Potential Pitfalls Associated with E-Procurement
Magazine articles and white papers are filled with optimistic estimates of how much money organizations will save by migrating to electronic procurement systems for all of their purchasing. However, many of these estimates fail to take into account the total cost of adapting these systems, the difficulty of realizing savings during the development and deployment phase of the transition, and the cost of training employees and getting suppliers to participate in the e-procurement system.
Procurement is a very broad term. There is, in general, a broad push for companies to adapt e-procurement for all types of purchasing. In most cases, the best place to apply electronic procurement is in circumstances where a very close business relationship must be established and ongoing cooperation is needed with suppliers, especially when developing new products or technologies.
Critical items and systems are not the first place to apply a new e-procurement system. Anything that will immediately impact profits or bottleneck your operations is not a good place to experiment with a new electronic procurement system. For this reason, some companies first integrate e-procurement in their maintenance, repair and operations (MRO) systems. Once they have the bumps ironed out of their system, they move on to their manufacturing operations.
It’s not a good idea to implement e-procurement first on systems that have a high supply risk and low profit impact, especially if there are a very limited number of suppliers to choose from. The company doing the purchasing will not see an immediate strategic advantage from this kind of implementation.
Effective Implementation
- Start with non-critical items. An initial e-procurement system should slim the amount of paperwork needed for purchasing and reduce order complexity by standardizing the exchange process between supplier and buyer. Use your intranet to bring all internal stake-holders on board with your new procurement process and to establish internal customer behavior. Streamline, map, test, troubleshoot and improve the process before expanding it to external suppliers. Work with a favored supplier to test the system.
- Leverage your system once it’s running. Exploit your full purchasing power by using reversed auctions. Invite new suppliers to participate once the system has proven itself.
- Aggregate buyers within your organization to increase your purchasing power and gain better pricing.
- Use a portfolio approach to expand your system. It is not possible to have uniform relationships with all suppliers nor are all purchasing requirements the same. Sort purchasing needs into groups that can use a similar process and a similar template.
Epiq Technologies Can Effectively Handle E-Procurement
Epiq Technologies offers extremely high quality enterprise software that follows common industry-standards processes for effective e-procurement.
Epiq enjoys one of the lowest hardware and hosting costs because it uses industry-standard Web servers and needs little customization for most installations. Web browsers are used for all interactions with the system, so no expensive and separately maintained client software is needed.
Epiq offers simplified and automated procurement processes that produce measurable results. Specialized tools for e-negotiation and e-procurement allow managers to can control and monitor an auction process
This streamlines the full RFQ process and enhances supplier management and overall satisfaction as they do business with your company.