What is e-procurement

asks alicevida

A. The term procurement, in business circles, refers the means of acquiring the best services and suppliers for your business at the best prices, and obtaining the highest quality where possible. It is a unique skill; you have to negotiate prices, find suppliers, place orders etc. That can be a lengthy and complicated process.

E-procurement allows you to do all of these activities electronically, using the internet. Although e-procurement is the new buzzword in e-business, it is more than that: it believed to be the way forward, and a solution for managing all businesses in the future. The British government, through the DTI, supports the concept.

Q. What are the benefits of e-procurement

A. The main advantage is that it saves you money, whether you are a supplier or a purchaser, as it provides an automated purchase and sales environment. For the purchaser, a centralised buying system helps you make better buying decisions and allows you to build strategic relationships with your suppliers. And, for the supplier, it is good business practice to get on board now, as being able to supply your services online will give you the competitive edge.

In addition, it makes maverick or impulse buying a lot less likely, so you won't lose out in any sales or promotions your competitors are running - and it is likely to offer you more business security if your prices remain competitive. Another advantage is that your goods may become available (and known about) by a larger group of purchasers, and your customer base will grow faster than through traditional methods. Online catalogues and advertisements for your services will also help in increasing your customer base.

Basically, e-procurement will reduce administration costs and enable your company to conduct more efficient transactions with its suppliers. BuyIt states that an average purchase order (PO) can cost a company 65, and e-procurement can make as much as a 90% saving on this.

Q. Is e-procurement more beneficial to large or small businesses

A. Currently it is more beneficial to large businesses, as normal business practice dictates that each department is responsible for its own purchasing. E-procurement amalgamates and centralises this process, and can save larger businesses a lot of money. For small businesses e-procurement will not have such a dramatic effect, but it is believed that online buying clubs (e.g. have a look at www.ogcbuyingsolutions.gov.uk or www.ezoka.com to see how a buying club works) will eventually help smaller businesses out.

Q. If I wanted to implement e-procurement methods into my business now, how would I go about this

A. Visit the BuyIt website: http://www.buyitnet.org/guidance/eproc/eproc-guideline/index.htm. It offers in-depth guidelines to best practice in e-procurement, and includes lots of case studies that detail how e-procurement has effected the bottom line in lots of different business models. You can compare this to your type of business and your buying (or selling) strategy. BuyIt will also tell you know how to evaluate your business, taking into account your current situation. For purchasers, it supplies lots of tips on how to do this. These include looking at:

(a) the items you buy and whether they are available from other suppliers

(b) what you buy and how you buy it

(c) whether your suppliers can, or plan to, trade electronically

(d) any gaps in your staff and how they can be filled to adapt to new technology.

For suppliers, BuyIt recommends that you identify your most important existing and potential customers, and talk to them about the level of service that will attract and/or retain them. Also, to look at your own capabilities to trade electronically.

BuyIt also lets you know about the computer software you have to invest in to enable e-procurement, and when you can expect to achieve a return on this investment.

Q. What are the disadvantages of e-procurement

A. The introduction of e-procurement can meet some resistance, as it often runs counter to corporate culture; in most organisations, this empowers local business units. So a centralised procurement process will not always be welcomed by business managers who feel that some of their power has been taken away from them. Only when they see that there is a financial return do they become convinced that e-procurement can work.

Other disadvantages can include motivating end-users to adopt the new system, and educating suppliers.

Q. Are there any other websites that give details on e-procurement

A. Check out the following sites. They will give you lots of in-depth information and case studies if you are serious about implementing it:

www.e-centre.org.uk

www.ecominfo.net

www.ukonlineforbusiness.gov.uk

Q. What types of companies have already adopted e-procurement

A. Early adopters of e-procurement include Cisco, HP, Visa, Reuters, Philips and Honeywell, and these companies claim approximately 8-15% savings on their indirect spend.

If you have any other Internet & Technology related questions, please click here

By Karen Anderson