ChatGPT & AI in
Procurement Course

Free Preview Lesson

Written by Marijn Overvest | Reviewed by Sjoed Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

E-Procurement — Everything You Should Know

Key take-aways

  • E-procurement optimizes online acquiring of goods/services, originating from 1980s electronic data interchange.
  • The process involves steps like e-sourcing, e-tendering, and online auctioning/ordering.
  • Implementation ensures financial savings, shortened purchasing cycles, and enhanced inventory control/transparency.

E-procurement has been adopted by many organizations as it simplifies the process of procurement. However, even if many people heard about it, many are still left wondering what it is.

For this article, we will discuss what e-procurement is all about. We will check how it works and the benefits it brings that make organizations love it. We will also show you the steps of e-procurement.

After you finish reading this article, you will have a deeper understanding of e-procurement that will enable you to become a procurement master someday. All the learnings you will gain by reading this article will allow you to use them to contribute to the growth of your organization. So without further ado, let’s dive into the world of e-procurement.

What is E-Procurement?

E-procurement is the same as traditional procurement. However, e-procurement does all processes online. Electronic procurement or e-procurement is the process of acquiring, ordering, and purchasing goods and services online.

To give a short background, electronic procurement started in the 1980s when electronic data interchange (EDI) was developed. EDI was further improved in the 1990s as organizations developed specialized online catalogs for suppliers.

The goal of using an e-procurement systemis to get goods or services at the best possible price at the best possible time. In order to meet this objective, it is significant for organizations to establish strong relationships with their suppliers.

Through electronic procurement, organizations can set guidelines or limits regarding the budget and spending within the platform.

When electronic procurement is implemented properly, it opens the lines of communication between the organization and the supplier by creating a link and facilitating interactions like bids, emails, and purchase orders.

Since electronic procurement is an online business platform, it utilized networked systems and web interfaces for supply chain processes and operations.

How Does it Work?

Electronic procurement decreases the need to manually carry out strenuous procurement-related tasks like e-auctions and e-tenders.

The process works by connecting various parties and processes into a centralized platform. Vendor management is one of the most important aspects of e-procurement. It involves supplier relationships and information management.

Other key aspects of e-procurement are e-sourcing, e-tendering, e-auctioning, e-ordering, and data analytics

5 Steps of E-procurement

To effectively utilize E-Procurement, here are the 5 steps to follow:

1. Online information transfer

E-informing or online information transfer is the stage that aligns with the traditional procurement cycle. This stage describes the exchange of information between two parties. This step allows organizations to streamline their e-procurement process.

2. E-sourcing

E-sourcing is the stage in procurement where the organization filters its potential suppliers. Organizations determine this by the designated procurement requirements that allow them to shortlist the suppliers.

3. E-tendering

E-tendering describes when the organization requests information, quotes, or proposals from its shortlisted suppliers. This process coincides with the assessment and solicitation process that helps the organization scrutinize potential suppliers.

4. Online auctioning

Online auctioning or e-auctioning is the process where all involved parties set the contract terms and negotiate prices. Once the parties come to an agreement, the organization purchases the goods and services it needs from the supplier.

There are times when multiple organizations pay more to secure a contract with the supplier. The alternative to this is an e-reverse auction where multiple suppliers lower their prices to secure a contract with an organization.

5. Online ordering

Online ordering or e-ordering is the final stage in the e-procurement process that includes the development and approval of requisitions. This is the stage where organizations place their orders and then receive them by the estimated date of arrival.

In finalizing this process, the organization indexes the contracts in a digital catalog so employees can access them anytime and place a new order.

“Embracing e-procurement is not just about streamlining operations; it’s about envisioning a future where every transaction is a testament to innovation and progress.”

Ralph de Groot

Co-Founder, Procurement Tactics

The Pros & Cons of E-Procurement

Here are the advantages and disadvantages of E-Procurement that you should take note of!

+ Advantages
1. E-procurement helps organizations save money as it eliminates errors that can occur when handling manual orders or paperwork.
2. The benefit of shorter purchasing cycles is that organizations can sustain consistent and cost-effective operations.
3. It is crucial for companies to manage their inventory as it allows them to have accurate information about the current supply of their goods.
4. Electronic procurement makes the transfer of data and information more transparent to organizations and their suppliers.
5. Streamlining the operation helps organizations to save time and increase productivity. Having all purchases online function seamlessly builds a more uniform system.
– Disadvantages
1. E-procurement systems can face disruptions due to technical glitches or software issues, leading to delays in the procurement process.
2. Online platforms are susceptible to cyberattacks, which can compromise sensitive data such as pricing details and company financials.
3. The initial implementation of an e-procurement system can be costly, considering expenses for software acquisition, staff training, and system integration.
4. Employees accustomed to traditional procurement methods might resist the shift to an electronic system, potentially slowing down the adoption process.
5. Not all suppliers may be equipped or willing to integrate with e-procurement platforms, which can limit the range of potential business partners.

Conclusion

In conclusion, e-procurement stands as a transformative force in the realm of organizational efficiency, altering traditional procurement processes into a streamlined digital landscape. While widely adopted, its nuances and benefits remain elusive to many.

This comprehensive guide unravels the intricacies of e-procurement, elucidating its definition, operational mechanics, and the steps involved. The journey encompasses the inception of electronic procurement in the 1980s through EDI, emphasizing its goal of securing goods or services at optimal prices and times through robust supplier relationships.

The e-procurement process, delineated in five steps, integrates facets like online information transfer, e-sourcing, e-tendering, online auctioning, and online ordering, fostering a seamless digital ecosystem.

Recognizing the pros and cons, from cost savings and transparent data transfer to potential disruptions and initial implementation costs, unveils the multifaceted landscape of e-procurement.

As organizations navigate this digital transformation, understanding its intricacies empowers them to harness the advantages and navigate the challenges for sustained growth and efficiency.

Frequentlyasked questions

What is e-procurement?

Electronic procurement or e-procurement is the process of acquiring, ordering, and purchasing goods and services online.

How does it work?

The electronic procurement process works by connecting various parties and processes into a centralized platform.

What as the aspects of e-procurement?

The aspects of e-procurement are e-sourcing, e-tendering, e-auctioning, e-ordering, and data analytics.

Procurement Strategy Template

When setting up an e-procurement strategy, it’s important to have a solid procurement strategy. We created a template that will help you to do just this.

To get started with the Procurement Strategy Template you can open the template in Powerpoint or Google Sheets by clicking the button above. Here’s how to get started:

  1. Download the template
  2. Watch the explanation video below
  3. Start filling out the template yourself

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics