It is not uncommon for consultants to be called in. In many cases, they set up an eProcurement project adapted to the company in order to make purchasing more transparent and easier. But what is eProcurement and how can you benefit from it? That’s what we’re going to show you in this blog post.
What is eProcurement?
This term covers electronic procurement processes for goods and services. Over time, increasing digitization has taken place in the traditional procurement process. It includes standardized processes such as requirements analysis, contract negotiations and deliveries. Companies are gradually switching to a “paperless office”, where as much information as possible is available electronically. Centrally located in one place.
What are the benefits of eProcurement?
The benefits of eProcurement are apparent to companies through a diverse range of useful functions:
- uniform structure
- diverse use of different interfaces
- keep an eye on prices
- Connection to ERP and SAP systems
- practical BI and analysis tools
The basis of every system is usually a uniform structure for entering article master data. Interfaces such as eCL@ss, BMEcat or other industry standards can be used. In addition, there are data records on quality and other specific article data.
Articles and suppliers are comparable and transmission errors are avoided.
How much is…? Keeping an eye on prices with eProcurement
Compare prices for the same product? This is possible thanks to eProcurement: the supplier always keeps the prices of the products up to date. This avoids rework due to incorrectly stored prices (difference credit memos, etc.).
In addition, framework agreements, price and quantity scales and discounts can be stored and maintained centrally in the eProcurement system.
Connecting ERP systems with eProcurement – Is that possible?
To avoid media discontinuities in the process and system changes, many eProcurement system providers provide interfaces for existing ERP systems. However, not only ERPs are connected, but also inventories, delivery lists or quantity data.
The entire process from tendering to invoicing takes place in the familiar user environment. There is no need for time-consuming training courses for the staff involved.
In order to sustainably improve purchasing, eProcurement systems provide the necessary BI (Business Intelligence) and analysis tools at the same time. They provide information about potentials in the entire supply chain. From purchasing behavior to prices and inventories to inventory optimization, eProcurement systems provide accurate insight into procurement structures thanks to deep integration. Increasingly, AI is also being used to further optimize procurement evaluation and decision-making.
What are the challenges in eProcurement for suppliers?
Where there is light, there is also shadow. This is the case in almost every subject area. This is also the case with eProcurement:
The advantages of an eProcurement system in terms of structured master data, clear prices and a process free of media breaks also apply to the supplier. However, only as long as he has only one system or systematics to maintain. As a rule, each customer uses an eProcurement system tailored to his needs. The supplier must often meet a variety of different requirements and be flexible. With every customer that uses another eProcurement solution, the effort on the supplier side increases.
In addition, depending on the possibilities of the supplier and the type of system, the sometimes high effort for data maintenance and updating of various catalogs. For eProcurement to be worthwhile for both sides, the system must be fully integrated into the customer’s ordering process. The mere ordering of partial assortments and the purchase of other products by e-mail, telephone or in online shops does not create a viable database. The analysis and optimizations of purchasing fail.
Another challenge is the expansion of the product range: The products to be entered into the eProcurement system are usually specified centrally by the customer. Cross- or up-sells are thus more difficult for the supplier.
Are there good alternatives to eProcurement?
Probably the best and most sustainable alternative to an eProcurement is a powerful ERP that is up to date with the latest technology. As a rule, the ERP is the central tool in the company and is used by all employees. Important: The ERP can also be linked to eProcurement.
System changes are necessary for the order. Without eProcurement, there are no interfaces, which shortens the ordering process. The procurement process is mapped consistently in and from one system. Current ERPs offer the possibility to connect suppliers via EDI (Electronic Data Interchange) or OCI (Open Catalog Interface).
The connection via EDI is always to be considered as a small project. Here, data consistency must be established between the customer’s ERP and the supplier’s ERP. The advantages that result justify this effort after a short time. When connecting a large number of suppliers, it is advisable to bring a so-called mapping service provider on board.
With the OCI format, the user jumps from the ERP to the supplier’s web shop. There he can place his order and gets the data from the shopping cart transferred back to his SAP or ERP system. To use OCI, only an access in the shop is necessary for the OCI user.
Another option is to order from the supplier’s shop. Depending on the system, it can be exported as a file from SAP and read into the shop. This call to the catalog is called a punchout.
The advantage: transmission errors are reduced to a minimum and buyers always have an exact overview of their orders.
Supply Chain Management and Purchasing – What is changing?
Already in 2015 and 2016, it was predicted that e-procurement would become more and more relevant. Particular attention was paid to the exchange of data along the supply chain.
Prof. Dr. Ronald Bogaschewsky (University of Würzburg) and Prof. Dr. Holger Müller (HTWK Leipzig) predicted long-term changes – in the IT systems of SCM and purchasing. They did not expect any weakening of the roles of purchasing and supply chain management due to digitalization. The surveys of small, medium-sized and large companies served as a basis.
In the meantime, many companies have switched to electronic procurement. Especially in the points
- Employee qualification
- Need for specialists
- Increased use of IT for control, planning, etc.
- Transparency and control for those responsible
- decentralized and automated decision-making by responsible parties and IT systems
- Automation of process flows and the
- Role of SCM and purchasing in the company
changes can be observed.
eProcurement – What are the conclusions?
For purchasing, eProcurement systems offer the advantages of structured product data and analysis options for the product range. From price to performance to the quality of the products. It makes sense to use it especially where the ERP does not offer these possibilities. However, in order to purchase in a truly efficient and value-added manner, supplier evaluation should not be neglected. Merely looking at the process of ordering and digitizing it is not enough here.
Particularly in the case of low-value consumer goods, the costs arise in purchasing; not with the product or the order, but with the purchaser.
Inquiries, research and selection of products from different suppliers, ordering, delivery as well as invoicing, possible complaints and rework take time. The more small-scale the procurement, the longer it ultimately takes. And time is money!
Rely on a few reliable suppliers to make both administrative and organizational processes efficient. This allows the purchasing department to concentrate on the products that are important for the company. If suppliers are then connected via eProcurement system, talk to all parties involved in the supply chain. There is probably already experience with existing systems. It is possible to agree on eProcurement in order to work together more efficiently.