E-Procurement History and Definition

Many organisations put their futures at risk by failing to control external expenditure on indirect goods and services. According to Chartered Institute of Purchasing and Supply CIPS, organisations will typically spend between 30% and 80% of total turnover, depending on their sector, on the procurement of goods and services. Therefore efetive procurement of these is a prime target for cost reduction. Because without effective procurement strategies, organisations can lose their way, cost spiral out of control, customers are let down and the reputation of the organisation is damaged. So, procurement should not be seen as a backroom, peripheral function but alse as a key business process. To achieve effective procurement, many organisations are trying to cut their complexity in business process especially in buying and selling process manually, but in the development of procurement history, now there is a way to using internet in order to make procurement more effective and efficient, it's called E-Procurement.

Basically, E-Procurement is a method that developed to getting rid of paper-based purchasing. This statement was emphasized by many executives that believe if E-Procurement could save them money, eliminate human errors, and also speed up business processes. In the past, E-Procurement generally accepted as a solution between company and supplier (B2B). Now, E-Procurement also used to maximizing the relation among supplier, customer, and or government. So that, it not just including B2B processes but also B2C and B2G.

Generally, in a broader definition, E-Procurement is defined as a system that utilizing internet technology to streamline the purchases of goods and products to reduce cost. In specific definition, according to Wikipedia, E-Procurement is the business-to-business or business-to-consumer or business-to-government purchase and sale of supplies, work, and services through internet as well as other information and networking systems, such as Electronic Data Interchange (EDI) and Enterprises Resource Planning (ERP). E-Procurement sometimes known as supplier exchange.

From the definition above, E-Procurement software gives possibility to automate some buying and selling processess. It means, an organisation may have a competitive advantage from their competitors. E-Procurement are not just enable automation in organisation, it also help them with decision-making by keeping relevan information neatly organized and time-stamped. This reasons that make their transactions standardized and trackable (I defines it as cross-customer-supplier). In keeping their track of all bids or transactions means they can leverage their knowledge to obtain better pricing, it allows company to focus on their most lucrative trading partners, contracts, and more extend to their customers.

Furthermore, a company who implement E-Procurement can be expected to be able in controlling their part inventories more effectively, reduce purchasing agent overhead, and improve manufacturing cycle. E-Procurement is expected to be integrated with the trend toward computerized supply chain management.

In new development of E-Procurement, there are several companies offers solution in E-Procurement in a hosting way, its called Hosting E-Procurement or Perfect Commerce defined it as On-Demand E-Procurement Model. This way is also defined as a "pay-as-you-go" systemsm instead of committing to an extensive managed and funded program. Using this E-Procurement system, company could only invest in a low start-up to having an E-Procurement in their process. They will realize faster return on investment (ROI) and lower total cost of ownership (TCO).

Benefits of E-Procurement

There are several benefits that many companies experience when they use E-Procurement as one of their key business process. The benefits are :

1. Increase Process Efficiencies
   All process including buying and selling is finished electronically (electronic purchase). Online Procurement also increase time saving because it will shorter order cycle time (and delivery time).
2. Cost Reduction
   Cost reduction give company a cost advantage than their competitors. Cost Reduction allow company to have :
   • Lower Price and Purchasing
     Because company could get the supplier easily. In addition, there is a link between company and supplier involve buying materials. Also they are allowed to cut their price and enable their customer to buy their goods cheaper than before.
   • Good Inventory Control
     Lower inventory levels but always able to fulfil demand from customers. It allows company to have an efficient control in inventory and keeping cost.
   • Free Human Errors and Free Staff for Strategic Activities
     Company can maximizing the source of employee and automation let the process free of human errors
   • Reduce Administration Fee
     Reduce the manual jobs and paper work.
3. Tracking or Monitoring Goods
   With E-Procurement, the company can track the order from customer and also the receipt to the supplier. It allows company to be able to maintain relationship with both customer and supplier
4. Just In Time Processing
   Daily request and delivery communication
5. Improve relationship with partners, customers and suppliers
   Using E-Procurement, company can manage to give accurate data, shipping time, and quality of services and products. Company can providing clear communication to their employees, stakeholders, and suppliers. Company also can easily understanding suppliers' concern and ensuring their continued support. Besides, their good relationship with customers can increase buyers productivity.
6. Improve Decision Making
   Decision maker in a company using this E-Procurement to generate report of their inventories, purchases, and orders
7. Enable Payment Automation if Integrating with ERP or SCM
   If E-Procurement is connected or integrated with ERP or SCM, it will allow company to control their budgeting more wisely.

E-Procurement cause the lower cost with many ways. For example: sale price, admistration fee, inventory cost, and other cost, and that’s why e-procurement can increase company ROI (return on investment). With all the benefit that achieved from E-Procurement, the company can significantly increase ROE (return on equity) dan ROI (return on investment). The price can be reducing directly from the sales price from selling process expense.

Real Effect of E-Procurement Implementation

There are some companies who offers E-Procurement software. The example are Coupa, SalesForce, Perfect Commerce, JCatalog

There are several example of customer testimonial after they have implemented E-Pocurement from Coupa:






From testimonials, we can see that there are many profitability that company could get from E-Procurement both tangible and intangible benefits. E-Procurement still have many possibilities to be developed in many area of business or process.