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Procuring goods or services for your organization doesn’t always have to be daunting or cumbersome. With e-procurement, you can bypass the enormous manual paperwork and the standard time-consuming to-and-fro conversations between suppliers and stakeholders across your organization.

Leveraging the capabilities of modern e procurement systems, organizations worldwide are massively simplifying their procurement and witnessing a remarkable boost in procurement efficiency. No surprise, the adoption of e-procurement has been steadily rising since 2019. Statista records that global sales through e-procurement systems exceeded one trillion U.S. dollars in 2022 and are growing. 

Wondering what this is all about and how to make it work for your organization? 

In this guide, we’ll share all the details you need to know about e-procurement and explain what you need to implement to streamline procurement for your organization. 

What is E-Procurement

E procurement, or electronic procurement, is the process of using digital systems and technologies to facilitate and manage the end-to-end procurement of goods and services. These digital systems may include the Internet or information systems like enterprise resource planning or electronic data interchange. E-procurement enables businesses to digitize everything from sourcing and purchasing goods and services to managing supplier relationships. 

This is possible by different e-procurement components, including: 

  • E-Catalogues, or the listings of products and services on sale
  • Requisition Management or the automated process of requesting goods and services.
  • Predefined approval workflows to streamline approval processes for procurement requests.
  • Generation and management of electronic purchase orders.
  • Maintenance and management of information about suppliers.
  • Automation of invoice generation and payment processes.

You might wonder if and how e-procurement differs from e-commerce, as their lines often blur. 

In e-commerce, businesses list goods on open platforms for end users to buy directly. E-procurement, on the other hand, uses a supplier's closed ecosystem for procurement. The system is only accessible to registered users. Any purchases occur after conducting the processes that otherwise occur during, before, and after purchasing B2B goods or services via the traditional procurement route. 

E-procurement is popular among organizations as it streamlines lengthy workflows and makes them significantly more manageable. This has benefits such as increased efficiency and transparency, cost reductions, and greater control over procurement activities. Now, let’s go over the process in greater detail.

What does a typical e-procurement process look like? 

The e-procurement process involves a series of interconnected steps across the procurement lifecycle. 

Common steps in a typical e-procurement system include:

  • E-Informing: E-informing is the first step in the e-procurement process. Here, the concerned individuals research and collate information on what they need to procure, the desired timelines qualifications of the vendor supplying, and so on. They then communicate this information to the supply chain partners for the next step.
  • E-Sourcing: Based on procurement research, the next step is to identify the best-fit vendors. E-procurement systems leverage technology to simplify this task by collecting relevant data. They also delineate better visibility into supplier databases, making it easy to highlight the most suited ones. 
  • E-Tendering: In this stage, RFQs (Requests for Quotations) are automatically generated to fetch quotes from the shortlisted vendors within the e-procurement system.
  • E-Auctioning: During e-auctioning, buyers enter dynamic negotiations with pre-qualified suppliers online. This is the stage to negotiate price and other contract terms while also ensuring approvals from the different stakeholders for compliance and budget adherence.
  • Purchase Order: Once the pricing and contract terms are approved, an automated purchase order is generated within the e-procurement system and routed to the supplier.
  • E-Invoicing: An electronic invoice is generated once the supplier delivers the goods and services. This invoice is matched to the purchase order to avoid errors and is processed for payment quickly.

  • Supplier Management: To maintain strong supplier relationships, the buyer manages and optimizes the contract management lifecycle with the supplier. This is possible through a contract management system that doubles as a secure, unified system to create, manage, and store contracts and automate the process. 

What are the benefits of e-procurement?

As you can see from the typical workflow, e-procurement implementation simplifies laborious processes greatly and introduces ease of work. These primary benefits of e-procurement thus include:

  • Efficiency boost: Procurement cycles hasten up as e-procurement systems unify different aspects like emails and spreadsheets and automate manual workflows. With the data captured across direct and indirect channels, there's a snapshot available of real-time spend visibility. Access to this consolidated information makes it more efficient for decision-makers to arrive at better procurement decisions.

  • Cost advantage: With e-procurement, you can replace much of the manual intervention that goes into procurement with automated workflows. This vastly reduces resource requirements and administrative costs, translating into massive cost efficiency, especially in bulk purchasing.
     
  • Increased transparency: E procurement supports greater visibility with real-time tracking of supply chain activities and reporting opportunities. This simplifies assessing factors like supplier risk, financial risk, or legal exposure. As a result, e-procurement also helps reduce fraud incidence and ensure compliance that occurs in manual procurement.

Now that we’re clear about components, processes, and benefits, let’s further explore what e-procurement software and systems you can adopt.

Overview of some popular e-procurement software and systems 

We’ve discussed how e procurement relies on digital tools and software applications. Currently, three broad categories are trending as e procurement software and systems. These include:

  • E procurement software: This refers to cloud-based apps that are built to simplify and streamline e-procurement processes. The software may address all the procurement stages or can be specialized to simplify a particular one. For example, a dedicated invoicing tool is an example of procurement software.

  • ERP systems: These refer to the Enterprise Resource Planning systems commonly used across organizations to streamline their critical business processes, from procurement to production, finance management, reporting, etc. So, e-procurement solutions are integrated as a component within these ERP systems and assist with managing procurement processes. It’s common to see a focus on procurement accounting, specifically within ERPs.

  • Electronic data interchange (EDI) software: These tools are designed to simplify electronic information exchange between two organizations and rely on an intranet. They are primarily leveraged to communicate details about orders, confirmations, and invoicing during e-procurement. 

Whichever e procurement software or system you use, vetting it for specific must-have attributes and a fit for your organization’s procurement needs is advisable. After all, the solution should have the essential features that meet your organization's unique requirements to manage suppliers, orders, and performance. In addition, make sure you evaluate it for some crucial capabilities.

Here are some capabilities to evaluate when choosing an e-procurement system

  • Automation: Make sure your e-procurement system empowers you to set up automated workflows. This will reduce the chances of human error in manual intervention and speed up procurement cycles accurately.

  • Customization: Procurement relies on different vendors, so a cookie-cutter approach rarely works. Thus, it is best to choose flexible e-procurement software that you can customize for different vendors. For instance, this may include flexibility in adjusting procedures or automation rules according to contract terms.

  • User-friendly interface: This is necessary to ensure that your team and the supplier teams can use the e-procurement system easily without spending too much time figuring out how to get things done. If the tool complicates processes instead of simplifying them, it defeats the purpose in the first place and won’t be adopted. So, ideally, look for something easy to use when streamlining procurement workflows.

  • Integration with your existing systems: No matter what e procurement software you use, you must ensure it works well with your other business operations and tools. Without it, your workflows can lengthen and create duplication of effort.

    For example, say you use Slack for your comms. So, it’s best if your e-procurement software also uses the same channel to get internal approvals and make the workflow seamless. So, whenever you pick an e-procurement system, ensure you can easily integrate it via built-in integrations or the API.

  • Comprehensive reporting and analytics: Ensure the system monitors performance and delivers regular reports in an easy-to-understand format. Unless you have clear visibility into spending and rule-based budget controls, you’ll wont be best equipped to control costs and prevent overspending. Similarly, if the tool has advanced analytics, you’ll be better prepared to handle cost/price fluctuations, demand imbalance, and supplier/financial risk.

  • Cost-effectiveness: Assess the software's cost, accounting for factors like implementation, training, and ongoing maintenance. The e-procurement software you pick needs to make financial sense based on your needs, its benefits, and their importance for your business.

  • Scalability: No matter which e-procurement solution you choose, ensure the software can scale with your organization's growth. Being forced to switch to another system because an existing one cannot support you when you grow is an inefficient move—something you’d rather avoid!

Are you looking for e-procurement software? Check out this comprehensive guide for valuable insights on choosing from the top 8 procurement automation software available. 

Examining challenges and solutions in E-Procurement

E-procurement adoption is not easy as it requires planning and the need to adapt to the company's periodical change in procurement operations. The success and failure depend largely on its implementation part. It consists of different tools, and all ideas to implement the tool have been boiled down to one critical factor ie ROI. There are a few adoption challenges that are generally in place at the time of implementation.

1.    Integration with the existing ERP system

It is necessary to verify compatibility between the ERP system and e-procurement.Data collection will play a key role in ensuring that the data flows flawlessly and error-free. When data is collected for implementation, data privacy concerns are also involved. Nevertheless, secure data transmission is crucial to protect the information and adhere to compliance and regulatory requirements in this regard. Since this is a key implementation area, all pertinent stakeholders, including the IT, finance, and procurement teams, must collaborate and define expectations early on to achieve the integration.

2.    Multiple approvals from other departments

The integration process necessitates approvals from the finance, legal, and operations teams because it includes investments and could be delayed by the need to convince stakeholders at several levels of approval. An unclear integration causes misunderstandings, several layers of discussion, and revisions, all of which can cause the approval process to drag out even longer. To overcome this obstacle, the company can identify areas for development by conducting benchmarking and gathering input from pertinent stakeholders.

 3.    Lack of clarity among the stakeholders

In the integration phase, each department and individual must have a distinct function to play. For instance, the finance/accounts team can concentrate on timely payments when the goods/services are delivered, while the procurement team can concentrate on cost savings and delivery timelines. An unclear assignment of responsibilities could cause misunderstandings and prolong the integration process. To solve this issue, it is imperative to establish clear departmental and individual roles, develop a methodical procedure with a closure schedule, and offer the required training.

 4.    The cost involved at each stage of implementation

Licensing fees, integration charges, training expenses, and data privacy-related expenses are all examples of spending that occurs during the integration process. A key element to consider is selecting the right software that will work best with the organization's existing ERP system or applications. Once the implementation is complete, it is necessary to maintain the software and incur support expenditures. Organizations should also consider the expense of future enhancements that may be required due to changes in company or client requirements.

 5.    Onboarding of all suppliers

Onboarding all vendors into the e-procurement platform is a time-consuming process. An organization's daily interactions with vendors/suppliers vary, ranging from large to medium to small-scale businesses. It may not be viable for such medium and small-scale firms to adapt to the latest technology because it requires substantial investment. This is a hurdle for an organization when attempting to onboard such vendors/suppliers. 

 6.    Resist the change from stakeholders

Change management is challenging because it is human. There are numerous reasons why people may resist change, including the fear of losing control, the time commitment, and the difficulty of adapting. To address this, the organization must establish an obvious goal for e-procurement. Communicate properly with all key parties about the benefits and provide training. Organizations will often recognize those who are actively involved in the implementation process and promote their accomplishments and success stories, which will improve the confidence of others in the organization. 

Real-Life Examples and Case Studies

  1. Nonprofit organization NPHY, had a high volume of critical expenditures each month, totaling $80K/month in organizational spending. They worked with youth experiencing homelessness, so their procurement needs ranged from hygiene products to bus passes to gift cards for local restaurants.

    Procurement for them was executed via manual workflows. There was massive paperwork and email exchange for collaboration. As a non-profit, they also had to follow specific grant reimbursement procedures for their expenses. As a result, there were too many lengthy, time-consuming steps in the process, and it was prone to manual errors.

    “I cannot tell you how many times I’ve gone to the AP email and not been able to find a PO because somebody didn’t name it, or I don’t know what the PO number is because it was never submitted. That was very difficult.”

    Michelle LaBonney, Director of Finance & Operations, Nevada Partnership for Homeless YouthThey implemented e-procurement to streamline requests and centralize documentation using Ramp’s unified central platform to overcome teething troubles like these. With that, the finance team could quickly review all documentation and approvals surrounding a PO in one place, making the workflow significantly simpler.

    Some tangible benefits included 90% faster PO approvals, over 6 hours saved monthly, and a 10-day faster month-end close. The e procurement system now helps them focus more on delivering care to their clients instead of being caught in the whirlwind of backend processes.

  • Viking Well Services’s business required them to make several large-ticket purchases regularly. However, they lacked a well-defined procurement process, eroding their finance team’s efficiency and transparency. Another problem was using a credit card under the name of one of the partners, which they had to move away from to introduce better procurement control.
“Having the purchase order and bills all in one place just makes a whole lot more sense for the type of business that Viking’s doing because you can simplify it down to a one-line-item type deal. That’s important for control purposes, for visibility."

Chris Lowdermilk, Senior Controller, Viking Well Service

To address this, they implemented a consolidated e-procurement platform with business credit cards, expense management, and procurement. They could consolidate bills and purchase orders in one central place. Their finance team got better visibility and control over their spending. They had to no longer wait for a statement from the partner who owned the card. As a result, they now have an 8-day faster month-end close and 2-3 days/week saved.

 The future of e-procurement

Using e-procurement becomes essential for organizations in the age of technology. According to new data, 75% of companies intend to use e-procurement tools within the next four years. E-procurement is expected to rise steadily due to shifting market conditions, technological advancements, and evolving procurement trends. The procurement team is in charge of the digital transition, and the widely used tools have several advantages. Procurement departments will soon be serving as business process catalysts and as interface managers between external partners and internal functions. 

E-procurement plays a major role in Environmental, Social and Governance (ESG) in promoting sustainable and ethical sourcing practices. E-procurement platforms help organizations prioritize sustainable sourcing practices by locating suppliers who provide environmentally friendly goods and services. Furthermore, e-procurement solutions can assist track and managing the whole product lifecycle, from procurement to disposal, thereby ensuring compliance with environmental regulations while encouraging ethical consumption and waste reduction.

The future of e-procurement is expected to be defined by the use of artificial intelligence, which helps in the prevention of repetitive operations such as invoice processing, purchase order creation, contract administration, etc. The cloud-based solutions will continue to gain popularity due to their flexibility and efficiency. This integration, collaboration, and sustainability allow organizations to become more efficient, resilient, and competitive in the global marketplace.

Time is money, and you can save both with e-procurement

E-procurement is an excellent means to streamline procurement for modern businesses. It offers significant benefits such as procurement cost reduction, improved efficiency, and enhanced transparency. That being said, implementing it initially can have challenges but you can overcome them if you take an objective approach. 

Make sure you start your e-procurement journey by understanding your organization’s unique needs and picking the best-fit e-procurement software. Vet it for desirable capabilities, follow best practices and you’ll be able to unlock better competitiveness and drive business success. 

If you want to improve efficiency, enhance transparency, and maintain compliance in your procurement and contract processes, consider investing in an all-in-one platform like Ramp’s Procurement Solution.

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Contributing Author, Economic Times
Kinzal Jalan is a content strategist and senior freelance writer. She has a decade of experience in B2B SaaS at high-growth companies like Recurly, Cleeng, Thinkific, and BCG Platiniton. Her expertise lies in writing value-driven, deeply researched long-form blogs, eBooks, and white papers.
Assistant Manager F&A, Infosys BPM
Finance professional and P2P specialist with over 18 years of industry experience in IT, insurance, and NBFC. In my present work, I assist the team and organization in achieving their goals and improving the process through automation and adjustment as needed depending on business requirements. Excited about taking on new challenges and aiming to enhance the process through close collaboration with the team. Also, contribute to the LinkedIn community by sharing knowledge and building connections with like-minded people. Aside from work, I love to travel and take images and videos. Watching movies, cricket, cooking, family time, playing with kids, and so forth.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.

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