E-procurement makes business transactions more efficient (10th Sep 2006)

E-procurement or e-sourcing is being driven by a renewed focus on cost cutting, different sourcing practices, maturing Internet commerce and quantifiable benefits of implementations. According to a survey conducted by the US-based Aberdeen group, the main benefits cited by early users include double digit percentage reductions in procurement costs, shortened sourcing cycles, faster time to market, improved product quality, enterprise-wide standardisation of sourcing practices, improved supplier and market knowledge, enhanced sourcing skills, and the ability to apply strategic sourcing to a greater portion of spending.

E-sourcing goes mainstream

The basic function of E-sourcing is to use the Internet to purchase goods and services. The capabilities of e-sourcing solutions include negotiation, collaboration, project management and document management. Normally it is difficult for businesses to go through information about potential suppliers, and to compare them before arriving at a final decision. Even a cost estimate takes up significant time as one must take into consideration delivery time, quality of the product, and several other factors.

E-sourcing also encourages the development and use of best practices.Most of the processes involved in e-sourcing become templates and successful practices are carried out each time these templates are used. These templates are also accessible to other departments so that they can implement strategies that have worked well. Such ractices include defining and developing a procurement strategy for materials, taking the time to pre-qualify suppliers, defining contracts for products in order to save time later, and developing strong relationships with suppliers.

“E-sourcing can deliver many benefits for a business, including cost and time savings. The best practices it brings [to the table] help companies maintain a good elationship with the supplier who provides critical components or products that are required in bulk,” said Indiamarkets chief executive officer Rohan Ajila.

Increased adaptability

For many companies, e-procurement sped up and shortened the buying process. They discovered that time was wasted in juggling numerous suppliers of the same product, or that they were paying the same vendor radically different prices. “E-sourcing helps you build a relationship and efficiently enforce company policies. Today companies that facilitate reverse auctions, online markets and providers of e-sourcing tools, have become part of the buyer/seller community. Their role has changed to consultants rather than simple service providers,” said Ajila.

Also, e-sourcing has given an edge to Indian manufacturing companies. “Companies from different countries such as South America and Turkey are sourcing products from India. Manufacturers of engineering tools and packaging among others are getting good orders for their products. Now, the Web has enabled them to supply their wares in international markets,” said Ajila.

Moving ahead

Companies that are using e-sourcing are moving beyond, not only in getting better prices but also in terms of having a wider range of suppliers. This helps them get quality products at better rates. “Companies that are using e-sourcing are getting around 15 to 20 percent cost savings over procurement or offline method,” said Ajila. However, benefits from a negotiation focussed e-sourcing strategy will diminish in value over time, the Aberdeen research suggests. To sustain savings and drive continuous improvements in sourcing, companies will have to adopt strategic functionalities, including analyses on spending, sourcing collaboration, knowledge management and advanced bid analyses. Early users, the research says, are ransitioning to broader e-sourcing functionality, including supplier performance measurement, sourcing collaboration, contract management and process and commodity specific templates. Early users also want to integrate e-sourcing with order execution platforms. Some enterprises see-sourcing as the basis of a larger cost management strategy.

-The Financial Express