Do you need an eProcurement system?

The procurement function has existed in companies long before the Internet came along, so is there a need to go electronic? What is the advantage of implementing an eProcurement system which allows for Requisition, Purchasing and Delivery Acknowledgement Invoicing and Payment to be performed electronically?

The driving force behind implementing an eProcurement system is to INCREASE PROFIT. Procurement Savings add significant value to the bottom line.  For example an increase of $10M in new sales versus $10M in procurement savings means that an additional $6.8 million can be added to Profit before Tax.

Typically, eProcurement  systems are implemented in medium to large organizations whose revenues can only be increased incrementally and thus are looking to maintain or increase profit margins by reducing cost.

Savings are realized in the following ways:

1) Decreasing "maverick" spend -- "Maverick" spend is the process  by which requestors (those who are creating a request for an item or service that will be turned into an order to a supplier) buy items or services that are outside the preferred process or system . This often means that a "maverick" purchase typically results in an individual or department buying an item in an ad-hoc fashion that results in paying a 20% premium for that item. Instead of buying from a preferred supplier with which the company has negotiated a contract with discount pricing, an individual goes outside the normal process and purchases that same item at retail, even an item other than the predetermined specification that results in higher price than agreed.

2) Increase of spend economies of scale -- By directing more spend toward a particular supplier, a company can negotiate more favorable pricing based on how much money it spends with that supplier in a given year. Many companies may purchase like items from many suppliers at different prices. By consolidating this "spend", and directing it toward one or a few suppliers, companies are able to get bigger discounts, especially through eBidding.

3) Increase process efficiencies-- Automating sourcing, procurement and payment processes can greatly improve the efficiency of paper based and manual processes.

4) Process savings can be measured in various ways such as: how long it takes to process a purchase order, how many individuals need to touch the purchase order before it can be sent ("touch points"), how long it takes to reconcile and pay the supplier, as well as many other methods to measure these process improvements.

Management of company spend and compliance with corporate governance legislation is under the spotlight in many organisations. Up to 45% of discretionary corporate spend can be attributed to “maverick” purchasing and off-contract spending. Therefore businesses need to ensure compliance and close management of company purchasing without impeding the organisation's commercial flow.

Procuring electronically using MyProcurenet can enable the daily flow of requisition and purchasing activity within tightly controlled and monitored boundaries, and is the best way to achieve visibility, control and efficiency. By deploying this browser-based solution, designed to automate and control internal buying processes, companies can embed corporate procurement policy and ensure best practice, while enabling the timely flow of requisitions and approvals for the procurement of business-critical products and services.

Entitled employees throughout the enterprise can requisition goods and services from approved suppliers and online catalogues using templates. Purchases requiring approval are automatically routed through an authorisation matrix, enabling relevant budgets to be updated and all spend allocated to the appropriate cost centres and codes. When goods and services are delivered, the details can be recorded to facilitate matching with purchase order information and invoice details.