E-Commerce - E-procurement

 

 

Corporate procurement, also referred to as corporate purchasing, deals with the buying of products and services by an organization for its operational and functional needs. Organizations procure materials to produce finished goods (referred to as direct procurement XE "Direct procurement" ) as well as products for daily operational needs (referred to as indirect procurement XE "Indirect procurement" ). Corporate procurement constitutes a substantial potion of an organization’s operational spending. For example, it is common for a large manufacturing organization to spend millions of US dollars in procuring products and services. Organizations thus accordingly formulate appropriate business processes using procurement systems that facilitate procurement and control overall procurement spending.  

The procurement activity for a large organization can be quite complex. Primary activities that encompass product selection, requisition generation, approvals, purchase order generation coupled with the secondary activities that include supplier selection XE "Supplier:Selection" , contract negotiation, partner collaboration XE "Collaboration" , spend analysis, and other activities contribute to the procurement’s process and cost overheads. This complexity is further exacerbated for manufacturing organizations that have elaborate supply chain XE "Supply chain" s comprising of thousands of suppliers and other trading partners. Furthermore, the interplay of various supply chain activities such as dependence of certain procurement decisions on manufacturing design decisions adds another twist to the procurement process. Thus, to balance the need of formulating appropriate business processes to help coordinate such activities against the need to control spending on procurement and associated overhead requires intelligent business strategies and appropriate IT solutions. 

 

E-procurement XE "E-procurement:Transactional"  is a new term that refers to the re-engineered procurement business processes using e-business XE "E-business"  technologies and strategies. E-procurement mostly refers to the structured elements of the procurement transaction that include selection of products, ordering them through suppliers, and paying for those orders. E-sourcing XE "E-sourcing"  on the other hand refers to the many methods of procurement that include auctions, RFP XE "RFP"  processing, procurement through private exchanges and net markets, and also encompasses all other secondary activities that traditionally have fattened the procurement transaction and cycle time. These activities include trading partner collaboration XE "Collaboration" , contract negotiation, supplier selection XE "Supplier:Selection" , etc. E-business provides innovative ways to provide more structure to such traditionally unstructured activities and thus has enabled in a drastic streamlining of the overall procurement process. 

Strategies and solutions linked to e-procurement have two fundamental goals. The first is to control corporate spending. Organizations want to apportion costs intelligently for procurement activities to reap maximum value of their spending. The goal is simply to ensure that money spent to procure items results in procuring the right products at best value. The second goal is to streamline the procurement process to make it efficient. Inefficiencies in the procurement process tend to introduce delays in ordering and receiving items, and tax internal resources.

Organizations seek to meet the two goals in three primary ways. First, organizations streamline the e-procurement process within an organization’s value chain. Doing so results in reduction of the workforce dedicated to the purchasing process, reduces the procurement cycle time to order and receive items, and empowers organization’s staff with enough information about the products and services to enable them to make intelligent decisions when procuring items. Second, organizations strive to align the organization’s procurement process with those of other trading partners, which belong to the organization’s virtual supply chain XE "Supply chain" . Alignment drives to automate the process from end-to-end including trading partner’s systems, and simplifies the buying process. This enables suppliers to react efficiently to the buyer’s needs. Finally, using appropriate e-procurement strategies and solutions, organizations analyze spending patterns in an effort to influence a change in spending behavior.

E-business XE "E-business"  has created more opportunities to resolve such issues. First, it links all trading partners in a network and empowers them to communicate and collaborate on all commercial issues. A linked and networked environment facilitates applications to work together on a network. Second, e-business infrastructures facilitate unparalleled information sharing that in turn enables users and corporations alike to instill intelligent decision making throughout their business processes. Finally, e-business has pushed enterprise computing power to all corporate users. Users are empowered to engage in self-service XE "Self-service"  transactions and instead of being bottlenecked in the process can actively facilitate the process.

Compared to other IT solutions, e-procurement related technology solutions are relatively new. Early tools did not address all elements of the procurement equation. The new tools on the other hand are more comprehensive in functionality. Besides, these tools and solutions interoperate in a multi-tiered environment supporting the activities of all trading participants in the supply chain XE "Supply chain" . Furthermore, e-procurement tools and solutions have emerged to automate unstructured transactions such as contract negotiation, online collaboration XE "Collaboration" , content management, supplier management features and so on.

E-commerce Home