January 25, 2023
What is eProcurement?
eProcurement automates and streamlines procurement practices, delivering cost savings and process efficiencies. We explore its origins, key features, and benefits.
eProcurement involves managing procurement processes through an online system. Procurement teams and buyers interact with their preferred suppliers through a digital solution that also allows them to automate and streamline processes.
The organization has complete control over the operation of the eProcurement solution, including:
- which users have access and which budgets they can purchase against
- which suppliers they can access
- the approval workflow for each user or user group.
The transition to a digital solution allows for the automation of the entire procure-to-pay process, from purchasing to approvals to invoice management, and means there is a digital, auditable record of each step in the chain.
The evolution of eProcurement
The origins of eProcurement date back to the 1980s with the development of electronic data interchange (EDI). This advancement allowed organizations to complete transactions with each other digitally and made a very basic form of online ordering possible.
The following decade saw the introduction of online catalogs through which organizations could browse products and purchase from their chosen suppliers. From that point on, eProcurement technology has continued to evolve with features capable of managing and optimizing all aspects of modern-day procurement.
Today, eProcurement has become an indispensable tool for many organizations, with global annual sales through B2B eProcurement channels currently just under the $1 trillion mark.
The key features of eProcurement
While not all eProcurement solutions offer the same functionality, many share a number of key features.
A foundational feature of eProcurement, a procurement (or B2B) marketplace offers an easy and intuitive way for end users to buy what they need and access all of an organization’s suppliers.
While a marketplace is hosted by a procurement solution provider, it is controlled by the organization that has purchased the service. As a result, only preferred suppliers providing products and services at agreed prices are accessible to end users, ensuring the organization is taking full advantage of negotiated pricing.
Marketplaces encourage on-contract spending by making buying simpler and providing end users with all available contracts in one convenient location. Visibility across all purchases also increases cost savings and cost avoidance by minimizing unnecessary or duplicate orders.
Finally, marketplaces provide end users with choice, empowering them with the knowledge and tools to compare prices from multiple suppliers quickly and get the best value for the organization.
Automated approval workflows
The optimal eProcurement platform will include automated and configurable approval workflows that support organizational spending policies.
For example, if the organization requires purchases over $5,000 to have executive-level approval, purchases above that amount will automatically route to the appropriate executive for sign-off.
Once an order is approved, it is automatically sent to the supplier for fulfillment, further minimizing the number of manual touchpoints involved.
eProcurement approval workflows eliminate paperwork and the need to chase approval emails, while also providing the peace of mind of an easily auditable trail.
From onboarding to optimization, eProcurement allows for simpler and more cost-effective management of suppliers.
Suppliers are integrated with the eProcurement solution instead of directly with an ERP. This means that the burden on an organization’s IT resources is greatly reduced and procurement teams are not forced to limit their supplier selection. In fact, many eProcurement solution providers already have a broad network of integrated suppliers, making onboarding even easier.
Plus, eProcurement solutions allow suppliers to manage and update their own catalogs, saving organizations time and effort while also ensuring that product information and prices are always up to date. All changes are subject to approval so the organization always retains full control and visibility.
Automated invoice processing
eProcurement solutions can streamline the accounts payable process and substantially reduce manual effort by automating invoice processing. Two or three-way matching is automatically carried out to the organization’s requirements and tolerances and its ERP is updated with the details of each invoice, meaning it has a complete record of all financial data at all times.
A major benefit of processing invoices this way is cost savings. The average cost to process an invoice manually is around $14 to $17 and takes approximately 14 days. But with automation, the cost drops to $3 and the cycle time shrinks to three days.
Automation also removes the risks associated with manual processing such as data entry errors and accounts payable fraud, plus it guarantees a transparent and traceable record of all invoices.
Organizations that manage contracts using spreadsheets or other manual processes may miss critical strategic opportunities. For example, cancellation or renewal windows, price increases, and other supplier-related issues that increase costs to an organization are a few situations where opportunities are often missed.
Contract management, a feature in some eProcurement platforms, is a central repository for contracts. But it’s much more than just storage.
Procurement and key stakeholders can review and collaborate on contract documents in a single solution. Reminder notifications can be created so that costly cancellation windows and renewal periods are not missed. In addition, procurement can initiate auditable workflows for new and amended contracts for greater compliance and accountability.
Top 5 benefits of eProcurement
Streamlining and automating processes through an eProcurement solution helps organizations meet key business objectives in a number of ways. These are some of eProcurement’s main benefits.
- eProcurement cuts costs. By automating the procure-to-pay process and cutting unnecessary manual costs, organizations can reallocate the saved money to other important initiatives. In addition, comprehensive spend data lets procurement realize volume discounts and negotiate more robust contracts, driving savings back to the organization.
- eProcurement is intuitive and easy to use. The more accessible and intuitive a solution is, the more users are incentivized to use it. eProcurement’s intuitive marketplaces and automated ordering and approval processes make doing business easier for users and suppliers. The value of this ease of use is even clearer when comparing eProcurement to a traditional ERP.
- eProcurement makes processes more efficient. Manual, paper-based processes are often time-consuming and inefficient. eProcurement automates procurement processes, making them more efficient and putting time back on the clock for both procurement teams and end users.
- eProcurement reduces risk and improves auditability. With eProcurement, there is a digital record of each step in the procurement process. It eliminates paper and replaces it with electronic data that is easily accessible and securely backed up, significantly reducing the risk involved with a paper-based procurement process.
- eProcurement increases spend visibility and transparency. One of the most compelling benefits of eProcurement for procurement and finance leaders is the comprehensive oversight of organizational spending behavior. Through configurable reports, leaders can analyze requisitions, approvals, purchase orders, invoices, payments, contracts, and suppliers.
eProcurement: The present and future of procurement
Greater digitalization and automation of procurement processes have consistently featured among procurement’s top priorities. In The Procurement Agenda: 2022 Key Issues, The Hackett Group described the digital transformation of procurement as “an essential enabler of procurement organizations’ ability to deliver new services amid constrained budgets.”
Purpose-built eProcurement solutions have emerged as the most cost-effective and accessible way to achieve this transformation, empowering organizations to streamline the entire procurement process.
Those forward-thinking procurement and finance leaders that have embraced eProcurement have been able to realize cost savings and efficiency benefits and deliver the competitive advantage their organizations need.
eProcurement in practice
- Find out how Touro University System uses eProcurement to simplify procurement across a complex organization.
- New Zealand’s National Institute of Water and Atmospheric Research makes purchasing easy for its end users with eProcurement.
- Discover how Duquesne University delivers substantial time and cost savings with an eProcurement solution.
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