5.35 eProcurement Systems

eProcurement is the digital-enabled purchase and sale of supplies, commonly business-to-business or business-to-government, but occasionally business-to-customer.

Third party software enables companies and their business facilities to communicate directly with suppliers, and effectively manage all interactions between them. Such interactions include correspondence, bids, questions and answers, previous pricing, multiple emails sent to multiple participants, and customized catalogs where purchases will encompass handling, shipping and insurance charges, and financial data can be imported directly into company financial systems.

eProcurement helps companies focus on of their key suppliers, and maintain an open line of communication before, during and after procurement. Information in digital form allows for ready comparisons on price and reliability, eliminates unnecessary paperwork, and promotes a better understanding of buyer and supplier requirements.

Types of Net Marketplace

It is usual to distinguish direct good (goods used in the manufacturing process) from indirect goods (goods simply used to support manufacturing). Contractual purchasing (where goods are purchased over a long period by contract between the parties) also needs to be distinguished from spot purchasing (one-off, made as needed, with no relationship necessarily between the parties). With those distinctions in place, net markets can be characterized as edistributers, independent exchanges, eprocurement and industry consortia. {8}

Purchase/Input Type

Direct Inputs

Indirect Inputs

Spot Purchasing

Independent Exchanges

eDistributors

Contractual Purchasing

Industry Consortia

eProcurement

Type of Market

Vertical Markets

Horizontal Markets

eProcurement Types

Seven main types of eprocurement can be distinguished: {1}

1. Web-based ERP (Enterprise Resource Planning): creating and approving purchasing requisitions, placing purchase orders and receiving goods and services.
2. eMRO (Maintenance, Repair and Overhaul): as ERP except that the goods and services are nonproduct-related MRO supplies.
3. eSourcing: identifying new suppliers for a specific category of purchasing requirements.
4. eTendering: sending requests for information and prices to suppliers and receiving their responses.
5. eReverse auctioning: buying and services from a number of known or unknown suppliers.
6. eInforming: gathering and distributing purchasing information between internal and external parties.
7. eMarketsites: integrates buyers and suppliers with their associated order and financial systems: opens up value chains.

Advantages

1. Realtime intelligence of the customer needs.
2. Purchases can be tracked and made to comply with company guidelines.
3. Overview of current suppliers and options becomes available.

Questions

1. Distinguish between eprocurement, digital exchanges, industrial consortia and private industrial networks.
2. Under what keywords would you undertake a search for eprocurement systems on the Internet?
3. Name and briefly describe the seven types of eprocurement systems
4. Explain how eprocurement systems work. What are their advantages?

Sources and Further Reading

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