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E-procurement: Successful digitization of purchasing and procurement

by Editor

Selecting suitable suppliers, comparing prices or processing orders – procurement processes take time and tie up human resources. This is all the more true if these processes are carried out manually. Thus, automated procedures in the purchasing process are an integral part of modern supply chain management and can help to make procurement more efficient, transparent and flexible. A wide range of e-procurement solutions as part of the digital supply chain helps companies streamline processes and relieve employees of routine tasks. We have compiled an overview of the benefits of e-procurement and present potential solutions.

  1. What is e-procurement?
  2. Advantages of electronic procurement
  3. E-procurement systems at a glance
    • Open, semi-open and closed systems
    • Supplier systems, procurement systems, marketplaces
  4. Platforms and systems: Examples

1. What is e-procurement?

An e-procurement system replaces manual or decentralized processes in purchasing and procurement with processes that are streamlined, digitized and centralized processes. This involves the use of online-based platforms and digital networks provided either by suppliers, purchasing companies or marketplace operators. Depending on the solution, all steps of a procurement process can be centrally coordinated and monitored, from supplier selection and offer management to invoicing and payment processing.

2. Advantages of electronic procurement

Frequently recurring procurement processes can be made more efficient through e-procurement. This applies to products with a high turnover rate, as is often the case with commodity group C. In the traditional procurement process with manual demand reports from the warehouse or sales department and non-centralized ordering processes, these routine activities take up an unnecessary amount of time, are prone to errors, and make it difficult to obtain a transparent view of global goods movements.

Digitization of procurement offers significant advantages:

Streamlining and increasing efficiency: Digital processes shorten routine procedures. Likewise, errors occurring during input and transmission can be avoided. Real-time data transfer and convenient order processing can shorten procurement times and make goods available quickly.

Transparency: E-procurement solutions and digital procurement processes increase visibility in global supplier networks. This enables all stakeholders to reliably keep an eye on the entire ordering and payment process.

Profitability: Automatic supplier selection, e.g. according to price criteria, and efficient payment management enable cost reduction and profit optimization. Targeted and controlled ordering processes with high processing speed facilitate inventory management.

Collaboration: Close networking of players and seamless cooperation of internal teams and suppliers, simplified rights distribution and communication contribute to efficient collaborative processes and transparency along the supply chain.

Flexibility: Comparisons of current conditions and the search for alternative offers is possible in a short period of time. In closed systems, stock levels can be viewed in part and orders can be placed automatically as soon as the reorder level is reached.

Inventory control and management: All processes and transactions can be tracked in real time and relevant data can be viewed. High transparency prevents incorrect and duplicate purchases. The purchasing department can react more agilely to fluctuations in demand.

Supplier management and agility: Strategic supplier management benefits from a central overview of existing supplier relationships, the simplified and flexible search for suitable suppliers, the option of standardized supplier evaluation  and uniform contract management.

Cost transparency: Using a centralized platform, companies can view their expenses in real time. Modern tools enable detailed expense reporting and analysis to better plan and control spending.

3. E-procurement systems at a glance

There are a large number of variants when it comes to electronic procurement. Which system is suitable for individual requirements strongly depends on the type of products, the commodity group, as well as  the prerequisites and requirements on the company and supplier side. For this reason, companies sometimes use different systems and tools at the same time.

Initially, a distinction is made according to how accessible or self-contained a system is:

  1. Open procurement systems

  • accessible for a large number of users
  • provide digital catalogs from various suppliers
  • Suppliers and offers can be compared directly
  • require neither special software nor interfaces
  • No automatic integration of the orders into the merchandise management system
    Special form: B2B marketplaces on the Internet
  1. Semi open systems

  • Provided by distributors/suppliers to market their own product portfolio
  • B2B customers are integrated into the supplier’s internal network
  • Enable orders to be integrated directly in the supplier system via a standard browser interface
  • Partial visibility into inventory and tracking
  • Connection to own merchandise management system via a secure interface partly possible
  1. Closed systems

  • Enable exclusive connection between procuring company and supplier
  • Implementation of a procurement software or integration into a closed system
  • Partly integrated into ERP systems and realized via VPN networks
  • Direct connection of the company networks of customers and suppliers
  • Enable high standards of transmission and data security
  • Corresponding interface adaptation necessary
  • Primarily suitable for close and lasting partnerships
  • Cloud-based systems are gaining importance due to their great potential

In addition, a distinction is made as to who offers or operates the system:

  1. Supplier systems/network marketplace (sell-side solutions):

  • Suppliers offer the necessary platform and determine the conditions
  • Bundling of all offers and services of a provider on one platform
  • Sometimes a registration or VPN connection is required
  • Sellers can present goods in the best possible way to generate as many orders as possible
  • Can be easily integrated into ERP systems on the part of the supplier
  • Only the offer of the respective supplier is available
  1. Procurement systems/procurement marketplace (buy-side solutions):

  • Access to wide product catalog of listed suppliers
  • External catalogs of suppliers can be added to the company’s own ERP system via a desktop purchasing system (DPS)
  • Business customers can conveniently compare offers
  • Can be integrated into your own merchandise management system
  • Orders can be placed via the company’s own Open Catalog Interface (OCI)
  • Cloud-based systems enable comprehensive administration, analysis, social collaboration and integration of mobile devices
  • Close collaboration
  1. E-commerce marketplaces/ online platforms (many-to-many solutions):

  • Many-to-many solutions are open systems with functions for order processing
  • Serve as a link between suppliers and business customers
  • Manufacturers and suppliers publish product catalogs
  • Large selection of suppliers / large number of potential customers
  • Offer good comparability
  • Unified user interface with multi-supplier catalog
  • Possibility to order products from different suppliers in one shopping cart

4. Useful tools for successful e-procurement

These platforms and systems can support companies in digital procurement:

  • SAP Ariba is a cloud-based platform that is suitable for larger or mid-sized companies and covers the entire procurement cycle.
  • SAP Business Network is a B2B platform that is already used by millions of companies worldwide to further expand the digital supplier network.
  • ERP systems such as SAP S/4HANA help procurement managers streamline processes and gain near real-time insights into corporate spend, suppliers, and market information.

Further procurement platforms include:

  1. Germany and Europe:

  1. Worldwide:

Conclusion: E-procurement is an important component of SCM

Used strategically, digital procurement processes are a decisive step on the way to a digital supply chain. In combination with other solutions such as supply chain management platforms or risk mapping, companies can further increase the efficiency, transparency and security of their goods movements.

Above all, collaborative, digitised processes from purchasing to long-distance transport and warehousing to delivery leads to holistically improved business models and services for B2B partners and end customers.

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