Over the years, procurement has undergone significant change. Now, we are in a new era of procurement management, and you have probably heard about e-Procurement and its many advantages for your small, medium, or large business.
One of the most important corporate processes is procurement, which involves making large-scale purchases of products or services to ensure smooth operations. Decision-makers are unsure whether to employ traditional procurement or e-procurement in light of the impact of digital transformation.
You will have a better grasp of difference between eProcurement and traditional procurement with the help of this article, allowing you to make better decisions for business continuity.
What is Traditional Procurement?
Traditional procurement entailed managing the function manually, heavily relying on paperwork, making phone calls to people for updates, etc., to ensure that goods and services arrived at a destination in a predetermined amount of time. Due to lack of visibility, the process was not only time-consuming but also vulnerable to interruptions from a variety of sources.
Disadvantages of Traditional Procurement
1- The function of procurement was traditionally handled manually, with a great deal of reliance on Excel sheets, paperwork, phone calls, and in-person conversations.
2- Companies lost out on the benefits of a strategic approach by treating procurement as a procedure of short-term purchasing rather than as a crucial element of business operations.
3- The objective of this tactical approach was to simply fulfil orders for goods and services in order to get the right quantity at the right price at the right time.
4- All source-to-pay processes are streamlined and expedited when procurement operations are moved to a single, digital platform, which opens up chances to increase value and make cost savings in the procurement process.
5- A company’s operations and potential for financial success were hindered by manual procurement, which relied on tiresome, repetitive processes that took a lot of time and produced little in the way of savings or profit. In an increasingly uncertain and digitalized environment, the traditional procurement method just doesn’t seem to have a place anymore.
What is e-Procurement?
The definition of e-Procurement, as given by The Chartered Institute of Purchasing and Supply (CIPS), is:
“The combined use of electronic information and communications technology to improve the relationships between the customer and the supplier, as well as with other partners in the value chain, and thereby to improve internal and external processes. A key component of B2B e-commerce is e-procurement.
In other words, e-procurement strengthens the internal business processes for both the buyer and the supplier, as well as the relationship between them. It also results in significant cost savings and increased profit.
Benefits of eProcurement
Supplier issues solved
It’s challenging to find the proper suppliers with the right quality and timing, and even if you do, order management issues may arise! But with e-procurement and a B2B marketplace, you can browse hundreds of suppliers, compare them, and choose the best one, then manage your order online without leaving your chair.
E-procurement makes it easy for departments to follow company procurement requirements without wasting time, and all procurement paperwork will be online and easier to review for errors. Also, your organization can more simply review old orders to verify new ones.
e-Procurement provides more data, which is consolidated, cleansed, and categorized by advanced analytics to improve spend visibility and analysis. You can also follow your company’s spend behavior in real time to better control and monitor spending and savings.
E-procurement automates source-to-pay processes, making operations faster and easier for procurement officers. E-procurement removes superfluous tasks, letting you focus on more important ones.
Cost reduction and savings
The procurement department’s main goal in any business is to generate more savings for the company while getting the needed procurement in the desired quality. You can get some savings with the traditional procurement approach, but you’re missing out if you don’t use e-Procurement because procurement is treated as a short-term process of purchasing, thus failing to bring significant savings and profit.
But with e-Procurement, you can easily reach your financial goals with strategic supplier sourcing, better management, and spend visibility. It also saves money by minimizing duplicate spending, leveraging volume buying, and avoiding paper-based methods.
What are eProcurement risks?
eProcurement is beneficial for your firm, but it has risks:
- eProcurement and internet business may put your transactions and corporate data at risk.
- eProcurement platforms frequently charge high subscription costs, making their benefits expensive.
Difference between eProcurement and Traditional Procurement
|This process is manual||This process is online|
|Procurement officers have to look through many suppliers’ catalogues and may not be aware of any discounts they offer. They then search for the suppliers through multiple phone calls and are frequently based on in-person conversations or pen and paper.||Quickly evaluate hundreds of online catalogues from many suppliers at once using your laptop or smartphone. You may also connect with the supplier online to confirm availability and quantity, which expedites the purchase order activity.|
|Time consuming||Time saving|
|Physical note listing the needed goods and their costs was submitted for approval||Purchase requisitions are prepared and accepted in the system itself|
|Purchase orders are manually created, reviewed, and approved before being faxed or delivered via courier to the vendor.||Purchase orders are prepared, approved, and sent to suppliers online in a matter of minutes, and the vendor can promptly confirm the same|
|Procurement officers must call the suppliers for order tracking||Online order tracking|