Trends in E-Procurement
As the current economic climate rebounds, more companies are starting to expand their involvement with electronic purchasing systems. This continues a trend that was seen in the late 1990s and 2000, but which has slowed considerably over the past three years as IT spending slowed to a trickle.
While producers of e-procurement software were waiting for new business, most did not stand idly by. Most were improving and integrating their products to make them more responsive to end-user needs.
One of the chief developments in e-procurement systems is the blending of several previously separate applications. Companies used to separately invest in things like supplier relationship management (SRM) software, auction software, and inventory tracking applications.
The most advanced e-procurement systems now combine these functions. As companies use an online auction system to publicize their requests for proposals and monitor their auctions, they need to have integrated access to their SRM systems to track correspondence with participants. They also need to quickly track inventory and monitor payments. Thus, e-procurement systems have become integration points, and control panels for using multiple systems
Current Level of E-Procurement Adoption
As of 2003, nine out of ten purchasing managers reportedly used the Internet for at least some of their corporate buying. This shows a considerably leveling off of the trend since well over 80 percent of purchasing managers have used the Internet for the past several years.
Barriers to participation include budget limits and spending priorities. Another ongoing issue is training. Many companies do not budget training as part of their process of switching to e-procurement. For this reason, some systems have gone unused as employees stick to their known “older systems” in some cases even paper-based systems.
Those companies who use a Web interface for their e-procurement systems have some advantage because most employees have used the Web and understand Web-based navigation.
Benefits of Adoption
The main benefit of adopting an e-procurement system is the ability to consolidate multiple information systems in a single place, while establishing a standardized way to conduct purchases and interface with suppliers. XML-based Web services have streamlined this process, making adaptation cheaper than it was a few years ago.
Those who make the switch to e-procurement often find that they smooth out relationship glitches with preferred suppliers, often establishing a relationship which if better long-term pricing.
E-procurement establishes pricing controls and buying controls, often meeting goals set by Chief Financial Officers for establishing who can authorize purchases and spend money.
Future of E-Procurement Adoption
The growth trend should resume sometime in 2006. The first area that’s likely to see an increase in spending is online auction and reverse auction systems followed closely by applications that tie these auction systems into SRM and inventory systems.
One surprise is that the much-touted public online marketplaces of the late 1990s failed to catch on, other than a few exceptions such as eBay and comparison systems like Shopping.com. Most companies preferred to install their own private systems allowing them to interface with approved suppliers.