Understanding E-Procurement Systems: Contribution, Challenges, And Benefits

Understanding the E-Procurement Systems

Discuss about the E Procurement Systems.

Due to the growing technological advancements in the business transactions today, E-procurement has been increasingly gaining significance in the integration of the various business processes, such as entry of the receiving material from the suppliers, getting customer orders, auditing, delivery of the materials to the B2B or B2C markets and checking status of orders and payment details electronically. The various components of the e-procurement, such as purchase order integration, e-tendering, shipment management, e-auditing, status updates of active order, and vendor management assist to integrate the business processes and activities electronically (Pablos and Patricia, 2012). This essay will describe the understanding of the e-procurement systems, contribution of e-procurement in the effectiveness of the supply chain operations and purchasing functions, and challenges of adopting the e-procurement system by the business organizations.

E-procurement is an integral part of the modern businesses whether private or public sector business enterprises as it offers a range of supply chain network services to support the global procurement transactions by using the internet system, digital connectivity, and ERP technology. E-procurement is termed as purchasing the good and services electronically by using internet system and digital technologies. It involves the components, like supply chain automation, purchasing order integration, e-tendering and e-auditing, shipment management, online catalogs from the approved vendors, checking status of orders, and electronic request for submit proposal (e-RFP process). The e-procurement is an automation tool for the corporation of the supply chain operations and purchasing transactions (Toktas-Palt, Baylav, Teoman, and Altunbey, 2014). It provides a comprehensive integrated IT network for promoting the leverage group buying and purchasing discipline for all procurement transactions responsible in an organization. E-procurement provides online information for the convenience of both business enterprises and customers as it provides the data related to the procurement processes, such as online order placement, online payment of money and confirmation of delivery of products. 

E-procurement is a significant part of E-commerce that is effective to manage the business transactions across the national boundaries electronically. It assists the business firms (private and public sector firms) to carry out the procurement activities through B2C (business to customer) and B2B (business to business) on enterprise resource planning and web-based exchange system. In the growing rapid technological dynamics in the modern businesses, E-procurement has been increasingly used by the manufacturing firms and service industries in both private and public sectors, such as oil, gases, and mining firms, production firms, and professional services to facilitate the business transactions electronically related to the purchasing functions and supply chain operations Boariu, N. (2015).

Contribution of E-Procurement Systems Toward the Efficiency of Supply Chain Operations and Purchasing Function

E-procurement is the electronic transaction of the goods and services to the B2B and B2C customers as well as accounting and auditing the materials or goods supplied from the suppliers electronically by using the internet systems, networking infrastructure and information technologies, such as ERP (Enterprise Resource System) and EDI (Electronic Data Interchange). The functions of e-procurement consist, like electronic order processing, e-informing, e-auctioning, e-tendering, e-payment, vendor management, invoice management, catalogue management, request requisition, purchasing order integration, order status, shipping notice, contract management (Shaw and Qualls, 2012). E-procurement includes features, such as purchasing orders, budgeting, requisitioning, approval management, quotation management and invoicing.

E-procurement assists in the vendor/supplier management by maintaining all accounts of the purchasing transactions or procurement processes as well as maintaining good vendor relationships electronically (William, 2007). It assists in the indent management by facilitating the online creation of the procurement processes and goods indents and estimates in the standardized electronic formats for the approval. It facilitates e-tendering and e-auctioning through the creation of online tender notification and document management and publishing, submission of requisition for online bid, evaluation and shortlisting, and auctioning electronically. It also assists in information system management by integrating the different business processes in order to generating reports electronically. It also facilitates the catalogue management of new and existing business contracts. It facilitates contract management through issuing the electronic purchase orders, updating of management of work progress, and customer relationship management (Ramanathan, 2004). The e-procurement is also effective to facilitate and manage electronic or online payment of bid submission fees, tender management, EMD (equity monthly deposits) and payment to vendors or suppliers.

The implementation of the e-procurement systems enhances the effectiveness and efficiency of the purchasing function and supply chain operations by facilitating changes in the organizational characteristics, procurement structures and processes, total cost of acquisitions, and change in governance structure, implementation, and management. The e-procurement system is effective for the business enterprises to provide both strategic advantage and operational benefits. It enhances the effectiveness of the procurement process, purchasing function and supply chain management operations and thereby reducing the total costs of the procurement. It contributes toward the operational efficiency of the procurement function by reducing the operational costs, delays, and paperwork through the cycle-time savings, errors savings, and staff savings. Better availability of the purchasing information and reduction in the cycle time through the e-procurement function help in the centralized control of the purchasing procedures, reducing the inventory, and better business planning (Vaidya and Kishor, 2011).

Benefits of E-Procurement Systems

 The e-procurement function provides avenue for buying the goods and services directly and indirectly that assists to make waves in the purchasing cycles. The e-procurement is efficient to enhance the effectiveness of the purchasing function and supply chain operations because it enhances the transparency, accountability and trust in the public procurement process. It is also effective because it facilitates faster procurement cycle, reduced human interface, bidding anywhere and anytime, reduced operational costs and delays, effective utilization of funds and price setting, enhanced process effectiveness and better decision-making (Kamel and Sherif, 2010).

The e-procurement provides greater transparency, wider geographical research, great satisfaction while negotiating with suppliers and customers, better pricing, and lesser time in the business transactions. It provides an opportunity for the business enterprises to attain the sustainable savings through an automated order processing, easy-to-use purchasing, invoice management, vendor management, and supplier enablement capabilities. It improves the purchasing efficiency, increase compliances, and garners sustainable savings across the business enterprises (Varajao, Quintela, and Sousa, 2012). E-procurement is the fastest way of responding to the purchasing process as it helps in reducing the paperwork, operational expenses, inventory costs and time taken in the business transactions, product delivery and payment. It is effective to collect and store the large amount of data related to the procurement processes caused from the purchasing and selling the goods or services from the suppliers and to the B2B or B2C customers representatively.

The e-procurement function assists the business enterprises to compare the prices easily and quickly, review the product specifications, and delivery dates from the suppliers worldwide. It is effective to incorporate different business aspects, such as hosting of databases, catalog management, order processing, managing tenders and auctions on behalf of the customers to represent a complete outsourced procurement service electronically. The successful implementation of the e-procurement function provides better means to the purchasing function by enhancing the procurement standards through integrating the different business processes related to the procurement function electronically. It is effective in the document administration, invoice management, customer order processing, and process requisition (Lee and In, (2008). It enhances the efficiency of the purchasing function and supply chain operations by ensuring the transparency and accountability of the business transactions and thereby avoiding the possibilities of discrimination, fraud or errors in the purchasing transactions.

Although, e-procurement is effective for managing the purchasing function and supply chain operations but it may bring cost to the business enterprises because of its challenges across the enterprises globally. One of the significant challenges is the cost of acquisitions and management of e-procurement operations in the capital tight environment. Another challenge of this is that the company has to define the synchronization and integration of the business processes and systems as well as harmonizing operations among the enterprise itself, customers, vendors, suppliers, and distributors. The conventional e-procurement is identified as a complex and unintuitive user interface which is challenging to operate the businesses globally (Purchasing and Production Center, 2014). It also creates challenges because of the less integration of the e-procurement processes and applications with the upcoming ERP and EDI systems. Sometimes, it becomes difficult for the enterprises to provide online support for the different business vendors and suppliers.

Challenges of Adopting E-Procurement Systems

The business enterprises also face challenges with adopting this system for ex- it requires technical feasible employees as providing the technological training to the employees can bring more cost and time to the businesses (Tschammer, Henriksen, Ramfos, and Renner, 2009). One challenge of it is that the small to medium enterprises have to comply with the ICT regulations related to the e-procurement. It also creates some other challenges for the business enterprises, such as fear of upfront cost and development time, lack of skilled professionals, and frequent updates of the rapid changes. For e.g.- in the European countries, the e-procurement system has witnessed low adoption rates among the business enterprises. The creation of an appropriate and context tailored strategy is one of the most significant challenges of having e-procurement system by the business enterprises. It is technological adoption and complex functional process which requires analytic and dynamic strategy, holistic vision, and transformational information (Hunja, 2015).

Conclusion

From the above studies on this essay, it can be concluded that due to the emergence of the e-commerce and e-business models, advent of the internet system and enterprise system technologies, and digital connectivity, the importance of e-procurement is remarkable for the modern business enterprises in the integration of business operations and processes, supply chain management operations, and purchasing processes. The different components of e-procurement assist in the effectiveness of the supply chain operations and purchasing processes. The firms also face challenges because of its shortcomings while adopting the e-procurement system in the business processes, activities, and systems.

References

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