Several companies today are downright struggling to keep up with the unprecedented market volatility in this post-pandemic world. Moreover, gaining an edge over competition requires upskilling the workforce and adopting new technologies, which is quite an intimidating task in itself.
In such scenarios, E-procurement has emerged as an effective way to control the supply chain better, helping the organisation save tons of money in the long run. However, as is the case with adopting any new technology, there’s always going to be questions like “How can e-procurement benefit my business?” or “How can I use e-procurement solutions to their full potential?”
If you are struggling with the idea of upgrading to e-procurement, you’re not alone.
Modern supply processes come with their share of pros and cons. Therefore, you will need time to completely understand the potential of this technology, learn the basics, compare its pros and cons, and then decide if your business will truly benefit from it by comparing its ROI.
To help you make an informed decision here’s a basic comparison of the advantages and disadvantages of e-procurement technologies and how it shapes the businesses of tomorrow.
The Basics Of E-procurement: What It Entails
Electronic procurement (or e-procurement) systems are software-as-a-service (SaaS) systems implemented as part of a larger management initiative, which provides an all-inclusive cloud-connected environment uniting the various nodes of the supply chain. By ensuring optimal connectivity and communication between operators, stakeholders, and suppliers, e-procurement aims to improve the efficiency of and visibility into the supply chain.
The scale of this technology varies massively depending on the project’s scope to which it is applied. For example, automation, a crucial advancement in industry 4.0, is still primarily reserved for larger organisations that handle massive order numbers daily.
Smaller organisations (and conglomerates) use software solutions to manage the various processes with an aim to improve transparency, reduce waste, eliminate human errors, and streamline business processes.
Advantages Of E-procurement
Regardless of the industry and age of the business, e-procurement will bring substantial benefits in regard to streamlining the processes and optimising the supply chain for maximum efficiency. Here are the top reasons why the pitch to shift to e-procurement makes all the sense.
1. Better Visibility
One of the most evident benefits of e-procurement systems is centralised data repositories, which significantly improve the supply chain visibility. Any authorised personnel can track the procure-to-pay lifecycle and analyse the metadata to find areas where the systems can be optimised for better efficiency.
For instance, invoice delays and other areas which take the longest approval times can be shorted with better insight. You can track the vendors where you pay a lot, compare vendors, and attempt negotiating for better prices or optimise cash flow by applying for early-pay discounts.
2. Easier Data Comprehension
Procurement is an all-hands-on-deck approach, with several parties working simultaneously collecting and storing data. In such data-rich environments, disparate data silos can disrupt communication and prolong the procurement cycle, leading to missed opportunities for cost savings.
So, when all the data is available in a single interface, communication and collaboration happen smoothly. You can simplify data management, create specialised channels, control who has access to which information, and how that can be used to improve the efficiency of the system.
As a business owner, you have to tackle complex validations to reduce operational costs on a daily basis. For example, you have to make sure that the invoice pricing matches the purchase order and that the product descriptions match the received goods. Unfortunately, manual three-way matching is time-consuming and prone to human errors.
E-procurement solutions provide automated three-way matching, which is crucial to improve the cost-effectiveness of a procurement life span. You can prevent duplicate payments and invoice delays and manage expenses by leveraging volume buying, saving the costs associated with traditional paper-based systems.
4. Better Vendor Management
Procurement managers don’t often get the time to track supplier performance, which creates a massive burden on the purchasing department. Furthermore, when the feedback is inconsistent and infrequent, organisations cannot identify poor supplier performance, which adds to operational costs and cause unnecessary delays.
Automated vendor masters, as part of e-procurement systems, collects and stores information about the vendors, their products, their costs, and their consistency. A rich supplier data can be leveraged to identify risks and negotiate better deals. Similar orders can be consolidated to take advantage of bulk order discounts.
5. Transparent Spending
Rogue spending occurs more frequently than you would imagine. This is because the procurement department has to purchase items either without approval or deviate from the purchase order at some point. When purchases are tracked using the traditional means, rogue purchases can get lost in the shuffle.
An electronic audit trail cannot be deleted or edited midway through the procurement process. Even if some stakeholders added something to the purchase orders, organisers would know where and when the change happened, which you can then approve or cancel based on the situation.
Perceived Disadvantages Of E-procurement
• Culture Shock
As is the case with almost every digital transformation, adopting e-procurement solutions brings a culture shock due to the perceived limitations of the software and the corporate reluctance to incorporate new processing models.
• Integration Challenges
Incomplete understanding of the goals and a lack of planning brings significant implementation and functionality challenges to adopting the chosen e-procurement software.
That said, these challenges cannot be classified as true disadvantages as these emerge whenever there is a seismic shift in operations. As such, they can be mitigated using extensive research, planning, and training.
For instance, you can introduce e-procurement solutions gradually into your business based on the increasing requirements. In this way, you can ensure that the perfect solution does not disrupt or displace the existing systems but complements the opportunities to extract maximum value.