Implementation of e-procurement system

Electronic procurement, also known as e-procurement or supplier exchange, is the process of requisitioning, ordering and purchasing goods and services online. It is a business-to-business process.

Unlike e-commerce, e-procurement utilizes a supplier’s closed system and is only available to registered users. E-procurement facilitates interactions between preferred suppliers and customers through bids, purchase orders and invoices.

E-procurement started in the 1980s, following the development of Electronic Data Interchange (EDI). A decade later, improvements in EDI allowed organizations to develop online catalogs for vendors. Today, e-procurement involves everything from supplier evaluation and selection to contract management, electronic orders and payments.

Implementation Steps

Assess Your Current Process

Before you can introduce a new procurement solution, it’s important to have a clear understanding of the current process. Analyse every step of the procurement process, including how long each task takes, the suppliers involved, controlled commodities, payment methods, and compliance checks.

A typical master dataset consists of the following:

• Product and services master catalog: Unique numbering and naming of all routinely procured goods and services. The product naming and nomenclature is made consistent across your entire organization and your business units so that the same item is recorded with the same code and name across every transaction.
• Supplier master directory: Consolidated directory of suppliers across your entire organization. All goods and services in the master catalog should be mapped to the suppliers in a many-to-many relational structure.
• Master category list: List of all categories against which goods and services are classified for reporting and analytics purposes and to support strategic planning and budgeting. All items in the master catalog should be mapped to these categories.
• Organizational structure: A chart representing the breakdown of your organizational structure, specifically aligned to the way your procurement process flows. This helps create a structure against which users can be assigned relevant user roles and permissions, and approval workflows can be created. The organizational structure may include your head office, branch offices and regional locations, business units and departments, discrete functional units and teams, and any other independent procuring unit within your overall procurement organization.
• User directory and permissions: All levels of users of the system such as executives, managers, audit, finance, procurement agents, purchasers, storekeeper, and end-users. Once defined, you can also assign broad permissions and roles and responsibilities for these users. These users should be defined for each organizational entity that you have defined and mapped accordingly.
• Procurement approval workflow and hierarchy definition: For the users defined, approval hierarchies should be defined for use in procurement workflows along with any conditional flows and alternate workflows.
• Historical transactions: Uploading a year of historical data comprising transactions conducted, items procured, and supplier engaged enables you to set a baseline for your future procurement. This ensures that on future purchases of similar items, you have some price history and intelligence to guide your purchase decisions.

Identify any Potential Gaps

Once the assessment is completed, you will have a better understanding of where there’s wasted time, duplicated efforts, lack of visibility, non-compliance or supplier issues and other factors that the new e-procurement system will need to solve.

Think About the Benefits

When a business truly adopts an e-procurement solution and gains 100% user adoption, purchasing compliance increases ten-fold, more spend is brought under management, and goods and services can be negotiated at better prices from strategic suppliers. In addition, e-procurement can:

• Optimise spend by reducing maverick purchases
• Seize discounts by combining orders and purchasing in volume
• Increase overall transaction speed
• Standardise the purchasing experience
• Provide more spend visibility
• Negotiate more favorable contracts with strategic suppliers
• Strengthen supplier relationships
• Safeguard against risk and supply chain disruption
• Alleviates routine tasks so procurement teams can focus on strategic initiatives
• Minimise fraudulent purchases

Choose A Provider

There are many e-procurement providers on the market and initial research may make it feel a little overwhelming. When you begin your search for the perfect e-procurement solution, it’s important to take into consideration all relevant stakeholders’ needs. Make sure you lead with your requirements and understand your budget to ensure both are met. Refer to the procurement section of this source-to-pay checklist for some suggested functionality to review in your demo(s) with each provider and clearly communicate what you’d like to see, so you can fairly evaluate each.

Create An Implementation Plan

Once a solution provider is awarded, you need to develop a plan for the implementation of your e-procurement strategy. Before kicking off the implementation project, it’s important to ensure you have the proper time and resources allocated. To minimise disruption, we suggest establishing key points of contact for each team affected and frequently communicate progress throughout the process.

Analyse

Once the e-procurement solution is in place, you’ll need to monitor performance and analyse results. When doing this, keep in mind the KPIs set out earlier or refer to this eBook for key metrics to watch.