Procurement consists of both tactical and strategic functions. E-procurement has streamlined the complexity of both functions, but its alignment with strategic sourcing is proving invaluable.
The concept of e-procurement is really quite straightforward; it is essentially the B2B purchasing and acquisition of materials through the internet. Like its consumer stepsister, e-commerce, e-procurement enables buyers and sellers to communicate and connect with one another anywhere in the world with no hassles.
But as procurement itself has taken on a more strategic position within the organization, e-procurement has proven to do much more than simply enable online transactions. It has provided visibility and data into transactions, both current and historical, which procurement can leverage to create stronger negotiating power and develop a long-term strategy geared towards growth.
What e-procurement contributes to strategic sourcing
Essentially, strategic sourcing has become an integral part of supply chain management, formalizing, tracking, and evaluating purchasing activities and processes. These include both the tactical (the actual purchase of material) and the strategic (process development). There are a number of steps involved in the strategic side of this equation, including:
- assessing demand
- collecting data
- planning strategy and defining the project
- creating RFPs
- instituting a supplier collection process
- maintaining control
This last step measures how sustainable this entire process is through metrics, KPIs, and ongoing evaluation.
E-procurement has made the goals of strategic sourcing more attainable as it provides the two most important factors necessary for growth in today’s competitive global market: data and visibility. This has led companies to look towards digitizing their back-end processes not just for the cost savings that automatically come with automation, but also for the predictive insights that allow for greater flexibility to scale to demand.
Implementation of an e-procurement system requires every transaction, regardless of the origin, to go through an online system which will include a list of approved suppliers, along with prices and terms. Information entered into the system will be visible to all stakeholders in the organization. This knowledge, and the control it brings with it ultimately band together to give procurement the ability to play that ever more important strategic role
3 top e-procurement features that make supply chain success sustainable
There is simply no way that procurement could fulfill its expanded role effectively in today’s environment without the technology that collects, digitizes, and tracks all data; provides real-time visibility into every transaction; and, enables enhanced reporting and analysis. The three features that have made e-procurement such a necessity are:
- Data collection – In the past, businesses had to often depend on suppliers to provide data that may or may not have been slanted to the supplier’s advantage. However, an e-procurement system lets you decide what data you need and collect it holistically, which gives a view into the details, including things like line-item, “ship to” location, dates of purchase, freight charges and more. This holistic view will enable the deep dive necessary to negotiate better and buy smarter. This data will also come into play when it becomes necessary to seek out new suppliers.
- Supplier Relationship Management – Nothing contributes more to a strong working relationship than transparency and trust. E-procurement keeps the communication lines open between both suppliers and customers ensuring that prices and terms are met and invoices are paid accurately and in a timely manner. Since all stakeholders have real-time visibility, suppliers know what their invoice status is, giving them the confidence necessary to better manage their own working capital. Plus, a reduction in disputes means that both sides (buyer and seller) are focused less on phone calls and emails to settle exceptions and more on helping realize growth.
- Maintenance of procurement practices and policies – As I noted above, one of the most important steps that need to be taken to make strategic sourcing effective is the development of sustainable processes. The data collected and the analysis and reports that are run utilizing that data allow procurement to accurately measure the effectiveness of those policies. Once established as effective, e-procurement helps to foster and maintain those policies.
See how implementing an e-procurement system can help you boost savings, innovation, and growth.