Page title: E-procurement: Products, Services and Solutions
Translated content:
E-Procurement Coverage
E-commerce applications are increasingly focused on the business transactions themselves, helping not only those who sell but also those who buy. All companies can only benefit from the same advantages of e-procurement tools.
After the big waves of Business-to-Consumer (B2C) e-commerce and online commerce, the Internet application that has been talked about the most in recent months is e-procurement, that is to say the integrated management of a company's supplies via the Internet, with three main objectives:
- make the purchasing process from suppliers more efficient by reducing intermediate bureaucratic steps and partially or completely automating payments.
- find the most advantageous offers and select suppliers by consulting the electronic catalogs on the suppliers' websites themselves or on electronic markets called e-marketplaces.
- organize electronic tenders and auctions for high value supplies.
In most organizations, purchasing activities are typically managed by telephone, fax, mail, email or EDI, with a mix of manual and automated activities, largely dependent on the technological capabilities of the customer and supplier. E-procurement applications aim to support, automate and streamline activities related to purchasing processes. In a broad sense, e-procurement is any activity related to purchases, carried out using the Internet, both by private consumers and by businesses: from the use of e-mail to request and send offers to the use of search engines specialized in product research and price comparison, up to electronic auctions between consumers. Strictly speaking, we speak of Business-to-business e-procurement when an organization integrates the entire purchasing process via the Internet with an appropriate IT infrastructure, with the aim of completely automating the “passive cycle”. In other words, business interest in e-procurement is based on the fact that companies first automated the "active cycle" (sales, production, invoicing) with traditional IT systems and ERPs, then tried e-commerce, before turning their attention to the "support cycle" with CRM applications, and finally focusing on the "passive cycle", which includes:
- Search for useful information to choose the product or service to acquire (Market Intelligence).
- Assistance in the preparation of quote requests and calls for tenders.
- Assistance in the process of comparing offers and selecting the supplier and product.
- Creating the order.
- Order approval and related internal controls (company powers, budget, standards and possible restrictions established by the quality system).
- Sending the order to the supplier.
- Receipt of the invoice, payment, accounting and closing of the transaction.
Currently, only very few companies worldwide have completely automated the passive cycle, while many purchasing departments make extensive use of the Internet in the Market Intelligence phase (search for information and consultation of electronic catalogs).
Better supply management, reduction in the number of errors that occur when managing orders, savings on the cost of acquired assets, the possibility of optimally planning the management of one's own supply chain, tracking orders in real time, reducing management times, constitute the main advantages of e-procurement, to which are added other collateral advantages, such as the reduction of the so-called "maverick effect" (due to that, to escape rigid bureaucratic procedures, we prefer to make certain purchases directly by requesting reimbursement for various costs, so that on average 30% of "indirect" items are acquired in this way) and the fact of automatically having a large quantity of statistical data (delivery times, price reductions, savings compared to offers from other suppliers).
The possibility also of configuring a product using a configurator program or an expert system and sending orders online constitutes a great advantage for both the supplier and the customer in terms of time and costs.
With appropriate adaptations to the IT system and business procedures, a medium-sized company can achieve savings of between 3 and 10% of turnover.
For multinationals, the savings can reach into the hundreds of billions. The economy focuses mainly on indirect assets, such as laptops and networking, telephones, software, various office supplies, services that do not directly concern productive cycles, rather than on direct purchases (raw materials and semi-finished products).
Studies of some large companies by Price Waterhouse Coopers and the Gartner Group show that 75% of invoices paid by companies are for items costing less than $1,000; the internal cost (overhead) of acquiring a $5 product is equal to that of $5,000 items; an average purchase using traditional processes involves 22 operations on average, lasts 15 days and has an internal cost between 35 and 80 dollars (sometimes exceeding 300 dollars). An e-procurement solution involves only 12 operations, requires few hours and costs $5 to $10.
Beyond the economic and productive advantages, purchasing processes become more controllable and the possibilities of error decrease.
Many American and German companies that have introduced e-procurement systems report having recouped their investments in less than twelve months.
In the United States, e-procurement is adopted by 25% of companies, and it is estimated that in 2001 this percentage will reach 40%.
Smaller companies that wish to achieve automation of the passive cycle can refer to external structures that several companies operate for this purpose, acting as purchasing cooperatives and service companies.
In this case, the external operator manages the catalog and structures itself as an outsourced e-procurement provider, according to an intermediate business model between an e-procurement system and an e-marketplace.
A significant European example is the German Unitec Gmbh, also present in Italy, which constitutes one of the first experiences of complete outsourcing of the supply, logistics and warehouse management function for companies of an essentially industrial nature.
