Electronic procurement, or also known as e-Procurement, is a process that automates procurement and supply chain processes using technology and internet-based applications.
E-Procurement advances enterprise resource planning (ERP) systems and allows you to automate all your internal business processes.
E-Procurement solutions enable procurement professionals in the world to communicate information easily and efficiently.
It streamlines the procurement process on a global scale while reducing the time and costs involved without compromising on quality and standards.
The world is on the brink of digital transformation, especially the corporate world.
You hear it everywhere that if you fail to adopt this transformation, your business may lag behind the race. There is no way or excuse to avoid digitalization. And, that is, in fact, a good thing. Just take small steps to help create a strong basis for the digital age.
The purchase-to-pay process makes a good start for that sound basis. Today, it is the age of collaborative business practices, stiff competition, and better analytics.
In this scenario, an ideal e-procurement solution helps companies focus on each area of their business processes. That’s why agility and productivity of your supplier has a direct impact on your business performance.
Put electronic procurement on the top of your list of priorities for digital transformation of your business.
Start giving more attention to the supplier relationships, ordering, supply chain digitization, transparency on spending, and automation of your procurement process.
Here are five reasons why it makes sense to digitize your procurement process.
Quick and High Return on Investment
A study conducted by ProcureCon purported that around 36% of the managers handling procurement within an organization believe that a quick return on investment is important for making a decision related to electronic purchasing.
Electronic procurement really helps drive faster ROI as compared to traditional approaches such as expanding manufacturing equipment and using modernizing machinery.
This automation leads to a faster amortization of expenditures at an early stage and more transparency in the entire process.
However, you need to bear one thing in mind to expect quick ROI with e-procurement systems. It is the key ingredient of your process to make the most out of this operational investment – suppliers’ participation.
Onboarding suppliers to get their catalog data into your new system may seem challenging for e-procurement managers. Even if they succeed at it, maintaining the accuracy may be another set of challenges.
This is where PunchOut catalogs enter!
PunchOut catalogs not only provide an excellent buying experience, but they also handle the responsibility of data management on behalf of procurement process managers.
Technological advancement has made it extremely easy for suppliers to quickly plug in and connect to your e-procurement system. All you need is to select a right e-procurement system partner to enable and onboard suppliers for you.
Achieve Greater Visibility
Among the top reasons why people are embracing e-procurement system is the level of visibility it offers.
Your ERP system mainly handles the purchase and processed orders, payments and invoices. All of these activities are part of the procurement-to-pay (P2P) cycle. ERP systems also use SAP in some way at some point. Most of the information related to order and purchase should be available as a part of tracking or confirmation effort.
However, in many situations, systems don’t interact easily, and data access becomes difficult.
So, what to do when you need to access, collect and organize all order-purchase-payment data in a report for providing monthly status or future forecasting? How will you manipulate data to generate reports by criteria?
Visibility and access to data masses without automation is critical. An optimal e-procurement system allows the quick report generation; thanks to an easy-to-use and intuitive dashboard in these systems.
E-procurement systems offer greater visibility into day-to-day transactions, which make it easy for users to find and connect with the suppliers they need.
All those businesses, who want better integration, improved communication and increased visibility, should get an e-procurement solution. It will put your business in a win-win situation while maintaining the quality you deliver.
Reduced Maverick Purchasing
‘Maverick’ may be enough term to win your suppliers’ attention to connecting with your e-procurement system. The term ‘Maverick Buying’ describes when a person makes purchases independently without complying with the standard purchase process.
Maverick purchasing leads to costs, which are significantly higher, as the purchase is done beyond existing contracts, payment terms and price agreements.
Maverick buying takes place because of slow or difficult purchasing process or missing products/services. Reports have revealed that it increases purchase costs by up to 15 percent, which is certainly a significant increase for potential legal implications.
Finding ways to control maverick buying may save several million dollars. Remember that you can’t attribute all non-PO purchases invoices to maverick buying.
Using special procurement channels (with their average share of 40%), you can procure a lot of categories.
When your company succeeds at controlling purchases, you will have a quicker noticeable effect in terms of increased added value and reduced costs.
But, the question is how to identify maverick buying in your company? One way is to check the cash-out rate, which represents the share of procurement expenses that the purchasing department controls in the total credit-side financial volume.
The remaining part is formed by purchases via specific channels and uncontrolled purchasing that includes free text orders. Lower this share within e-procurement for a more positive attitude of your CEO towards your electronic purchasing initiative.
Streamlined Processes
E-procurement helps with electronic creation and validation of purchase orders and automatic exchange of documents with suppliers. All these processes follow workflow-controlled approval procedures.
In simple terms, e-procurement puts an end to costly manual processes by providing a faster and more transparent system for purchasing that follows the set standard process.
With an e-procurement system, you can decrease process time, leverage rebates and discount for better relationships with suppliers, and stay compliant with the process. It also eliminates the chances of making mistakes due to less manual data entry work. You can control misinterpreting responses of your suppliers by properly structuring their inputs, delays, and reworking. Agreed procurement workflow certainly minimizes errors.
Moreover, you can bundle your requirements and prevent redundancies that result in an efficient and straightforward process for you and your vendors.
Every single procurement process controlled by e-procurement system increases the added value with every order. It releases the workload from the purchasing department so that they can spend their time on tasks with higher added value, leading to higher productivity and purchasing.
According to the Association for Supply Chain Management, Procurement and Logistics, the introduction of e-procurement with a catalog system lower the overall costs of purchasing process by an average of 30%.
However, for these benefits, you need the willpower to embrace new technologies and procedures. Lacking willingness may put your business case or project proposal on a risk. Simply, if you want to use new technology without leaving the old structures, you’ll fail.
Enhanced Adherence To Compliance
Electronic procurement improves monitoring capabilities, and keeps you adherent to compliance rules.
As compared to the manual procurement process, automation provides a quicker and more transparent process. It allows you to keep track of your procurement costs in real time at your fingertips.
Besides this, technologically advanced procurement systems easily adapt to any purchasing guidelines set by your company.
It allows a standardized approval process and workflows to ensure the right authorization level for each transaction.
Policy compliance is enhanced as users can quickly find desired products and services from preferred suppliers and can’t create maverick purchases. You don’t need to worry about compliance at all.
Improved Standardization
Electronic catalogs allow suppliers to avail standardized offers to buyers. So, buyers can easily and quickly compare offers using e-catalogs.
But since assessing a product’s quality without samples is difficult, be careful while making these comparisons. Ask for samples and take time to assess to clear your doubts, if have any.
The best part is that most catalog websites work similarly. They’re very easy to set up and allow multiple business users to undertake their own procurement.
It keeps the business running and sourcing day-to-day business needs, which allow the procurement team to continue fostering great value-adding relationships.
Conclusion
Automating your procurement process is not only an option, but it’s also a necessity nowadays. To make your business competitive in your niche, you need a procurement strategy that is both transactional and strategic.
The over-riding advantage of an e-procurement system is it frees procurement professionals from low-value tasks and gives them enough time to focus on more strategic corporate activities.
You will realize the benefits of automating your procurement process at the initial stage itself. In addition to the benefits listed above, you will achieve primary objectives including reduced risk, eliminated waste and cost saving.
Get in touch! We can help with your eProcurement and Punchout needs