The What, Why and How of E-procurement

  • Last Updated: November 29, 2022
  • 4 Min Read

Over the years, procurement has gone from being a basic function in a supportive role to a more digitized, strategic process that boasts a proven track record of bolstering businesses.

History tells us that written records of transactions pertaining to the acquisitions of goods and services have been well documented. In fact, the earliest traces of procurement started with the Egyptians in 3,000 BC where they used scribes to manage the supply of materials used to build pyramids. Impressive, right? This is just an example that shows the importance of implementing a procurement structure that can help large organizations streamline their supply chain operations.

Procurement ensures that all items and services are properly acquired so businesses can carry out their payment processes efficiently. Improving procurement processes is paramount as it can strategize governance, minimize costs, improve quality, and mitigate supplier risk, all while embracing innovation.

What is procurement?

Procurement is a series of steps involved in identifying and acquiring goods and services for any business, from point A to B. It consists of every activity involved in obtaining the goods and services an organization needs to support its everyday activities—from sourcing, negotiating, purchasing and receiving, to inspecting and tracking records—basically the whole "shebang," from start to finish!

The procure-to-pay process essentially involves four key stages:

  • Selecting goods and services

  • Enforcing compliance and order

  • Receiving and reconciliation

  • Invoicing and payment

The 3 types of procurement

  • Direct procurement involves expenditure towards goods and services that drive profit and performance of any business—for example, subcontracted labor and purchase of raw materials.

  • Indirect procurement is the expense that covers the resources required to support the ongoing existence of a business. Examples of indirect procurement include marketing expenditure and purchase of office hardware.

  • Services procurement is the strategic outsourcing of labor to an individual or organization for a specific purpose—for example, consulting firms and maintenance companies.

Why e-procurement?

In spite of modern day technological advancements, a lot of businesses are still using traditional methods—from paper-heavy processes, excel sheets, and phone calls between suppliers and customers, amongst other manual procedures. Apart from being time-consuming, cumbersome, and sometimes repetitive, traditional procurement could also potentially result in lack of quality control; incorrect data; slower delivery times; and other associated market risks. This lack of visibility could hinder the growth of any business.

Deploying the traditional method doesn’t make sense to large organizations in a constantly changing and fast paced digital business environment. So, what is the answer to this challenge?

Enter e-procurement solutions! Electronic procurement, or e-procurement, in a nutshell, is a B2B process that automates and streamlines the procurement and purchasing stages through a web interface or a networked system that connects suppliers and customers. It is usually deployed in a closed system, which means only registered users are granted access.

Whereas a business using the manual approach would require taxing activities such as rummaging through paper catalogs and physical forms, e-procurement digitizes the entire workflow, resulting in efficient tasking and accurate results.

5 benefits of e-procurement

Shifting procurement operations to a more unified, digital platform opens up a world of opportunities to grow your business. Here are a few benefits e-procurement solutions can offer:

  1. Automation - E-procurement solutions come with built-in monitoring tools and automation systems that help automate laborious manual tasks.

  2. Shorter purchasing cycles - Through e-procurement, supply chain processes become more agile since buyers have electronic access to products, services, and pricing, with transaction statuses in real time. Shorter purchasing cycles are a result of reduced delivery time, which in turn, increases flexibility.

  3. Controlled maverick spend - Maverick spend, or rogue spend, is defined as the external vendor spend that doesn’t follow a company’s pre-established procurement policies. E-procurement solutions help reduce maverick spending with a centralized system to manage all P2P purchases, eliminating unnecessary expenditure.

  4. Enhanced inventory management - E-procurement solutions provide increased visibility, which is a key factor in monitoring inventory, depending on demand variability. Better insight leads to better strategy, which enables businesses to come up with faster and efficient processes.

  5. Transparency - All information is centralized, and depending on the situation, it can be made available to management, partners, shareholders, or the general public.

Procurement in digital transformation

New and emerging digital technologies like IoT, AI, cloud, and cognitive computing are playing a pivotal role in shaping the digital transformation of procurement. E-procurement solutions help businesses integrate different processes and collaborate across functions to create business value.

With the right tools, you can free your procurement teams from mundane tasks and let them focus on core activities such as contract negotiations. Data is centralized in a unified dashboard, enabling easy access to stakeholders and management, thus leading to better decision-making.

If you're looking for an end-to-end e-procurement solution that can streamline and automate all your P2P processes with full visibility, look no further. Click the link below to access Zoho Creator's fully customizable e-procurement software.

Explore the E-Procurment Solution

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  • Stephen

    Stephen is a product marketer at Zoho Creator. An avid writer, he plies his trade evangelizing low-code during the day and pens songs at night. Sneakerhead and sushi enthusiast too.

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