Procurement 10120 Benefits of E-Procurement Systems for Decision Makers in 2019
You’ve probably been doing some research about the benefits of different e-procurement software options available on the market – but perhaps haven’t been entirely convinced by the advantages these systems claim to offer.
What’s really in it for you, and are the benefits e-procurement systems actually worth the cost of implementation?
There are a lot of different things to consider before buying into an e-procurement system, including disadvantages and challenges that might be associated with making the switch for your specific company or industry.
To help you weigh your options, here’s a list of the most common benefits and advantages that companies expect to attain by implementing an e-procurement system.
Before we get into all the good stuff that e-procurement services have to offer, it makes sense to understand what people are referring to when they talk about “e-procurement”.
What is E-Procurement?
An overview of what e-procurement actually “is” can be found in this article – but here’s a synopsis:
Traditionally, the procurement process (the steps companies follow to buy the stuff they need) has been handled through physical paperwork and forms being passed around, by hand, through different departments. But just like everything else, it’s no surprise that technology is changing the way modern procurement processes work.
“E-Procurement is the B2B (business-to-business) purchase or sale of supplies, work, and services through the internet and other information networking systems like EDI (electronic data interchange) and ERP (enterprise resource planning) platforms.” –Wikipedia
Let’s run through that info once more, in English this time.
Simply put, e-procurement refers to the software tools that companies (and purchasing professionals working in those companies) use to manage what money is being spent on.
E-procurement software offers a wide range of advantages that directly impact the bottom-line earnings of a company. In this article, we’re going to be exploring the top 20 benefits that e-procurement systems are providing to purchasing managers in companies large and small around the world.
To start things off, there are several beneficial traits associated with e-procurement systems that make them super-easy to dive into:
When you consider that most e-procurement solutions are subscription based, being able to maintain access to your primary purchasing tools without breaking the bank is definitely a plus. In most cases, there aren’t many pesky implementation fees to worry about either.
The other nice thing about the affordability of e-procurement is that it can be used alongside existing setups like ERP (Enterprise Resource Planning) systems, without breaking the bank.
In fact, it’s not uncommon to see mid to large sized companies using a standalone SaaS (software as a service) procurement solution INSTEAD of the procurement tools that are included in their ERP system!
More comparisons between dedicated purchasing tools vs ERP systems can be found in this article.
The key takeaway? E-procurement solutions provide more detailed, dedicated features for managing the purchasing process than ERP systems, for a fraction of the price – to the joy of purchasing managers everywhere.
One of the last things a company wants to think about is spending weeks configuring a new system for their employees to use. Fortunately, that’s not an issue that’s commonly associated with e-procurement platforms.
While ERP systems can take months to setup (even with the help of expensive consultants), procurement systems are usually far more intuitive when it comes to setting things up.
Companies usually have a few specific workflows that they need to establish when it comes to purchasing, and e-procurement systems offer a selection of different modules for carrying out those workflows efficiently.
Things like purchase-to-pay, strategic sourcing, and contract management are all offered through e-procurement, and systems can often be configured to create a workflow that centralizes the management of these different needs.
Still curious about whether an e-procurement system can cover your company’s needs? Try seeing if those needs align with the most commonly used solutions throughout purchasing departments – chances are, your use-case will be on the list.
The other great thing about e-procurement is that it’s easy to contact support teams. Free demos of the software, live chat support, and tutorial resources are typically offered to help teams through the onboarding and implementation process.
No one wants to be stuck using tools they don’t like, especially when there are better options available. One of the great things about e-procurement is that it’s easy to switch between providers if you find a system that’s better than the one you’re currently using.
Another awesome thing about procurement software is that you can usually export your transaction records and purchasing data easily to spreadsheet format. If you happen to find a more appealing system in the future, moving your data is a simple matter of importing it from a saved spreadsheet.
It’s also not a bad idea to consider multi-sourcing your procurement systems depending on the needs of your company. Because of the affordable nature of e-procurement, buying into several different systems that excel at providing certain tools is a perfectly viable approach for meeting the varied needs of your procurement team.
the benefits of e-procurement include tons of tasty advantages for your processes, so get ready to dig into some serious value:
If you’ve been stuck using an outdated, clunky procurement process for a long time, implementing an e-procurement solution can be a great way to kick-start a movement to update that process.
BEFORE you get started though, it’s important to understand that e-procurement software isn’t going to be a “magic wand quick-fix” for a broken purchasing process. It can’t be stressed enough how vital it is to meet with stakeholders first to address the issues the company is facing, establish objectives for improving the process, and finally explain how e-procurement is going to help meet those objectives.
Why is doing this first important? Because buying procurement software isn’t going to mean your team starts using it right away. Improving internal compliance with policies and expectations before rolling out your e-procurement solution is going to ensure you get the most benefit out of it.
You can find some great tips for rolling out new policies provided by a procurement pro here.
Attaining internal compliance and restructuring the way your company handles purchasing is probably the most involved part of getting your team onboard with e-procurement, but once you get over these “growing pains”, the advantages you’ll gain are definitely worth the effort.
Business is moving online on all fronts. In the PayStream Advisors 2018 Payables Insight Report, companies reported that 34% of invoices are being received through online mediums. In previous reports by PayStream, it’s also been mentioned that over 70% of purchase orders are sent via email as well.
As suppliers continue to adopt more digital tools into their order receiving process, they’re also going to find it much more convenient to respond to orders that are sent through online tools.
By handling your purchasing process through e-procurement, you’re complying with the way most businesses are starting to operate, and can expect to have a better compliance rate from those suppliers.
What’s not to love about using neat, presentable, standardized purchase order and RFQ templates to do business? Not only are you going to look more professional, but you’re going to be making your suppliers happy with an easy way to process your order. Win-win!
No one likes having to keep track of a whirlwind of physical documents. Having to staple copies of requisitions, purchase orders, invoices, and delivery notes together and then file them away is a thing of the past when using an e-procurement system.
Different departments can also keep their sanity when they need to send documentation to one another. Just think about how much time is going to be saved by not passing purchase requisitions and received invoices around the office hand-to-hand.
Another great advantage gained (apart from lighter filing cabinets) is being able to quickly generate spend reports from stored purchasing data. What would normally take hours of digging through file folders and compiling data takes seconds with an e-procurement solution.
Plus, with all the reduced paper being used…
Your team can feel great about using an eco-friendly purchasing process!
Not every purchase made on the company budget justifies the time it takes to fill out an official purchase order form. In fact, the cost of raising a purchase order form in some companies is estimated to be as high as $120 – certainly not worth the price of an occasional cup of coffee!
Fun Fact – The estimated price of raising a purchase order can be reduced to as low as $2 when using e-procurement. Check out the full study conducted by Research Gate.
Modern procurement systems have accounted for this, and usually offer a way to document minor expense tracking with associated GL (general ledger) accounts on the system. Not only is this convenient for people who make minor, authorized, company-covered transactions on the norm, but accounts payable won’t need to worry about hunting down company coffee enthusiasts anymore to confirm their pocket-change expenditures.
Expense tracking offers a great way to keep company snackers and event-goers happy, without the headache (and cost) of raising an overly detailed purchase order, just to record the cost of a candy bar or taxi fare.
When was the last time you evaluated your list of supplier? When does our financial year end again? What do you mean that contract expired three and a half months ago?
E-procurement systems offer a nice way to manage all of the different due dates associated with the procurement process. These timeframes are also synchronized and shared with all of the users on the system, which improves overall coordination.
Teams in charge of receiving deliveries can also benefit from having a way to track incoming orders. When a purchase order is placed, a due date for delivery can be established and measured against the actual time frame it took to receive that order.
How many times do question arise during the purchasing process? Who should this requisition go to for approval… what’s our current stock level at for this item… has the supplier responded to this purchase order yet… the list goes on.
During sourcing events, internal and external collaboration can also get very involved. What’s the total cost of ownership… have we run a technical evaluation on the offers yet… what’s the current best offer… again, lots of communication taking place that can be complicated to manage through emails and phone calls alone.
E-procurement improves collaboration by centralizing all of the communications that take place in the purchasing process. What’s even better is that this communication can be saved along with other details of a completed transaction, meaning that audit reports of what happened during a sourcing event is easy to share with stakeholders.
Other actions that were taken by team members such as notes made, attached documents, and granted approvals are also saved on every step of documented processes. No more office interrogations to find out who requisitioned five pepperoni pizzas (or who approved the order).
How many times have you wondered if your company is keeping up with the best practices in procurement? Alright, even if the answer is “never, lol” – you’re going to like what you read next.
Almost every standard operating procedure (SOP for the abbreviation-savvy) can be setup and maintained through an e-procurement platform. Some of these procedures include:
- Creating purchase requisition forms before purchase orders (what’s the difference?).
- Ensuring orders are placed from established contracts to avoid off-contract spend.
- Automatically routing approvals to the right individuals before orders are sent.
- Verifying invoices and delivery details to confirm a 3-way match on each purchase.
- Evaluating supplier performance based on item quality, efficiency, and timing.
If your company isn’t already following these practices, e-procurement makes it easy to embed them into your purchasing process – without having to micro-manage your team to ensure that these practices are being followed.
When companies start dealing with multiple branches and several different departments within those branches, managing purchasing can get really complicated, really fast. When there’s no system in place to structure a complicated process, poor practices and misaligned expectations begin to damage the company’s bottom line – pretty undesirable, right?
The benefits of e-procurement include being able to design and structure even the most complicated processes – from single office startups to international corporations that make purchases across borders in different currencies. Being able to store automated tax information and payment terms under each supplier profile is also convenient.
For companies that cycle through new staff frequently, a flexible approach to assigning user roles is also a valuable asset. Configurable systems allow designated purchasing managers to configure the permissions for their team, meaning that the trusted individuals in your company have access to everything they need to keep procurement running smoothly.
It’s rare to find an e-procurement system these days that isn’t integrated with at least a handful of accounting platforms, as streamlining accounts payable with purchasing departments has become a highly desirable optimization in many companies.
Not surprisingly, many companies make a decision about which e-procurement system to use based on what integrations are offered. While there are certainly other features and criteria to consider, finding an e-procurement solution that gets a thumbs up from your accounting team is going to make things a lot easier when it comes time to implement.
It’s also important not to overlook the other main benefits of e-procurement by getting too focused on an accounting perspective. Many platforms offer custom integration work, so the possibility to expand on what each of your departments need will usually be an option as you move forward.
To drop down the old proverb – time is money. When your procurement process hits maximum velocity, your team is going to spend less time executing that process and more time on being productive. Pretty simple, right?
So how exactly does e-procurement save time?
- Details, attachments, and requirements are maintained across all documents.
- Instant notifications are sent to decision makers like approvers.
- Supplier contact details stored in one place (no more searching for “contact us” pages).
- Frequently purchased items are catalogued and accessible by all relevant parties.
- Large orders and complex bills of quantities can be saved and recalled instantly.
- Delivery receiving and 3-way match invoicing can be verified using reliable information and auto-fill features.
The key takeaway here isn’t just that your team is going to be doing these things faster, but that they’re going to be keeping your structured procurement process intact while doing it.
This ties in with saving time. Whether someone is on-site for construction work or stuck in a drawn-out board meeting, it only takes a few seconds to respond to “action-needed” alerts on a phone or tablet.
When there are critical agreements and big deals on the line, a prompt response while away from the office desk can help keep you maintain an agile approach to negotiation.
For the would-be workaholics out there, a mobile e-procurement solution also affords you a way to sneak a little productivity in during netflix and chill too (especially useful for when that new release just isn’t worth your full attention).
Now this isn’t to say that e-procurement is going to give you a coupon for 15% off everything you buy… at least not directly.
What’s really going to be saving you that extra cash is efficient sourcing. An effective e-procurement platform should include tools that help your sourcing professionals rock at their job.
A few of the basic e-procurement features you should be gunning for here:
- Access to an approved list of suppliers
- Keeping an RFQ rally going with multiple points of contact
- Storing / sharing important documents with suppliers
- Technical evaluation functionality to get the opinion of experts on your team
- Lets teams make use of established contracts to secure better prices
Just because you’ve got someone handling your sourcing doesn’t mean you have to be left in the dark, either. Even a complicated, month long back-and-forth involving twenty different suppliers is going to be organized and presentable through e-procurement.
Johnny sourcing-pro isn’t going to keep putting strain on your desk with his 20lb file-folder anymore – so you can scratch a replacement desk off of your expenses list while you’re at it.
Another great way to cut costs is asking for supplier-loyalty discounts. Instead of just approaching a vendor with:
“Hey brother, can I grab a sweet discount, your company is bodacious.”
Add some validity by pulling stats from your transaction history:
“Hey fam, we’ve ordered $20,000 worth of goods and services from your biz over the past 4 months. We’ve noticed some tag-popping prices from competitors, but your company is completely rad, so we were hoping you could hook us up with a lit deal.”
You may want to drop your totally legit street-speak in favor of a more traditional business-professional approach, but that’s a decision for you to make on your own.
Hold up buddy, isn’t that the same thing as reducing costs? Is this guy trying to pull a fast one with a duplicate point here? Not quite.
Ever heard the term “maverick spending”?
Without a process in place, you run the risk of your departments buying whatever they want whenever they want to. The last thing you need is a bunch of rabble rousing banditos pilfering your company’s bottom line!
Maverick spending can start running rampant real quick when there’s no official procurement process in place. So, when we talk about “reducing spending”, we’re not actually reducing the price of the things we buy through efficient sourcing techniques that cut costs – we’re flat out avoiding having to pay for things that we don’t need or want in the first place.
Spend visibility is a term that gets passed around the procurement table a lot. It refers to the ability to see exactly where the fat wads of cash from your company are going. It also makes sure you actually have those cash wads on hand to avoid going over your budget.
Audit trails have been mentioned as a useful feature to have for reducing confusion, but they’re just as important for planning out your spending roadmaps and creating beneficial budgets.
Don’t let your company get tricked into being backstabbed by a poorly planned bad budget.
Having instant access to the 5W’s (who approved, what was purchased, where was it ordered from, when did the transaction take place, and why was it made) offers an excellent way to gauge the effectiveness of purchases. It also lets adjust your budgeting strategy to maintain relevant cost effective spending habits in your company.
No more garden gnomes finding their way into the supply closet. You can start being properly concerned if any show up while using e-procurement… because that means they’re extra crafty.
No one enjoys surveying the land after the dust settles from company spending, but it’s a necessary part of finalizing and fine-tuning the purchasing process at the end of the day. When the time comes to forward the damage report to stakeholders, at least you’ll know all of the information you’re pulling is completely accurate.
Plus, you’ll be able to take care of the process in seconds.
- How much has been spent on each supplier in the past 3 months?
- Where did the majority of the warehouse’s funding go last month?
- How much is remaining on the company budget this quarter?
Instead of rifling through a filing cabinet and spending hours crunching numbers to answer these questions, an e-procurement system lets you pick and choose exactly what details to include on a report – then bang. Ready to review by you, your boss, and your boss’s boss.
Once you start using e-procurement to get your company into the fast lane of purchasing, you might notice that your suppliers start lagging behind the pace of your own company. This is where SRM (supplier relationship management) starts becoming your best friend for maintaining an optimised procurement machine.
Supplier evaluations and scorecards are the perfect tools for measuring the average speed, quality, and other custom metrics commonly associated with vendor performance.
If a supplier is constantly causing your projects to fall behind, you can acknowledge that trend and make adjustments to your list accordingly. A stitch in time may save nine, but a delivery on time keeps your schedule looking fine – infinitely more valuable for developing an agile business strategy (but perhaps equally valuable for a tailoring business).
It has to be mentioned – procurement is definitely in the running for being considered one of the most boring professions out there. Right up there with its brother accounting. The last thing procurement needs is to hang on to the boring factor with tedious manual processes.
One of the most fundamental benefits of e-procurement systems is being help to alleviate some of that boredom. Automating aspects of procurement that traditionally required manual actions offers an advantageous and much needed breath of fresh air to the profession. It’ll also give you more free time – time you can use to be more productive…
… or do a little dance to celebrate your company’s new and improved procurement process.
Do you have a benefit we missed, or just feel like sharing your plans for the weekend?
Let us know in the comments – we’d love to hear from you!
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