The applications of e-business are increasingly focusing on commercial transactions to benefit not only sellers but also buyers. All companies can benefit from the tools of e-procurement.
After major waves of business-to-consumer (B2C) electronic commerce and online commerce, the application of the Internet that has been most discussed in recent months is e-procurement, i.e. h. the integrated management of a company's procurement via the Internet, with three main objectives:
- Make the procurement process with suppliers more efficient by reducing bureaucratic intermediate steps and fully or partially automating payments.
- find the cheapest offers and select suppliers by consulting electronic catalogs on the suppliers' websites or on so-called e-marketplaces.
- Organize electronic tenders and auctions for high value purchases.
In most organizations, procurement activities are typically managed by telephone, fax, letter, email or EDI, with a mix of manual and automated activitiesthat are highly dependent on the technological capabilities of the customer and supplier. E-procurement applications aim to support, automate and streamline the activities associated with procurement processes. In the broadest sense, e-procurement is any activity related to purchases carried out using the Internet, both by individuals and companies: from the use of email to request and send offers, to the use of search engines specialized in product search and price comparison, to electronic auctions between consumers. In a narrower sense, business-to-business e-procurement is when an organization organizes the procurement process entirely over the Internet using pure information systems, with the aim of fully automating the “passive cycle”. In other words, companies' interest in e-procurement arises from the fact that companies first automated the "active cycle" (sales, production, invoicing) with traditional IT systems and ERP, then made their first attempts at electronic commerce, then turned their attention to the "support cycle" with CRM applications, and finally focused on the "passive cycle" which includes:
- Obtaining information necessary to select the product or service to be purchased (market intelligence).
- Assistance in preparing request for proposals.
- Support in comparing offers and selecting supplier and product.
- Creation of the order.
- Approval of the order and related internal controls (authorities of the company, budget, standards and any regulations established by the quality management system).
- Shipping the order to the supplier.
- Invoice receipt, payment, booking and completion of the transaction.
Currently, few companies in the world have fully automated the passive cycle, while many procurement departments intensively use the Internet in the market intelligence phase (information search and consultation of electronic catalogs).
Better management of procurement, reduction of errors in the order management phase, savings in acquired assets, the possibility of optimally planning the management of one's own supply chain, real-time tracking of orders, reduction of management times - these are the main advantages of e-procurement, to which are added other advantages such as the reduction of the so-called "maverick effect" (employees who want to escape the rigid bureaucratic procedures make some purchases directly and apply later reimbursement, on average 30% of “indirect” items are purchased in this way) and the possibility of automatically collecting a large amount of statistical data (delivery times, price reductions, savings compared to offers from other suppliers). Also, the possibility of designing a product using a configurator program or an expert system and the online shipping of orders represents a great advantage in terms of times and costs for both the supplier and the customer.
With appropriate adjustments to IT systems and business processes, a medium-sized company can achieve savings of between 3 and 10% of sales.
For multinational corporations, savings can be in the hundreds of millions. The savings mainly concern indirect assets such as notebooks and network hardware, telephones, software, various office supplies and services that do not directly affect production processes, rather than direct purchases (raw materials and semi-finished products). Research conducted by large companies by Price Waterhouse Coopers and Gartner Group shows that 75% of invoices paid by companies are for items under $1,000; the internal costs (overhead) of purchasing a $5 product are the same as $5,000 items; an average purchase using traditional processes involves an average of 22 operations, takes about 15 days and has internal costs between $35 and $80 (sometimes over $300). An e-procurement solution involves only 12 operations, requires a few hours and costs between 5 and 10 dollars.
In addition to the economic and productive advantages, procurement processes become more controllable and the error rate decreases. Many American and German companies that have implemented e-procurement systems report that they have recouped their investments in less than twelve months.
In the US, e-procurement is used by 25% of companies and it is estimated that this percentage will reach 40% in 2001.
Smaller companies that want to realize the automation of the passive cycle can turn to external structures that operate several companies, acting like procurement cooperatives and service companies.
In this case, the external operator manages the catalog and acts as an outsourcer for e-procurement, with a business model between an e-procurement system and an e-marketplace. A significant European example is the German company Unitec Gmbh, also present in Italy, which represents one of the first experiments in complete outsourcing of the procurement function, logistics and warehouse management of predominantly industrial companies.
