In our previous article, Influence of Digitization on Procurement Part 1, we have discussed about the basics of this topic. The electronic purchase of products and services by companies via digital networks is referred to as e-procurement. The aim of e-procurement is to support both strategic and operative procurement with electronic tools, or to optimize the two parameters of process costs and process results. The terms e-ordering and e-sourcing each refer to the electronic support of strategic or operative purchasing with the corresponding focal points.
With e-ordering, the focus is on operational and administrative tasks. Approaches to reducing process costs, for example through the use of electronic catalog systems or online shops for corporate customers, are included for the processing of low-value requirements. E-sourcing, on the other hand, is characterized by strategic approaches in which the main goal is to lower purchase prices and not primarily lower process costs. The use of databases to identify new suppliers, electronic inquiries and tenders or electronic purchase auctions can be mentioned as an example.
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Objectives of E-Procurement
Because all savings generated in purchasing can be added directly to company profits, the so-called “leveraging effect of materials management” is recognized as the main reason for the attractiveness of e-procurement. The product costs are the most obvious way to achieve savings. In particular, dynamic pricing mechanisms, such as those found in e-auctions, offer the possibility of realizing lower final prices. Procurement goods with high goods values are particularly suitable for this because of the large savings potential.
Further savings potential lies in the reduction of process costs and the optimization of warehousing and inventory costs, which can be realized through faster and more flexible handling of the operational and strategic procurement processes.
The simplification, support and automation of business processes is another central goal of e-procurement solutions, in addition to the financial goals. The savings are made on the one hand by reducing process costs and on the other hand by increasing process quality and reducing susceptibility to faults. By automating the purchasing processes, orders are processed faster and more easily. Significant times can be saved, especially in the areas of idle times, approval procedures and transaction paths. e-procurement systems can offer the opportunity to reduce throughput times by an average of 83%.
In addition, the use of e-procurement solutions leads to an optimization of the existing capacities, so that the purchasing employee is relieved of operational tasks and can concentrate more on the strategic part of the procurement.
The use of e-procurement solutions leads to a significant improvement in the information available. The simplification of obtaining and evaluating information has led to more and faster information being available to buyers.
A company can significantly improve the market position of its purchasing department by using e-procurement. The transparency gained enables a much simpler procedure for bundling needs and thus better positioning on the market. The company thus gains bargaining power, which it can use to reduce purchase prices or improve conditions.
In addition, the transparency of e-tenders or e-auctions also means that competition among suppliers is intensified and made clear, which results in an increase in price pressure on suppliers.
Finally, the automation of the ordering process leads to a fight against shadow processes such as the so-called “maverick buying” in purchasing. This refers to the purchase of goods and services by non-specialist departments without the direct involvement of purchasing.