Know the right questions to ask and the major factors involved when determining the appropriate e-procurement solution for your company
e-Procurement was one of the star technologies of the dot-com era, promising millions of dollars in savings for enterprises looking to streamline their purchasing costs. While it didn't transform corporate purchasing in the way many had hoped, e-procurement or e-purchasing nonetheless continues to be a viable means to achieve real savings if some of the remaining obstacles can be overcome.
Before embarking on the road toward an e-procurement program, companies must have a firm grasp on their own spending and payment data. Where are they spending? What is the method of payment to their suppliers?
Strategic sourcing initiatives enable companies to realize savings: By analyzing detailed information on vendor spending and payment, some companies have reduced their number of suppliers by 90 percent and achieved savings in the millions of dollars. According to the research firm Dun and Bradstreet's report Strategic Sourcing — Two Words that Produce Savings, it is not uncommon for companies leveraging strategic sourcing initiatives to realize savings of 3 to 8 percent of their negotiable spend. Without capturing this data, companies cannot drive purchasing productivity and the ability to negotiate better deals with key vendors.
Highlighted below are four major factors to pay attention to, as well as questions to ask of potential suppliers, when trying to determine the appropriate e-procurement solution set for a company.
Most corporations have heavily invested in enterprise resource planning (ERP) systems and many have doled out more dollars for online purchasing. But problems arise when an organization moves its purchasing function to an online system; because the e-purchasing software may be incompatible with the existing ERP system the result is an integration nightmare. Thus, companies must add more time and expense to the initiative and waste investment in software systems they have already purchased and maintained.
Corporations must be sure to ask suppliers, or whoever is providing the solution, about integration. A full systems check and assessment must be completed prior to implementation. Will these systems integrate? What problems might there be? In particular, one important key to remember is that although systems may be supplied by the same provider, integration is not guaranteed to be easy.
Solutions such as rules-based catalog software often stop short of providing key functions of integration. Instead, organizations must review their needs and invest in a solution that will positively impact their suppliers and complete the necessary automation and integration tasks. It is important to look for a solution that is adaptable to the existing ERP system.
When skeptical of ROI, companies hesitate to allocate additional resources to existing e-purchasing initiatives. Those companies that have already invested heavily in ERP are anxious to protect their investments and are concerned about future expenditures and additional software that will only exacerbate integration headaches. The complex pricing structures of procurement software suppliers may further contribute to the missed ROI and reluctance to continue investment.