Historically, procurement was carried out using systems that were ‘paper’ based. Orders had to be raised, which would then be sent in the post and there would be a time delay between an order being raised and it being received by the supplier. Once the order was received, it would then have to go through internal procedures and steps, to ensure that it was received by the particular section that had to fulfill the order. The order would then be processed and made up, with it finally being sent to the customer.
Obviously this took a considerable amount of time. There was also a risk that the order would not be received or even that it would go astray when received by the supplier.
However, with the benefits of e-procurement there is an immediate notification to the supplier that a customer wishes to have a certain amount of goods sent to them on a particular day. This enables both the customer and the supplier immediate information regarding supplies and there is also no risk of purchase orders either going adrift in the post, or being held up by postal delays.
An e-procurement system is effectively a seamless, business to business system that will ensure that the whole process is automated, taking the process of procurement up to a high level and creating a process for supply chain management that is efficient and robust. It is either internet or electronically based, using electronically shared data to revolutionise the process of procurement.
Cost Reduction Benefits
All e-procurement systems are based on software, thus eliminating the need to have paperwork involved, which instantly results in less costs. There is also less wastage of paper, which in turn leads to increased value, which is central to Lean thinking and general efficiency.
In essence the process of e-procurement is certainly very time efficient. This is its beauty because no time is wasted checking or even tracking pieces of paper; it can all be done with just a few clicks on a PC.
Tracking Orders
With more and more companies seeking supplies to be provided on a ‘Just In Time’ basis, an e-procurement system allows them to be able to track supplies so that they know where they are and when they can be expected within the company. This is a much more efficient means of operating than simply being left in the dark, ‘hoping’ or trusting that supplies will indeed turn up!
Keep Suppliers Happy
Some e-procurement systems have a means whereby the supplier can automatically be alerted to the stock levels that the customer has. This means that stock can be automatically sent out when the levels are low. From a supplier’s point of view, this is good, because stock levels are always maintained, rather than the customer waiting until stock levels are low and then making an urgent request for items to be sent. The automatic updates and re-ordering make ‘super urgent’ orders less frequent and instead creates a steady flow.
The whole process being done electronically means that suppliers are also paid quicker and they do not have to carry debt for so long, which ensures their cash flow is kept constant.
The relationship that is established with regard to e-procurement facilitates for a trusting relationship to develop between the supplier and the customer.
Small businesses also get the opportunity to benefit from supplying companies that they may otherwise may not be considered suitable suppliers for. This is because of the automated system, which means that there is less paperwork and less staff time devoted to the process of procurement itself. Thus time is freed up so that staff can turn their attention to the business of supply; not paperwork!
