt and financial accounting, and also the customer. The internal advantages are transmitted directly to the customer thanks to the rapid availability and up-to-date data on the products (delivery times, etc.).
Benefits for online marketing
Process optimization always plays an important role in online marketing. With e-procurement, online stores have the possibility of making the most of the acquisition of their products. The faster the goods can be purchased, the faster they will be available for sale again. The more profitable the procurement of goods, the greater the pricing alternatives. In turn, low prices can be advertised selectively, thereby increasing brand awareness and reach. Together with an ERP system and a store CMS, online merchants can automate many different processes at the same time, thus saving additional costs or using resources for business or personal promotion.