eProcurement

What are the traditional eProcurement methods? What are their pros and cons?

According to Claritum, a traditional procurement process is characterised by manual events, including many small, repetitive tasks (from approvals, writing RFxs contracts, negotiations and discussions of bids).

Typical phone calls between a buyer and a seller are time consuming and can take an average of six minutes per call for basic interactions

• Time consuming and expensive in resource terms
• Managing the approvals, invoices and bills on paper is both wasteful and costly and of course prone to errors and loss of paperwork
• Sufficient people in demand to manage  the processes, with business expansion resulting in a direct correlation to increased headcount

History of eProcurement

2001: Zeborg, later acquired by Emptoris, along with Verticalnet and Softface, later acquired by Ariba, adopted the first "automated spend analysis" application

2002:

- Aentropy, later acquired by Ketera, and Zycus appeared with slightly different offerings

-  Tigris and Silver Oak Solutions, specialist consulting outfits, used analytic tools along with consultants to address the all-manual approach used in the past with a slight change in content

 - D&B and Austin-Tetra started offering services for supplier intelligence

 -  Pure content providers such as Intigma, which was also later acquired by Emptoris, developed cutting-edge technology for classification and supplied sub-contracting services to major spend analysis providers

2004: Verticalnet acquired Tigris to gain its vendor and product classification expertise and consultants.

(Pandit & Marmanis 2018)

Presutti (2003) believes that an e-procurement system is an information technology-based procuring system that lies at the input end of the supply chain.

Required Internet technologies The technologies that are needed to enable staff of an organization to implement eProcurement are marketplaces, intranet and extranet (Boer, Hanrik & Heijboer 2001).

Boer, Harink, & Heijboer (2001) state that there are basically five main forms of e-procurement: web-based ERP

• e-sourcing
• e-tendering
• e-reverse auctioning
• e-informing
• e-MRO as well as web-based ERP

(Mahdillou & Akbary 2014)

What are the current eProcurement methods? What are their pros and cons?

Comparison of Traditional vs. e-Procurement (Sheffi)

Current Trends:

- Next Gen Spend Analytics: Spend analytics has moved beyond aggregating and analyzing transactional data, to gathering strategic intelligence. Supplier performance & risk information must be integrated into spend analysis to present a truly holistic view of an enterprise’s spend behavior. This is achieved by taking advantage of 3rd party information sources, such as local news media coverage.

- Digital Capabilities Adoption for Indirect Spend: Companies have begun to realize that reducing indirect spend, offers a huge opportunity, by affecting its cost structure. To drive maturity in indirect spend, companies have incorporated cloud based technologies to create an “amazon-like” experience, with real time market view for buyers.

- Best Cost Country Sourcing: There has been a steady shift in strategy around low-cost country sourcing to best-cost country sourcing. Companies have understood that source choice should be based, not only on a static view of total cost of ownership (TCO), but on future costs, alternative growth markets, and approaches to implementing greener and leaner supply chains.

- Supply Chain Sustainability: Consumers are becoming aware of how products are sourced and manufactured. Supply chain sustainability has therefore, become an important factor today with more companies pushing towards positive social change and environmental protection.

(Viswanathan 2018)

The digital applications that will make a real difference to a company’s procurement performance fall into two broad areas: tools that identify and create value, and tools that prevent value leakage

(Boulaye, Riedstra & Spiller 2017)

2017 Focus On Driving Efficiency And Increasing Agility 

 

(Breault 2018) 

How can companies optimize the best eProcurement methods for their sourcing management? 

Many companies have adopted eProcurement software systems, with varying levels of success. Some achieved the touted benefits of automation and efficiency that early eProcurement software promoters hyped. Others had much less success and, in some cases, have had to abandon their eProcurement efforts.

Challenges with eProcurement Software (Why eProcurement software may be not be the method of choice for a given enterprise?)

Lack of partner buy-in is a compelling obstacle. If suppliers aren’t participating in these types of digital platforms, it can spell trouble for procurement models.

Confusing mix of vendor options and solutions. Cross-compatibility has seemed to be a big issue for the businesses that couldn’t solve the eProcurement puzzle. With so many voices in play, it’s difficult to be diligent in researching any kind of software vendor, and eProcurement software is no exception.

It is difficult to tie to other parts of the architecture. Many businesses consider enterprise resource planning to be the center or hub of a business’ digital toolbox. There’s the urgency of tying eProcurement solutions into ERP, as well as integrating it with CMMS or other maintenance software. When these tasks become less feasible, eProcurement software becomes less desirable to a company.

Incorrectly implement eProcurement software systems. There’s a sense that many companies put eProcurement software in place just to “automate the process of wasting money.

(SelectHub)

Digitalizing processes is a massive opportunity whose real challenge is to integrate technology and insights in a way that is both progressive and supports business needs at each step of the journey.

A roadmap for change and align it with enterprise-level digital transformation initiatives:

1) Define a digital roadmap and vision: 

Strategy needs to support organization’s overall approach to leveraging digital technologies to transform its business model and ensure that each investment in a digital capability must have beneficial business outcome.

2) Align with organizational strategy: 

On their own, big data, or predictive analytics or any of the other so-called ‘digital’ enablers are not valuable as stand alone technologies. Outcomes need to help the business make decisions and drive actions that are consistent with the overall company objectives and digital plan. Any discrepancies between the two can create “technology islands” and put procurement at odds with corporate objectives.

3) Build a Digital competency within procurement to understand, master and lead the prioritised acquisition and implementation of digital tools.

(Breault 2018) 

References

Boulaye, P., Riedstra, P. and Spiller, P (2017). Driving superior value through digital procurement. McKinsey&Company. URL: https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/driving-superior-value-through-digital-procurement. Accessed on: 24 September 2018.

Breault, G. 2018. Procurement Agility in the Age of Digitalisation. The Startup. Medium. URL: https://medium.com/swlh/procurement-agility-in-the-age-of-digitalisation-e5b9a71da9dd. Accessed on: 24 September 2018.

Mahdillou, H & Akbary, J 2014. E-Procurement Adoption, Its Benefits And Costs: Academic Literature Review. University of Borås. Borås. Sweden. URL: http://bada.hb.se/bitstream/2320/14364/1/Mahdillou%20Akbary.pdf. Accessed on: 24 September 2018.

Pandit, K. & Marmanis, H. 2018. Spend Analysis: The Window Into Strategic Sourcing. J.Ross Publishing. USA.

SelectHub. Is eProcurement Software Dead?. SelectHub. URL: https://selecthub.com/eprocurement/eprocurement-software-dead. Accessed on: 24 September 2018.

Sheffi, Y. Modern Procurement. Mass Institute of Tech. Cambridge. MA. URL: http://www.ocw.nur.ac.rw/NR/rdonlyres/Engineering-Systems-Division/ESD-260JFall2003/1FFAD3C7-EF76-4E29-B27F-33D782C76BAD/0/l19procauctcomb.pdf. Accessed on: 24 September 2018. 

Viswanathan, A. 2018. The Evolution Of Procurement: Past, Present, Future – Part 1 Of 2. CGN Global. URL: http://www.cgnglobal.com/blog/69. Accessed on: 24 September 2018.