Procurement is the process of buying and paying for goods and services for a company. It is one of the most impactful functions within an organization. It’s a cross-departmental operation that, when administered correctly, helps drive top-line performance while protecting the bottom line.
As companies grow, procurement activities take on a life of their own. This leads to wasteful spending, underutilized data, and frustration for teams. For many organizations, electronic procurement (e-procurement) is the best solution for avoiding procurement logjams and improving data visibility. It provides scalable, automated business processes for handling increases in vendors, invoices, and ordering.
What exactly is e-procurement, how does it work, and how do e-procurement tools help businesses save money? Let’s take a look at e-procurement top to bottom: the process, steps, and benefits of adding e-procurement to your procure-to-pay (P2P) process.
What is e-procurement?
E-procurement digitizes the procurement process through a cloud-based or software-as-a-service (SaaS) purchasing tool. This intelligent procurement approach allows companies to buy and sell products and services quickly, without the time-consuming tasks of calling a sales rep, transmitting POs by email or fax, or mailing a check once the goods arrive.
How does the e-procurement process work?
E-procurement solutions give finance and procurement departments complete control over the e-sourcing and purchasing process. At the same time, they enable users to order the tools and products they like via e-ordering.
Buyers have access to curated, pre-vetted catalogs of products or services, allowing them to get the items they need in a familiar “fill the cart” process. When the user places their order, the request goes through a standard approval and fulfillment process in the backend.
The system allows administrators to set purchasing parameters and create dynamic user budgets. These budgets are customizable by username, role, authority level, department, or location. And because e-procurement uses real-time inventory levels (reported by the supplier), instances of out-of-stock or back-ordered goods are reduced or eliminated.
Using a curated catalog for procuring goods and services also reduces the time spent on ordering and payment. It dramatically reduces busy work and allows stakeholders and accounts payable to spend more time on higher-value tasks.
How e-procurement programs handle purchasing
E-procurement differs from a traditional procurement process. E-procurement uses a sophisticated system of workflows and automatically handles tasks previously overseen by procurement and AP teams. As a result, the overall stages of the process—sourcing, purchasing, and payment—remain the same, but orders placed within the e-procurement system proceed with far less human intervention.
The e-procurement process improves upon traditional procurement in several ways:
Need identification: As with traditional procurement, the first step of the procurement cycle begins when a stakeholder identifies the need for goods or services. In e-procurement, the buyer researches options through a marketplace or curated digital catalog of preferred suppliers and approved items using an electronic data interchange. Next, the user selects items based on available options, guided by dynamic budget parameters set up in the system.
Ordering: Once a buyer identifies their desired items, the e-procurement platform automatically routes the order through approval. Because inventory levels, pricing, and delivery data are reported directly within the system, buyers understand costs and timelines up-front. This eliminates the need for traditional contract negotiation. Greenlit purchases move directly through the system with a few clicks, allowing the order to proceed to fulfillment quickly.
Fulfillment and receipt: The e-procurement platform automatically updates buyers on each order’s status and provides real-time information on delivery status. The ability to track the order from processing to delivery reduces the need to communicate with the supplier for updates. Once delivered, the buyer or receiver inspects and evaluates items for accuracy and quality, then electronically accepts the order as received.
Post-close data management: All purchasing data is centralized in the database. Supplier contracts are easily accessed for contract management, and reporting dashboards allow users to visualize data and trends for spend management and supplier management. Data is exportable to other programs such as ERP and marketing systems, allowing different departments to track metrics and import data for use across the organization.
5 benefits of e-procurement software
- Better cost efficiency: One of the benefits of e-procurement software is protecting the bottom line when buying the items and services your company needs.
E-procurement creates savings through:1. Better cost of goods from working with pre-approved and preferred vendors
2. Reduced requisition-to-invoice costs by as much as 48%
3. Thousands in savings on employee wages for manual processing
4. More cost-efficiency created through increased staff productivity
5. Reduction of wasteful spending on late fees and penalties
- Lower error rates: Automatic order processing and payments significantly reduce the exception rate for invoices. The automated system eliminates problems common in manual invoice processing—such as duplicate orders, missed payments, and duplicate payments.
- Eliminated maverick spending: The use of curated suppliers and approval matrices streamlines the buying process for everyone, making it easier for buyers to get what they need quickly. The result is fewer instances of unauthorized spending through unapproved providers.
- Better pricing: Using pre-approved suppliers within an e-procurement system ensures you’re getting competitive pricing for goods.
- Integrated analysis tools: Data centralization makes it possible to generate spending reports automatically and conduct a wide range of spend analyses. With better data visualization, businesses can forecast, plan, and budget more effectively.
How Order can help with e-procurement
Choosing the right e-procurement solution important for companies that want to save money on goods and reduce procurement timelines. Order takes the best features of a first-in-class procurement tool and improves them with features that further streamline the process and reduce the burden of manual tasks.
- The platform makes it easy to manage spending across any number of users, locations, and unique ordering needs. All your users will find their favorite products and tools available within the system. With these specifics in mind, catalogs are optimized, providing user satisfaction while prioritizing cost, brand, and timing.
- Even small businesses with a handful of locations can generate hundreds of invoices every month. Order goes beyond invoice management by introducing invoice consolidation—a tool that reduces a pile of monthly invoices down to one invoice a month. Order consolidates all invoices across every supplier down to one perfectly-coded invoice, so AP has one bill to pay at the end of the month without the hassle of manually coding any invoices.
These features help clients like ZeroCater tame out-of-control invoicing systems, increase visibility, and eliminate hidden spending quickly and systematically.
E-procurement takes the power of a robust procurement process and removes the effort of manual administration—giving back time and improving capital efficiency. If your organization is ready for the efficiency and savings e-procurement offers, request a demo of Order today.