What does e-Procurement exactly mean?

Simply put, e-procurement is the electronic sale of goods or services between businesses (B2B), Consumers (C), and Governments. It removes manual work like paper-based purchase orders and helps automate procurement processes, saving time and reducing costs. Generally, this buying and selling is done via the Internet or an organization's intranet by using electronic data interchange (EDI) or an ERP system in place.

How does e-Procurement work?

Having an e-procurement system in place optimizes your existing procurement processes. This online platform allows both parties to eliminate the need to handle manual processes like paper-based contract exchanges, helping maintain an efficient, automated, and safe process.

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E-procurement software can also simplify your organization's finance and procurement operations.

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Overall, the e-procurement system consists of many components, such as -

Source-to-contract (S2C)

It is the end-to-end workflow for identifying and securing goods or services. This element of the e-procurement process ensures a cohesive and strategic sourcing operation while also organizing and handling contracts. Typically, S2C consists of contract management and e-sourcing strategies for businesses.

Supplier Relationship Management

By now, there’s no doubt about how important it is to have good relationships with suppliers for a smooth business. By combining all the information about the preferred suppliers, past performances, workflow, and communication trail, we can make it easier and faster for the e-procurement cycle to continue.

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Pay-to-purchase (P2P)

It is the process from when an order is made for goods or services until payment is received. The P2P process also consists of tracking orders, handling important information and bills, and monitoring the budget. When businesses utilize P2P software, they can work efficiently, cut costs, focus on what they're buying, and make the whole buying process easier for everyone.

Analytics

These days, most business tools provide the opportunity to examine and analyze data. For businesses to thrive, their procurement teams need access to such informative tools. With better data, you can assess your procurement process, identify any roadblocks, save money, and streamline processes. Additionally, your team can make smart choices and look at what your business is spending to find ways to spend less.

E-Procurement Process

For the e-procurement process to happen, there are three key steps to follow -

Choosing the goods 

As a first step, businesses typically use a specific platform consisting of an online catalog. This platform or website is known as a Punch-Out[1] or a B2B vendor website, which provides access to the vendor's entire collection plus information about the conditions (such as goods selected, total expense, savings, etc.).

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Now, businesses will select their requirements, and the next step is to send a purchase request with a click. This request will be shared with the vendors and also entered into the procurement system.

Sending the Order

After receiving approval, the purchase request automatically transitions into an order. Next, the e-procurement system sends it to the designated supplier as an electronic document or through a shared marketplace. Upon receiving the receipt, the supplier begins preparing the order shipment.

Receiving the Invoice

Paperless invoicing enables the companies to receive the invoice through a PDF file. Then, the system will match the invoice with the exact order and initiate the payment process.

Benefits of Moving to E-Procurement

Selecting the right e-procurement can offer plenty of benefits for your business or organization. Here are the most significant benefits -

Better transparency with monitoring

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Transparency and visibility are extremely important for a business to thrive. The procurement process helps tremendously by improving them overall and providing hassle-free monitoring so that you can always stay vigilant. 

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Organizations can boost their supply chain productivity by adopting a twofold procurement method. Firstly, they can decentralize daily procurement tasks like sourcing, approvals, ordering, receiving deliveries, and handling invoices and payments. At the operational level, this can bring more flexibility and faster implementation. 

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On the other hand, businesses can make all the big procurement-related decisions in one place, which includes tasks like defining the product specs, anticipating the procurement needs, finding the right vendors, requesting and reviewing the received quotes, and negotiating deals. By ensuring these key decisions, businesses will have more consistency while leveraging their buying power and making smarter choices for the long term.

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By maintaining this key balance between decentralized operations and centralized strategy, businesses will have the opportunity to streamline their supply chains and drive better overall results.

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Budgeting

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With a traditional procurement system in place, budget calculations are usually managed by spreadsheets or manually, which means there needs to be more visibility and a solid way to authorize the approvals in case of over-budgeting. 

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Today's e-procurement lets you automate it entirely while sharing the available budget and possible impact. In case there's an over-budget request, the system will send alerts to the approvers to inform them beforehand. Plus, it enables budgeting at both GL and project-level accounts, which adds more flexibility to your budgeting requirements.

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Automation

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Manual or human error is still one of the most common challenges with traditional procurement approaches. Modern e-procurement utilizes the power of automation to address these problems, including options like automated PO creation, templates, punchout catalogs, internal catalogs, and more. 

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These features can greatly help you automate data entry, match invoices, and minimize risk. 

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Save time and reduce cost

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An e-procurement platform will eliminate redundant activities like order tracking, vendor assessment, processing invoices and matching them against orders, and requests for important documents like proposals. With a process in place, you can easily access or browse the online catalogs of approved suppliers anywhere in the world. This reduces the turnaround time for purchase orders to a great level.

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Additionally, the e-procurement process makes handling document management and manual orders much easier by removing errors. By removing the focus on redundant tasks and handling paperwork smoothly, the business lowers its administrative and overhead costs, allowing for more emphasis on cost savings.

More control over the procurement process

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The right e-procurement will enable better overall control and flexibility for every factor of the buying process. Additionally, you can know every minute detail about a particular transaction if needed. If you're looking for something more advanced, such as who in your company has the authority to spend, it's also possible.

Improved spending control and relationships

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Dark spending can be quite a worrisome matter for businesses that want to thrive. E-procurement enables effective tracking of spending, buying budgets, and shipments. Typically, there's a dashboard that will track these metrics and generate reports for you in real-time so that you can reduce unnecessary spending and lower supplier fraud as well. 

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Better internal and external relations are always preferred for a business to flourish. Also, when staff at all levels feel connected and valued, it quickly promotes a positive and productive work culture. Now, e-procurement is vital in improving both by providing a centralized hub for all relevant information. This facilitates smooth communication and better collaboration between teams and vendors. A transparent audit trail builds further trust with both internal and external teams. 

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Future-proof audit history

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Initially, businesses used paper and spreadsheets to track purchases. However, this can impose some limitations. It can be tricky to know who made changes along the way, as there's no reliable record to show for it.

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With modern e-procurement systems, you can now get a detailed log of each interaction. This means you'll know who made the initial request or the final payment. This level of detail can make auditing easier than ever, as there'll always be a clear history of all changes. 

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Challenges in e-Procurement and how to overcome

Transitioning to a new e-procurement process can be quite daunting and met with resistance when you're used to manual processes. However, you can overcome the common challenges with the right approach and tools.

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Integration with existing systems

Integrating the new digital eProcurement software with your current ERP or accounting software is complex. Hence, a proper planning and implementation routine can be helpful.

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While choosing the new system, ensure you look for one that can integrate with the existing tools. To make it hassle-free, consider working with procurement professionals who can provide expert implementation support to make the journey much faster and better for all.

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Resistance to change

When businesses introduce e-procurement systems, some employees may be hesitant to embrace it as they might feel more familiar with the old way of doing things, such as sending emails, phone calls and Excel spreadsheets. This can make it tricky for companies to maximize the possibility of e-procurement.

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Data security

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When companies use e-procurement systems, they share important and private information with their suppliers. This information can be about purchase orders, invoices or other internal data. Sharing these sensitive information can create security risks which is why it's important to have strong security measures in place to protect the data.

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Poor onboarding process and complex software

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Teams are expected to use the software daily to determine its adoption success. In the initial months of the implementation journey, everyone will need to receive the proper clarification, guidance, and suggestions while also asking many questions to improve their understanding. A well-organized training and support session can quickly address all these. Most importantly, without proper training, convincing people to adopt the system successfully will be challenging. Hence, preparation is the key to introducing new solutions for business.

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In general, e-procurement processes are not often changed, and hence, businesses prefer versatile solutions. Ideally, the platform should be able to scale as the business grows and its internal systems change. However, these systems often have complicated interfaces that can be challenging to navigate, as it takes time to get used to them.

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Risk management

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For the procurement team to deliver the best results, robust risk management is essential. Procurement can be quite a lengthy process, and many factors impact it. 

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These factors can also lead to both internal and external risks that needs to be controlled. For example - supply chainn disruption which can be caused by political turmoil, war or natural disaster. The major challenge here will be to source the materials from different vendor at that time. To address such instances, it's important to have a response system to handle these scenarios more effectively.

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The procurement process also faces fraudulent activities from vendors, contractors or employees. For example - invoice fraud is one of the most common risks happening when the suppliers increase the cost and the team proceeds with it without a proper verification. 

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Opting for the right e-procurement provider is important – especially when security is significantly involved. Your service provider should have a strict set of security measures to not only protect your business, but also your employees, customers and suppliers.

E-Procurement Best Practices

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You're investing in a new e-procurement software to improve your business, so naturally, you'd expect a solid return. To help you maximize your investment and reap the full benefits of e-procurement, we've compiled a list of best practices:

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Better relationships through reverse auctions

When working with suppliers, emphasize building good partnerships that go beyond business. You need to communicate effectively with your suppliers about topics like changes in demand or issues that arise. 

One way to nurture these relationships is by engaging with vendors during reverse auctions.

This can be done using the e-procurement platform's online chat features. These tools enable communication with suppliers in real time during the auction process.

Get procurement checklist and framework ready

Checklists are extremely important to keep any process steady and successful. Make sure you've a similar checklist dedicated to e-procurement system. This checklist can be kept on paper or digitally available on your computer. This will make it easier for all in the team to stay aligned and reduce extra processing time. 

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Now, the next step is to build a framework for procurement management that can establish guidelines regarding -

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• Invoicing and payment
• Maintaining a record
• Employee training on goods
• Handling suppliers and procurement negotiation process
• Controlling the purchase requests
• Performing matching and quality assurance on each step

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This isn't done overnight so you'd need to take a deep dive into the procurement process to create the perfect workflow and standard operation procedures for business.

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Encourage the adoption company-wide

Implementing an e-procurement system can be quite challenging, as people often resist change. For a successful deployment, ensure that the new system is promoted throughout the entire organization. One effective strategy is to enlist the help of influential team members who can advocate for its benefits.

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Create defined RFIs, RFPs and RFQs

When seeking information or bids from suppliers, it's important to be clear and detailed in your requests. This applies to Requests for Information (RFI), Proposals (RFP), and quotes (RFQ). The request cannot be completed if you don’t provide the right information or provide too little information.

Streamline your inventory

Not managing the current inventory properly is often neglected upon in the procurement process. Monitoring the spend and keeping a track of stock and intake is challenging for business owners. Planned purchase is important to minimize any wastage while providing a topnotch customer experience is one of the best procurement practices to follow.  It's also important to know that on the long run, holding inventory for a prolonged time period can affect your ROI. 

Benchmark the current procurement 

To measure the success of your e-procurement process, it's important to have a benchmark, which is why, ensure you make time to carefully consider the metrics that matter the most for your business. Measurable results help you to maximize the full potential of your e-procurement system.

Look Beyond the Lowest Bid

You might be tempted to go with the lowest bid when choosing the vendor. However, the lowest price can sometimes mean the best deal for your business. In some cases, especially in reverse auction situations, the lowest bid may have a pricing structure hiding any additional cost, which means you may pay more than expected. Hence, always focus on price and consider the full scope of the contract. Take the time to carefully evaluate all aspects of the offer details.

Engage your suppliers

Building long-term relationships with vendors is key to your thriving business. However, ensuring suppliers are delivering the high-quality products or services at best rate and timely needs maintaining a strategic relationship with them. For this to happen, you need to have better knowledge about your vendors to track performance and see your business needs are met. Some of the key ways are -

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• Always strive for a clear and open communication with your supplier about purchase orders, invoices and requirements.
• Set expectations early on so that your suppliers can adhere to that standard from the beginning.
• Assess the vendor performance on a timely basis to ensure your business gets the best value.
• Pay suppliers on time so that you can keep receiving the best service from them.
• Have a vendor dashboard to trakc the performance real time while also comparing and switching them if ncessary.

Different types of e-Procurement tools

E-procurement software

An ideal e-procurement software usually comes with a comprehensive suite of tools. It optimizes the entire procure-to-pay process by unifying each step in a single platform. Then, the software ensures the vendor offers are available for quick comparison while minimizing any buyer risk. E-procurement software also has capability to provide users with tailored solutions.

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Supplier Management Tools

These tools help to streamline the communication between you and the vendors during the entire sourcing process. Additionally, these tools share Requests for Information (RFIs) and Requests for Proposals (RFPs) and gather the key responses.

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Contract Management Tools

Contract management solutions manage A to Z of your supplier contracts. Not only this, they also ensure a proper flow is maintained in audit, contract variations, spend analytics, payments and refunds.

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Spend management functionality

Procurement system offers its users to stay informed about their investments with a detailed tracking and analytics. These features give a more informed understanding of your business's current spend information and what adjustments are needed to get the maximum benefit from your investment. Spendflo's Slack bot is created to keep the stakeholders in the loop about all purchases. Slack bot's proactive notifications allows you to rectify any action in case there's any discrepancy. Additionally, it ensures there's no miscommunication between teams to promote simpler and efficient processes.

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SpendFlo, your one-stop destination for procurement

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Spendflo is one of the top-tier SaaS Spend Management solutions, focusing on optimizing the procurement for your business. It also provides superior spend control with a seamless intake & vendor management. Now, get a world-class procurement services at a fraction of the in-house cost.

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Spendflo saves you time and money by ensuring - 

• Streamlined negotiation
• Spend analysis powered by Flo AI
• Third-party risk management
• Dynamic license management
• Approval workflows
• Contract management
• Granular usage data
• Rich insights data
• Sentiment survey
• Timely renewal alerts

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Not only this, Spendflo is a great fit for your team and current tech stack because you can integrate all your apps hassle free. 

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Tap into Spendflo's powerful procurement platform and expertise to get the best value for your company. Request for a demo here.

Frequently asked questions about e-Procurement

What is e-procurement software?

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E-procurement software is simply a tool to optimize your traditional procurement process. It helps businesses to handle important aspects of procurement such as vendor selection, sending an order request and invoices and processing pending payments digitally to save time and improve efficiency overall.

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Is e-procurement a part of ERP?

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Yes and no, because e-procurement can be a single solution or combined into an Enterprise Resource Planning (ERP) process. A lot of ERP tools can consist of specific e-procurement interfaces to smoothly connect with other business functions like inventory or supply chain management.

How can a business effectively adapt to e-procurement?

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For a successful move to e-procurement for your business or organization, first, you need to define a few elements, such as - 

• Receive clarity about your goals and objectives
• A secure support system in place 
• Choose the solution that works for your requirement 
• Involve stakeholders and key people to stay informed throughout the adoption process
• Ensure sufficient training is available so that all stay aligned.