eProcurement: Exploring the Advantages and Benefits

According to a report from BCG, only 30% (!) of digital transformations are successful. Of course, the definition of success can vary depending on a company's specific requirements. However, the report defines successful implementation as resulting in 66% more value, enhanced corporate capabilities by 82%, and achieving 120% more of their objectives.

Figure 1: Success in Digital Transformations

Source: Boston Consulting Group

Today, supply chain systems are becoming quite sophisticated with the presence of advanced communication technologies. However, within companies, there are always hurdles to achieving the full adoption of new systems and achieving their full capacity. Well-developed businesses should change their complete supply chain systems and processes or migrate them to their legacy processes.

The reasons for the "feature" of digital transformation might differ from company to company:

1. Failure in change management: This leads to resistance to training and miscommunication between top management and other stakeholders.

2. Failure in proper training and documentation: Users who are not properly trained may not know how to use the system effectively, leading to errors and frustration.

3. Failure in system/process simplification: Resistance from the users' perspective will increase. Furthermore, complicated systems are more prone to technical problems such as compatibility issues, software bugs, or hardware malfunctions, which can derail the implementation process.

Although procurement system rollouts are more prone to failure for companies, a well-planned and pre-defined rollout can provide significant long-term benefits. By establishing a centralized system for procurement, companies can increase efficiency, reduce costs, and improve supplier relationships. This can build a strong foundation for future eProcurement processes and set companies up for success.

What is actually eProcurement?

The generic definition of the term eProcurement (Electronic Procurement) is the process of conducting procurement activities through electronic channels such as the internet or other digital technologies. This includes the purchase of goods, services, or works, as well as the management of the procurement process itself.

In practice, eProcurement systems or platforms differ from ERP systems and can be integrated into them. To give an analogy to understand eProcurement:

Just like how a traditional mall brings together multiple stores under one roof for easy access and convenience, eProcurement platforms bring together multiple suppliers and vendors in one online location. Just as shoppers can easily compare products and prices from different stores in a mall, eProcurement systems allow organizations to compare offerings from different suppliers, check prices, and select the best option. Additionally, just as online shopping provides the convenience of shopping from anywhere and at any time, eProcurement enables procurement activities to take place online, from anywhere with an internet connection, and at any time.

Market examples for those platforms can be:

• SAP Ariba

• Oracle Procurement

• Coupa

• Jaggaer

• Kissflow

Benefits and Advantages

If we analyze the offers from the market leaders given above on the eProcurement system, we can name dozens of benefits and advantages.

Undoubtedly, after the recent pandemic and the increase in the pace of globalization, companies aim to reduce their information exchange time and react as quickly as possible to market requirements.

Increased Efficiency

eProcurement simplifies the procurement process, making it quicker and easier to complete transactions. This can result in faster procurement cycles, decreased administrative workload, and heightened efficiency

Cost Savings

eProcurement can help organizations save money by reducing paperwork, minimizing errors, and optimizing supplier relationships. By automating the procurement process, organizations can also reduce overhead costs associated with manual processing and streamline their procurement operations

Improved Accuracy

eProcurement systems can help ensure data accuracy by reducing errors associated with manual data entry and providing real-time updates on procurement activities. This can improve overall data quality, reduce the risk of errors and inconsistencies, and help organizations make more informed procurement decisions

Better Transparency

eProcurement can improve transparency in the procurement process by providing stakeholders with real-time information on procurement activities, such as bids, contracts, and vendor performance. This can help organizations make more informed decisions and increase accountability

Increased Competition

eProcurement can increase competition by providing a level playing field for suppliers to bid on contracts. This can lead to better pricing, higher quality products and services, and improved supplier relationships

Along with the listed advantages, are there any disadvantages? The answer, as you can guess, is that there is no perfect system that can suit all companies' needs and meet their requirements. At the moment, we face challenges in the safety of transactions, the privacy of distributed information, fees and costs related to procurement processes, limitations of the suppliers that are onboarded to the platforms, the complexity of integrating the eProcurement system into ERP or accounting systems, and so on.

Sources

Boston Consulting Group: Companies Can Flip the Odds of Success in Digital Transformations from 30% to 80%

Spend Matters: How to overcome e-procurement platform adoption challenges

CIPS: 90% of procurement software rollouts end in failure

Coupa: Why Coupa

SAP: Was ist Ariba?

Jaggaer: Why JAGGAER for Autonomous Commerce