Dec 11, 2021
4 mins read
As the economy becomes increasingly competitive, sustaining competitiveness and profitability requires organizations to focus on product innovation, higher quality, and faster response times, all of which must be delivered at the lowest possible cost. Purchasing can be seen as either strategic or transactional. Electronic purchasing, also known as e-purchasing or e-procurement, is a powerful tool that enables organizations to turn their purchasing department into a strategic function. E-procurement advantages can only be fully realized when the systems and processes to manage it are in place. Do you have a well-established procurement strategy and policy?
Industry studies indicate that e-procurement is poised for explosive growth. For many manufacturing and wholesale distribution organizations, this focus falls squarely on an effectively managed supply chain. Strategic buying involves the establishment of mutually beneficial long-term relationships between buyers and suppliers. E-purchasing automates and extends manual buying and selling processes, from the creation of the requisition to payment of suppliers. Costs can be reduced by leveraging volume, having structured supplier relationships, and using system improvements to reduce spending while improving quality and supplier performance. Regardless of where they’re located, buyers can access catalogs using a standard web browser. Does your procurement process support the firm’s operations with an uninterrupted flow of materials and services? An e-readiness analysis of the supply base is essential when selecting which suppliers to bring online.
Firms with the most competitive supply chains are and will continue to be the big winners in contemporary business. Strategic purchasing enables firms to foster close working relationships with a limited number of suppliers, promotes open communication among supply chain partners, and develops a long-term strategic relationship orientation for the achievement of mutual goals. E-procurement eliminates paperwork, rework, and errors. Standardized approval processes and formal workflows ensure that the correct level of authorization is applied to each transaction. Does your procurement process buy competitively and wisely (achieve the best combination of price, quality, and service)? Will your current infrastructure support e-procurement?
While all of the links in the supply chain must be strong and well-integrated, a key link that sets the foundation for others is building a strong supplier base that can help the organization deliver on the competitive advantages needed to succeed. Communication needed in competitive bidding, purchase order placement, order tracking, and follow-up is enhanced by the speed and ease afforded by establishing online systems. Cost efficiency results from a variety of factors including reduced time between order creation and order fulfillment, a greater selection of goods and services from which to choose, the formation of trading communities to consolidate buying power, the opportunity to purchase surplus products and services below market prices. Compliance with the policy is improved as users can quickly locate products and services from preferred suppliers and are restricted from making purchases outside of policy. Does your procurement process minimize inventory investment and loss? Is your hardware configuration scalable to support additional servers, processors, and an increase in transactional volume?
As the role of purchasing grows in importance, purchasing departments are being charged with even more responsibilities. In fact, e-procurement is considered one of the characteristics of a world-class purchasing organization. Centralized tracking of transactions enables full reporting on requisitions, items purchased, orders processed and payments made. In today’s digital marketplace, businesses increasingly use electronic systems for more efficient, predictable, transparent, and secure management of their supply chains. Does your procurement process develop reliable and effective supply sources? Web-based procurement applications can be configured to meet the unique needs of buyers and sellers and be scaled to grow as the organizations grow. Strategic purchasing includes coordinating purchase needs with user departments. E-procurement also helps ensure compliance with existing and established contracts. Is your organization ready for e-procurement? Does your procurement process develop and maintain healthy relations with active suppliers and the supplier community? E-procurement software must be object-based to support the addition of custom or third-party applications, as well as easy integration with your current back-office systems, as the needs of your marketplace change.
Strategic purchasing includes identifying potential suppliers, conducting market studies for material purchases, analyzing proposals, selecting suppliers, issuing purchase orders, meeting with sales representatives, negotiating and administering contracts, resolving purchasing-related problems, and finally maintaining purchasing records. Automated procurement processes can yield significant time savings at all levels across an enterprise, increasing opportunities for employees to focus on more strategically important tasks and functions. How will your current procurement processes need to change to maximize e-procurement? Does your procurement process achieve maximum integration with other departments, while achieving and maintaining effective working relationships with them? Factors driving e-procurement growth include the number of buyers and suppliers participating, increased accessibility to authorized users throughout an organization, improvements in e-commerce software, and organizational growth.
According to a leading e-procurement systems vendor, 80% of indirect goods and services are purchased from vendors classified as “other”. How will e-procurement integrate into that strategy? Does your procurement process take advantage of standardization and simplification? This translates into increased transaction volume that can easily overwhelm the capacity of an e-procurement system. This results from the frustrations and time delays inherent in processing paper-based purchases. If you don’t have a strategy in place, how can you build one that will support e-procurement? Does your procurement process keep up with market trends? If your supply chain needs some strategic attention considering e-procurement can help you lower costs, strengthen your supplier base, reduce the procurement lifecycle and improve your overall control of the process. Make the technology work for you