What is an e-procurement?

05.11.2019 Angelika Siczek
little figure of a shopping cart filled with tiny bags with a laptop in the background

When doing business on the internet, it’s important to familiarize yourself with important terms that describe phenomena and methods that enable or improve your work. These include the concept of e-procurement, which applies to electronic purchases. So it is a part of the e-business field. It is characterized by a number of solutions that are worth implementing in your business. See what exactly e-procurement is and how to use it.

E-procurement – definition

As we have already mentioned, the term e-procurement itself means shopping electronically. This can be done via a website, mobile application or via shopping platforms. Applies to both private and public sector transactions. It involves the integration and management of activities related to electronic orders.

E-procurement has three main functions throughout the entire purchasing process:

1. It is responsible for its automation – it covers supplying the company at all levels. Not only in the sales assortment, but also the one needed for the proper functioning of the enterprise, including for document circulation, issuing e-invoices, use of e-signature, etc.

2. Controls purchases – e-procurement enables planning, coordination and monitoring of the purchasing process. Including budget control. Thanks to this, people responsible for making purchases can take up e.g. a more strategic selection of suppliers and focus on cooperation instead of spending time budgeting and planning the entire action.

3. Standardizes the product range – verification of purchased goods and suppliers’ budget is also implemented with e-procurement. Thanks to this, you can count on planned and more effective cooperation with your suppliers.

B2B e-procurement solutions are eagerly used by sellers in the B2B sector because it provides them with more efficient business operations and even savings.

E-procurement – acting in practice

How to use e-procurement solutions in practice? First of all, e-procurement activities should be used to ensure that the store operates without downtime. It should also buy goods at attractive prices. Must be able to control your inventory – have a storage system that will indicate which products should be replenished. The e-shop should also settle orders using the ERP system or the settlement system with various suppliers. However, if you want to actively search for even better commercial offers and suppliers, use e-sourcing solutions that will support e-procurement.

The three main functions that e-procurement fulfills in B2B practice translate into three processes. These include:

1. Sales and inventory analysis, and forecasting based on previous transactions with suppliers.

2. Creating inventory and evaluation of suppliers. The system will assess current suppliers, find new ones, process information about trade conditions, credit limits or delivery deadlines.

3. In advanced systems, it is possible to create an electronic document flow. It can be an uncomplicated workflow or an advanced solution that will allow you to exchange digital invoices.

How to build e-procurement? This can be done with a simple ERP. Thanks to it you will receive information about the stock and sales volume. You will also get to know suppliers, their offer and prices. In such a system, you can configure mechanisms that track your inventory and control their status based on criteria given at a low cost. The system will automatically generate orders for completing the product range. What’s more, it will also check whether you have an unused credit limit at the particular contractor (supplier). And in case of any difficulties, he will manage orders and submit them to the right supplier.

E-procuremet can use software already present in the company, newly purchased, specialized applications or use external software from companies offering procurement services. Depending on the solution you choose, you can automate the purchasing and procurement process accordingly. Online tenders are also an interesting use of eprocurement. They take place on special internet platforms where purchases are made at auctions. As in the case of a classic auction – the highest bid submitted wins. Auctions can be open or closed. In the first case, the offer is addressed to everyone. In the second, only selected recipients can benefit. The reverse use of procurement is opposite to auctions. On them, in response to inquiries, suppliers present the lowest price of their goods. Thanks to this, you can buy an assortment at very favorable prices. Trade fairs can also have an open or closed character.

The use of e-procurement in a classic online store and in a model based on external shipping

In the classic model of the online store, according to the website, it is attracting the customer, presenting him the offer, accepting the order and enabling him to make the payment through available external payment methods. Orders placed by the website are ranked in the list of shipments. Then, complete the ordered products and prepare packages. At the same time, waybills are generated and notifications about the order are sent to the customer. Sold goods are obtained in their warehouse before sale. It uses the available budget and stores products in a designated place. Settlement and control of inventory takes place on the backend of the store. For more advanced business models, they are made in the ERP system or ERP with WMS elements.

However, if the store operates in the model of fulfillment or dropshipping, in which an external company deals with the shipment of ordered goods, you can use e-procurement solutions in a simpler way. When you integrate your ordering system with your fulfillment provider, many tasks will be completed automatically. So you will gain additional time and resources to improve your way of running a store, e.g. finding new suppliers. However, you will still need to work on shopping on the stock, because this issue cannot yet be fully automated in this model. In turn, in the case of dropshipping, thanks to automation, orders are sent from the customer directly to the supplier. Therefore, the implementation of e-procurement is very simple.

How to implement e-procurement solutions?

Have you decided to use e-procurement in your company? However, before you do this, analyze your situation. Make sure your current suppliers use these types of systems. This is very important because they must be able to integrate their system with yours. Also check if your company is ready for such innovations. You can do the test. Take part in the auction and evaluate your potential profit. Then check in which departments of the company will be easiest for you to enter repetitive purchases.

Also remember to carry out reaserch among companies offering e-procurement services. If they have significant and large clients in their portfolio, this may prove their reliability and professionalism. Also make sure that the service provider knows your industry and whether it will accompany you during the development of your company.

Advantages of e-procurement solutions

Finally, learn about the basic advantages of e-procurement, which are the final excuse to use such solutions in your business.

First of all, standardization and automation of the process of ordering goods for your store is useful. Thanks to this, you reduce the time needed to complete the right number of products and to settle accounts with suppliers.

You avoid mistakes and having to constantly check your budget when placing orders.

You save time that you can spend on developing your business. Including to find and create the optimal supplier chain.

You not only care about your finances and convenience, but also about ecology. By minimizing paper circulation of documents and replacing it with electronic documentation.

These are the most important advantages of eproceurement solutions. However, with their use, you will certainly see even more advantages.

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