Introduction:

a. Definition: “The electronic integration and management of all procurement activities including purchasing, request, authorization, ordering, delivery and payment between a purchaser and a supplier.”

b. E-procurement should be directed at improving performance for each of the five rights of purchasing which are sourcing items:

• At the right price
• Delivered at the right time
• Are of the right quality
• Of the right quantity
• From the right source

Benefits:

i. Reducing costs

• Costs can be reduced by leveraging volume, having structured supplier relationships and by using system improvements to reduce external spend while improving quality and supplier performance.
• Product standardization and consolidation of buys reduces prices.
• E-procurement eliminates paperwork, rework and errors.

ii. Visibility of spend

• Centralized tracking of transactions enables full reporting on requisitions, items purchased, orders processes and payments made.
• E-procurement advantages extend to ensuring compliance with existing and established contracts.

iii. Transactional Benefits

E-procurement enables the purchase-to pay process online. A typical example uses a Web-based transacting tool whereby items are selected predominantly from pre-sourced catalogs and submitted for electronic approval. This tool is then linked to the back end ERP system for entry, payment of invoices, and collation of management information. Electronic processing (including the automation of p-card purchasing) leads to great time savings and efficiency due to:

• Global, automated processes incorporating best practice and eliminating unnecessary activities
• E-enabled relationship with suppliers, which speeds procurement cycle times and facilitates supplier performance improvements; and
• Greater data accuracy, which minimizes ordering inaccuracies and provides the essential foundation for better management through measurement and analysis

iv. Compliance Benefits

In many cases within an organization, compliance and maverick spending is a significant issue – not because employees deliberately purchase outside of preferred arrangements, but rather through lack of awareness. E-procurement addresses this through tools such as catalogs and standard order processing and approval processes. Compliance will be achieved due to:

• A simple and quick requisition-to-payment process including a user-friendly interface and pre-sourced catalogs tailored to the requirements of the individual user.
• A simple and quick strategic sourcing process with standard procurement processes and tools, as well as easily accessible information.

v. Management Information Benefits

• The fact that key information (cost centre, commodity codes,etc.) is hard coded against the user dramatically reduces coding errors and provides highly detailed and easily accessible data.
• This is essential to maximize the financial benefits of strategic sourcing.
• A successful e-procurement implementation will provide high quality, detailed management information and will negate the need for data warehousing or resource-heavy data mining.