The introduction of E-Procurement.

The introduction of E-Procurement:

Price and availability are not the only factors to be considered in a purchasing decision, especially now that a strong supply chain has become an unmissable element for every company in today’s business climate (Namulo, 2017). The dynamic of business around the world is changing at a rapid pace due to fast-growing technological advancements. The ease of accessibility of this technology causes many organizations to shift towards E-Procurement as an effective and innovative Supply Chain support system to help companies reach goals including operational efficiencies, sustainability, and profitability.

According to (Namulo, 2017), “E-Procurement is the acquisition of goods, services or works from an external source. In procurement, it is necessary to ensure that the goods, services, or works are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality, quantity time, and location”.

The use of E-Procurement has recently increased as technologies are positively affecting different sectors around the world. E-procurement, which is known as ‘electronic procurement’ or ‘supplier exchange’, is changing the way companies are sourcing their goods and services. Over the last ten years, institutions have been using more electronic tools to manage their procurement activities. Organizations in both public and private sectors are adopting systems such as the Electronic Data Interchange tool (EDI), Enterprise Resource Planning (ERP), and of course the internet to benefit them when sourcing their goods (Adebayo, Dec 2015).

Advantages/disadvantages:

E-procurement is a tool that yields benefits in all kinds of ways. It enables companies to decentralize operational processes and centralize strategic procurement processes which result in higher transparency and integrity, as well as reducing transaction cost and boost decision-making processes. Furthermore, e-procurement enables price negotiation and supplier evaluation. It also enables selection to be automated between an organization and its suppliers which prevents time consumption. Instead of exchanging contracts or sending out a tender document, the entire operation is computerized, and therefore it helps reduce human errors, increase operational speed and allow staff to focus on other tasks (digital, n.d.).

Moreover, e-procurement enables companies to have a good workflow that facilitates end-users self-services. The inflows/outflows of goods through the supply chain improves as the tracing and tracking of those goods are automated which reduces emergency shipments. Institutions can visualize their purchasing behaviors to control purchasing management and save costs by identifying leverage buying power (digital, n.d.). Finally, being connected to external supply chains and enterprise resource planning (ERP) enables companies to get a better overview of supplier transactions and information by sharing real-time data through ERP systems which improve communication (digital, n.d.).

It is important to note that there are also obstructing factors that prevent implementing e- procurement. Lack of a strong business relationship, financial support, and organizational priority can also from obstacles as developing countries are usually late adopters and do not invest money into early adopters’ trends. On the contrary, firms from countries with low uncertainty avoidance such as Germany or the UK are early adopters of e-procurement, while countries that are less reluctant to change such as Spain or France have lower adoptions rate (Namulo, 2017).

Concept of implementing E-procurement:

Electronic procurement innovations (EPIs) are being utilized by many businesses to improve their supply chain sector. (EPIs) support the different parts of the core procurement process of businesses such as supplier selection, order placement, order fulfillment, payment, and settlement.

Many organizations are using the scheme below to help implement e-procurement into their supply chain (Namulo, 2017). Successful implementation of e-procurement depends on strong good management to achieve the firm’s performance goals. It is important to have sufficient awareness about what adopting e-procurement means on a long-term and short-term basis. E- procurement has become a powerful tool resulting in a competitive advantage for many businesses. It is integrated into many firms’ overall strategies as the role of IT has evolved from productivity to a strategic tool (KANDA, 2017).

(Namulo, 2017).

Five forms of e-procurement:

E-procurement is categorized into five main applications which consist of E-ordering, E-sourcing, E-tendering, E-auctioning, and E-informing.

E-ordering: The ordering process is one of the major challenges for suppliers and buyers. Based on (Zaman, 2019), E-ordering captures electronic data which includes orders, requests, and information received by the customer. E-ordering benefits both suppliers and buyers in different ways such as speed, security, standardization, and traceability. From the supplier’s side, E-ordering can reduce errors and eliminate papers as invoices are automatically generated from the order information through the internet (Edicom, 2020).

E-sourcing: Described as the action of selecting and identifying the suppliers based on specific requirements. This approach allows the firms to select their preferable suppliers taking into account their competitive aspects.

E-tendering: is the procedure when the suppliers receive the invoices and the purchase requests. This process allows both suppliers and buyers to realize their online transactions. Moreover, the procedure covers the tender requirements which will be exchanged electronically (Zaman, 2019).

E-auctioning: Online reverse Auctions facilitate the process of a buyer investigation ability to select the right suppliers to buy products or services. Instead of negotiating with several suppliers before selecting one, online reverse auction enables temporal and geographical convenience as well as reducing the cost of contact, providing feedback and privacy (Namulo, 2017). In other words, the buyers give a contract to the suppliers who have ‘won’ the online process of bidding where suppliers compete in real-time (Zaman, 2019).

E-informing: This method includes assembling and gathering information regarding purchases of buyers and suppliers by using web-based technology (Zaman, 2019).

The supply chain performance is dependent on each of the stated independent e-procurement steps. These steps aim to improve the overall supply chain performance. (Zaman, 2019).

Would you like to know more about adopting E-Procurement within your Supply Chain? Contact one of ModusLink’s Industry experts by clicking here.

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