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E-Procurement

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What is E-Procurement?

E-procurement or electronic procurement is using technology to automate the end-to-end procurement process for a company.

Some people refer to e-tendering or e-sourcing as e-procurement.

That is not correct.

E-procurement is the complete procurement process automation using the purchasing process. That includes not just selecting the appropriate vendor but also automation of the purchasing process following the vendor selection.

Steps in the E-Procurement process?

This section briefly describes the key steps in the e-procurement process. The e-procurement system automates the following steps. When companies don’t have E-procurement technology, the company manages these steps manually.

Purchase Request

The purchase request process starts when a stakeholder identifies the need for purchasing a product or service.

For example, the sales team manually manages leads and needs new software to track and manage the leads digitally.

Or it could be as simple as purchasing office supplies for your company.

If the requester already knows the preferred vendor, they just select that and request the purchase. The procurement team issues a quote request if the vendor is unknown in case of a new product or service.

Quote process

The procurement team issues a request for the quote when you don’t have a preferred vendor for purchase.

Your purchasing policy should clearly define when a Request for Quote(RFQ) is required. Some companies require that you run an RFP(Request for proposal) process, and some require acquiring at least 3- bids for comparison.

The e-procurement system greatly helps with automating manual tasks but also provides transparency in the vendor selection process.

Purchase approval

The purchase approval process is the formal authorization of the purchase by the appropriate person in the company.

Depending upon the requester approval limit, one might need additional approvals.

Again, this should be part of the company’s purchasing policy.

The E-procurement technology automates the purchase approval process so that employees don’t have to chase managers for approval.

The E-procurement system automatically assigns the approvers and then sends a notification to the appropriate party.

Issue purchase order to the vendor

The last step in the E-procurement process is to issue the purchase order to the vendor. The buyer converts an approved purchase request to a purchase order and issues it to the vendor.

In the absence of an E-procurement system, this process is managed manually by the buyer. That involves using templates to create, print, and email the PO to the vendor.

With e-procurement, you can use the purchase order system to automate the entire purchase order process.

Advantages of the E-Procurement

The key advantages of an E-procurement system are as follows:

Reduced cycle time

With an E-procurement system, a company can greatly reduce the purchasing cycle time.
Many companies see anywhere from 40-50% reduction in cycle time within 30 days of implementing an E-procurement system.

You are saving time, including the time managers spend on approvals and requesting additional information from the requesters. A purchase order costs anywhere from $60 to $550. Reducing the cycle time reduces the purchase order cost.

Increase cost control

With the E-procurement system, the person with the approval authority always reviews purchase requests.

That allows the approvers to reject an expense if they deem it unnecessary.

The ability to pro-actively authorize spending gives you better cost control.

Better cash flow planning

An E-procurement system lets you see all your purchases in one place.

Rather than tracking multiple spreadsheets for orders, the finance team can see all committed Spend in one place and plan the cash flow based on that.

No more surprise invoices!